Pittsburgh Tribune Review
January 31, 2010 Sunday
Union health care exemption bill under microscope
by Joe Napsha
The political deal that would give labor union members a five-year exemption from paying taxes on more-expensive health care coverage — as proposed under a Senate health care reform bill — is catching flak from all sides.
The White House, in a political compromise to win passage, recently reached an agreement with labor leaders and Senate Democrats to consider revisions in the Senate bill to exempt union members until 2018 from paying a 40 percent tax on the value of any health insurance plan.
Other workers would have to pay the excise tax beginning in 2013 on the value of any health coverage premiums above a certain level.
"It's a tremendously bad proposal. You should not give a kickback to one group," said James Sherk, a labor expert with the conservative Heritage Foundation in Washington.
The health insurance tax, which the Citizens for Tax Justice predicts will affect 58 million people by 2019, is being proposed to fund health care reform provisions. Exempting union members for five years might cost about $30 million.
Giving labor unions a one-year window to renegotiate existing labor contracts to alter health insurance plans might be fair, but there is no need for five years of tax-free benefits, he added.
The United Steelworkers union, which has about 850,000 members, is supports efforts to lessen the blow of health care costs to its members, but it does not favor a tax on any worker's insurance, said Connie Mabin, a spokeswoman for the Pittsburgh-based union.
"Our union prefers that no benefits are taxed. We continue to fight for real reform that includes those principles and doesn't hurt the middle class," Mabin said.
The Kaiser Family Foundation estimated that average annual premiums in 2008 were far below the taxable threshold for both single and family coverage for both union and nonunion workers. The foundation estimated that single coverage for a union member averaged $4,836, just $200 more than the nonunion worker; and $13,009 for union members, just $500 more than for nonunion workers.
The USW has conducted research on the cost of health care for its members, but is keeping those results in-house as the debate unfolds, Mabin said.
Health insurer Highmark Inc. in Pittsburgh has not determined the potential impact of proposed health care reform on premiums, or average costs of plans for union and non-union employers because there are so many variables, spokesman Michael Weinstein said.
"It would be impossible at this point," because each plan in different, Weinstein said.
The tax on the benefits is being considered as a method of paying for the health care reform, said Paul Fronstin, director of the health care program at the non-profit Employee Benefit Research Institute. The institute, based in Washington, is nonpartisan and supported by businesses, unions, benefit consultants and health insurance companies.
One of the reasons the issue of taxing health benefits has arisen is because health care insurance provided by employers is considered "a tax-free benefit without limit," Fronstin said.
As distasteful as taxation is, Sherk said that if the government needs to raise money to fund health care reform, the Senate's plan is a much better than the House's proposal to levy a 5 percent tax on small businesses offering health insurance.
"That's a disincentive to create jobs," and that will do greater harm to the economy, Sherk said.
Taxing all employees on the value of their health insurance would be a more fair method, and may even lead to better use of the health care system, Sherk said.
That may motivate employers in nonunion businesses to keep insurance premiums below taxable levels, said Lorin Lacey, principal for the health and productivity practice at Buck Consultants LLC, a human resources consultant in Pittsburgh.