Details Emerge On White House-Labor Health Care Agreement

January 14, 2010 10:23 a.m.

The Obama administration and organized labor have reached a tentative agreement on the so-called Cadillac tax on high end health insurance plans, signaling that Democrats may soon be able to resolve their differences over how to finance health care reform.

Unions had opposed the measure, which, as originally designed, would have imposed a 40 percent excise tax on insurance policies that cost more than $23,000 for families, and $8,500 for individuals, indexed just above inflation.

Under the terms of the proposed deal, the threshold for families would be raised to $24,000, and would exempt certain benefits like vision and dental, according to a Democratic source.Collectively bargained plans would be exempted until 2017, to provide workers with a real opportunity to renegotiate their benefits packages, which were designed under current law and excluded from taxation.

The White House appears to have stood its ground, though, on the question of how to index the tax. By indexing it just above the consumer price index, the provision generates a great deal of cost-savings, which are crucial to getting a passing score from CBO.

Labor officials and progressives had suggested the index would have to be raised to keep pace with medical inflation–a tweak that would prevent the tax from ensnaring middle class people over time, but that would also eliminate the measure’s savings potential. But they seem to have lost that fight.

Now the question is, will House Democrats–particularly progressives, and those close to unions–close ranks around a bill with a financing measure they still don’t like? They will be briefed in detail later this afternoon. The tax remains deeply unpopular in the caucus, but a direct appeal from President Obama carries a lot of weight.

We’ll get you more details as they emerge.

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