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Lawmakers Weighing Tax on ‘Cadillac’ Health Plans

As Congress continues searching for ways to finance a health care overhaul, one option under review is taxing the costliest employer-provided health plans, otherwise known as "Cadillac" plans. After a recap on developments on the health care front, experts discuss the proposal with Judy Woodruff.

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  • GWEN IFILL:

    Tonight, taxing benefits. It's one of the key issues the Senate Finance Committee is grappling with as it tries to craft a bipartisan health care bill.

    Betty Ann Bowser begins with this report. Our Health Unit is a partnership with the Robert Wood Johnson Foundation.

    BETTY ANN BOWSER, NewsHour correspondent: One idea on the table to pay for health care reform is taxing the most costly of employer-provided health insurance benefits, the so-called Cadillac plans, provided to a small percentage of workers.

    Currently, employees who receive their health care benefits through their companies pay no tax on their benefits, but some in Congress are considering taxing insurers or employers if they provide coverage exceeding a set basic cost.

    While senators have not laid out any specific numbers yet, here's one hypothetical example of how the tax might work. If an insurer or employer provided a plan for a worker and his family that costs $22,000, the insurance company or employer might pay a tax on the difference between $22,000 and a base amount to be determined by Congress.

    For the purposes of our example, if that amount was set at $17,000, the insurer or employer would pay a tax on the $5,000 difference, and the employer or insurer could choose to pass those costs on to the employee.

    Before House members return to their districts for the August break, Speaker Nancy Pelosi told the NewsHour's Judy Woodruff she's open to the idea.

    REP. NANCY PELOSI, D-Calif., Speaker of the House: I say just put everything on the table, but I think it has to be truly the top of the line. Once you get into sort of the middle income, I don't think that that is a good idea.

    When we talk about at the highest level to have a surcharge or at the highest package, let's take a look at — insurance package — let's take a look at it, but there's a big appetite to insure — to tax the insurance companies.

  • U.S. PRESIDENT BARACK OBAMA:

    Your co-payments and deductibles have gone up…

  • BETTY ANN BOWSER:

    And although, while campaigning for president last year, candidate Obama was opposed to taxing benefits.

  • BARACK OBAMA:

    … that is fundamentally the wrong way to go.

  • BETTY ANN BOWSER:

    But President Obama told Jim Lehrer two weeks ago he could support taxing some employee benefits.

  • BARACK OBAMA:

    I said during the campaign, when this was raised by John McCain, he had proposed to eliminate completely the exclusion on the taxation of health benefits. I had said that this would be the wrong way to go because it would be too disruptive.

    What's being talked about now, I understand, is the possibility of penalizing insurance companies who are offering super gold-plated Cadillac plans.

    I haven't seen the details of this yet, but it may be an approach that, you know, doesn't put additional burdens on middle-class families.

  • BETTY ANN BOWSER:

    On the Sunday talk shows, Obama administration officials said they wouldn't rule out a tax hike to pay for health care reform and to help reduce the federal deficit.

    But today, White House spokesman Robert Gibbs said there will be no tax hike on the middle class.

    ROBERT GIBBS, White House press secretary: Let me be precise. The president's clear commitment is not to raise taxes on those making less than $250,000 a year.

  • BETTY ANN BOWSER:

    Gibbs said the president is scheduled to meet with Senate Democrats tomorrow at the White House.