Health Insurance Tax Upsets Union Leaders

Labor leaders against proposed tax on high-value health insurance plans, saying it would hurt working-class Americans who've negotiated good benefits for lesser pay.

WASHINGTON (AP) -- Labor leaders are pushing hard on President Barack Obama and Senate Democrats to drop a proposed new tax on high-value health insurance plans, warning of political consequences.

The White House has indicated the tax may change so it hits fewer workers -- but it's not going away.

A Monday evening meeting at the White House between Obama and about a dozen heads of the country's biggest labor unions capped a day when two union leaders fired broadsides at Obama and Senate Democrats over their plans to pay for overhauling the nation's health care system with a tax union leaders fear could hurt their workers.

The 40 percent tax would fall on employer health plans worth more than $8,500 for an individual or $23,000 for a family. Although Obama terms them "Cadillac" plans, union leaders say numerous working-class Americans who've negotiated good benefits in exchange for lesser pay would be hurt.

The president of the AFL-CIO, Richard Trumka, warned that Democrats risk catastrophic election defeats similar to 1994 if they fail to come up with a health bill labor likes.

"A bad bill could have that kind of effect -- a place where people sit at home" -- as happened in 1994, when Democrats lost 54 House seats and eight in the Senate, costing them control of Congress, Trumka told reporters.

The head of the International Association of Firefighters, Harold A. Schaitberger, made similarly threatening remarks in a statement Monday. "The president's support for the excise tax is a huge disappointment and cannot be ignored. If President Obama continues to support it and signs a bill that includes the excise tax on workers, we will hold him accountable," said Schaitberger, who was not among the attendees at the White House meeting.

The AFL-CIO's Trumka made his remarks before delivering a speech in which he bashed the tax proposal in the Senate's health overhaul bill, contending that it "drives a wedge between the middle class and the poor."

"The bill rightly seeks to ensure that most Americans have health insurance. But instead of taxing the rich, the Senate bill taxes the middle class by taxing workers' health plans -- not just union members' health care; most of the 31 million insured employees who would be hit by the excise tax are not union members," Trumka said hours before going to the White House. "This is a policy designed to benefit the elites."

Despite the criticism, Trumka stopped short of saying labor would actively oppose the bill if it included the tax. Trumka said bringing Americans health care reform "is too important for us to get this close and then say we quit."

Obama argues the high-value insurance plan tax is a way to control spending on health care services, one of his goals for his health care overhaul. Trumka and other labor leaders strongly prefer the approach taken in the House health care bill -- an income tax increase on individuals earning over $500,000 a year and households earning over $1 million.

White House spokesman Reid Cherlin said Monday night's meeting included an exchange of views and a productive discussion, but did not suggest any agreement had been reached. Earlier in the day White House spokesman Robert Gibbs indicated Obama was open to adjusting the tax so it would affect fewer people and said that would be discussed at the meeting.

That dispute over the tax is one of the sticking points between House and Senate Democrats as they work to reconcile health legislation passed by each chamber. They're looking for a product that Obama could embrace and sign into law in time for his State of the Union address sometime next month. With Obama behind the Senate tax approach, the final bill is likely to include it in some form.

There's been discussion of raising the threshold for the tax from $23,000 to $25,000 or higher. The threshold has already been raised for first responders and workers in certain high-risk fields and the levy could be softened for more union professions.

Trumka warned Democrats Monday, as he has in the past, that they can no longer take union voters for granted.

"Politicians who think that working people have it too good -- too much health care, too much Social Security and Medicare, too much power on the job -- are inviting a repeat of 1994," Trumka said. "Our country cannot afford such a repeat."

But organized labor must walk a tightrope in its criticism of the bill. Unions are among Obama's strongest supporters and have spent millions in grass-roots lobbying to garner support for his health overhaul plans.

Associated Press writer Sam Hananel contributed to this report.

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