Unions May Get a Pass on Health Care Benefits Tax

6a00d8341c909d53ef01157023e340970b-pi There is a major bipartisan effort going on in the Senate Finance Committee to reform the health care system.Reportedly, one of the elements of that effort may be a tax on "gold plated" health insurance benefits
above a certain threshold–$17,000 for family coverage is one option
being discussed. The new tax could raise close to $300 billion over ten
years to help pay for a health care bill.

However, the word also is that a new benefits tax would not apply to current union contracts for at least five years.This from a Bloomberg story on Friday:

Gerald Shea, an AFL-CIO
official lobbying for health-care reform, said grandfathering benefits
negotiated in a collective bargaining agreement is a “common thing when
there is a big change in federal law.”

‘Expectations Are Set’

a collective bargaining agreement is set, employer’s budgets are set,
workers expectations are set. It doesn’t make sense to go back in the
middle of the contract and change it,” he said.

Union groups and workers said Congress shouldn’t target contractually negotiated benefits.

Anna Burger, secretary-treasurer of the Service Employees International Union, said in an interview that workers have often traded salary increases for better benefits in agreements.

“shouldn’t be taken from the backs of workers who have bargained away
wages and other things for their benefits over the years,” Burger said.

Sandra Carter, a retired Pacific Bell Telephone Co. technician from Stockton, California, said her health benefits, worth about $12,000 per year, were negotiated by the Communications Workers of America.
She is unmarried with no children, meaning her individual coverage
exceeds benefits paid to federal workers by about $7,800. If that
amount were taxed at the 15 percent marginal rate, she would owe

“I can’t afford the taxes I pay now,” said
Carter, who said she suffers from diabetes. “Why should I get taxed on
a benefit that keeps me a functioning person?”

Carving unions out of any deal to tax health insurance benefits would be outrageous.

First, such a new tax would not alter any collective bargaining agreements–it would only change how those earnings would be taxed.

since when have unions become a special class? Every new tax increase
I've ever been subject to was on something–my income, my house, my
property–that was either set or owned well before the new tax was

This is tantamount to a smoker telling us the new tobacco
tax to pay for the childrens' health plan shouldn't apply to him
because he developed his addiction to cigarettes before the tax was

I now think I understand how the Chrysler and GM
bondholders felt when they were forced to give up their priority
bankruptcy claims in favor of the Unions' retiree health care fund.

Robert Laszweski has been a fixture in Washington health policy
circles for the better part of three decades. He currently serves as
the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group
Markets, for the Liberty Mutual Insurance Company. You can read more of
his thoughtful analysis of healthcare industry trends at The Health
Policy and Marketplace Blog
, where this post first appeared.

6 replies »

  1. How is the union worker any different from any other worker with benefits? Haven’t all workers unionized or not accepted lower pay because of the benefits?

  2. Generally I am a pro-union/Labor guy because I would rather see the working man get some then the spoils be largely divided by a few at the top but it is really hard to sympathize or support this kind of naked political favoritism just as it was in the Chrysler bankruptcy decision where the bondholders had to eat it due to the Obama administration.

  3. Time for President Messiah and the Dems to pay back their union pals for all their millions in campaign donations!

  4. Right on, Robert.
    Of course, this is politics, and the Democrats must throw the unions, whom they are stiffing on the “Employee Free Choice Act”, some kind of bone to get health reform financed. True enough, unionized workers’ after tax income isn’t protected by collective bargaining, but if unions knew it could fall by 5-7% because of a benefits tax, they would have asked for more in wages to cover the cost.
    I completely agree with the Chrysler/GM analogy. Those gold plated benefits are a major reason why our manufacturing sector is in trouble, and why our state and local governments are drowning in red ink. It is COSTS, not recession diminished revenues, that people need to focus on.