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Obama Collapses To Unions On Backroom Heath Care Deal?

By Cathy Wilson Posted in Health Insurance News

The Obama Administration announced a tentative agreement with union leaders on the tax on “Cadillac health insurance plans”. Obama wanted the Cadillac plans taxed for two reasons. First, the revenue would help offset the increase in government spending to help lower income people who are uninsured get health insurance. Second, the tax would discourage the purchase of these plans which would in turn help bring down the skyrocketing costs of health insurance.

Why The Unions Opposed The Cadillac Plans Tax Earlier

In the past, unions have traded off higher wages in exchange for these generous health insurance plans. If these plans are taxed, employers would probably switch to health insurance plans below the surtax amounts. The agreement specified that family coverage plans of $24,000.00 and individual plans of $8,900.00 annually would have a 40% tax. The tax would be collected from the insurance companies. The insurers would pass this expense back to the insured or just discontinue the plans.

The Concessions Unions Received For Agreeing Not To Oppose The Cadillac Tax

Even though this agreement is not expected to become final before January 19, 2010, the cadillac tax is supposed become effective in 2013. Obama and the democrats agreed that any health insurance plans set up through collective bargaining agreements or on behalf of state and local government employees would be exempted from the tax provision for another 5 years. The rationale for this extension was to allow unions a chance to reach agreements with employers under the new rules. Many employers are expected to shift to a less generous health insurance plan to avoid the 40% surtax. The unions want to bargain for higher wages to offset the loss of the generous health insurance plans.

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