Health Reform Negotations Continue as White House, Unions Reach Tentative Deal on ‘Cadillac’ Tax

BY Lea Winerman  January 14, 2010 at 12:10 PM EDT

Updated 5:55 p.m.

Union leaders have reached an agreement with the White House on a tax on high-cost “Cadillac” health care plans, one of the main sticking points in negotiating a compromise health care reform bill.

In order to pay for reform, the Senate bill would impose a 40 percent excise tax on high-cost insurance plans, a plan that angers many House Democrats, as well as organized labor.

The new agreement would keep but scale back the tax. It “is good for all working Americans. Not just the labor movement, but all working Americans — this makes this bill more fair for them,” Richard Trumka, president of the AFL-CIO, said in a conference call with reporters Thursday.

Trumka and other labor leaders negotiated the deal in a marathon 15-hour session at the White House Wednesday. The deal will, among other things:

  • Raise the threshold at which the tax kicks in — when it begins in 2013 — from $23,000 to $24,000 for family plans and from $8,500 to $8,900 for individual plans.
  • Include a provision that will adjust that threshold up if the cost of health care rises more than expected between 2010 and 2013.
  • Include a provision that will adjust the threshold up for plans that cost more because of age or gender, rather than extra services.
  • Exempt all collectively bargained plans from the tax until Jan. 1, 2018.

President Obama also continued to meet with Democratic lawmakers Thursday afternoon, as House and Senate leaders aimed to reconcile differences over health care reform. The lawmakers met for eight hours Wednesday.

“Today we made significant progress in bridging the remaining gaps between the two health insurance reform bills,” House Speaker Nancy Pelosi, Senate Majority Harry Reid and the president said in a joint statement Wednesday evening, after an 8-hour meeting at the White House.

Reid and Pelosi, together with other senior legislators and staff, met from 10:30 a.m. to 6:40 p.m. ET Wednesday. President Obama stepped in and out of the meeting to deal with the aftermath of the earthquake in Haiti, but was reported to be present for several hours.

“President Obama has his sleeves rolled up and is in the middle of the discussions,” Rep. Robert E. Andrews, D-N.J., a subcommittee chairman who was briefed on the meetings, told the New York Times. “He is choosing the right moment to be engaged. His effectiveness will be higher because he waited until the last minute.”

No cell phones or BlackBerries were allowed in the Cabinet room where the negotiations took place, according to the Washington Post, as legislators hunkered down in a final push to deliver a compromise bill.

The House and Senate bills are similar in many ways — both would extend health insurance to more than 30 million Americans by expanding Medicaid and providing subsidies to help low- and middle-income Americans purchase insurance in a new “exchange” marketplace system. Both would also impose similar new restrictions on the insurance industry, forbidding, for example, insurers from rejecting customers based on pre-existing conditions.

But differences remain over issues beyond how to pay for reform.

Lawmakers are also discussing whether to create a national health insurance exchange marketplace, as in the House bill, or state-based exchanges, as in the Senate bill. They did not spent much time on Wednesday discussing the abortion language in the bill, according to the New York Times.

House Ways and Means Committee chairman Charles Rangel, D-N.Y., said Thursday that negotiators hope to reach an agreement and send a bill to the Congressional Budget Office for a cost estimate by Friday or Saturday, according to Politico.

Democrats have been aiming to send a bill to the President to sign before the State of the Union address, in late January or early February. However, the CBO estimate could take more than a week, and senior Democrats told the Washington Post that a final bill is unlikely to reach the president before early February.

And on Wednesday House Minority Leader John Boehner, R-Ohio, told Republicans they still have a chance to beat the bill. “The American people are with us,” he said, according to the New York Times.