The AFL-CIO is running a print ad this week arguing that "the House bill gets it right" on health care. The Senate bill? Not so much, says the labor federation.
Its beef is with the tax in the Senate Finance Committee bill on high-cost (a.k.a. "Cadillac") health care plans. Unions have come out against the tax, saying many of their middle-class members would be affected. The proposal calls for a 40 percent tax on the value of insurance benefits that exceed $21,000 a year for a family or $8,000 for an individual. There are higher thresholds for early retirees and those in high-risk jobs. While the tax falls on the insurer, it would be passed along to the consumer in some way.
While the average cost of employer-provided health insurance is significantly less than those cut-offs, some union members may well have plans that exceed those amounts. But the labor federation’s ad, which is running in Washington, D.C., newspapers Roll Call, the Hill and Politico, is misleading. It says the tax "would hit one-third of all individual and family plans within a few years of the law taking effect." That’s true, but only if employers and insurance companies do nothing in response to the tax. Under current law, the percentage of plans pricey enough to be subject to the tax would be as high as 40 percent by 2019.
As we pointed out when the liberal Health Care for America Now made similar claims in a TV ad, the Joint Committee on Taxation, Congressional Budget Office and loads of economists don’t believe employers and insurers will do nothing. In fact, they’re counting on employers changing their behavior. They say employers will pick less expensive plans, and increase wages instead. Those wages are subject to payroll and income taxes, and that’s where the real money for the government is made. The JCT says 70 percent of government revenues from this Cadillac-plan tax will come from those payroll and income taxes, not the excise tax itself — and even the Communications Workers of America union acknowledged that in a recent report critical of the proposal.
Insurers, too, could tailor plans to come in just under the tax thresholds. CBO Director Douglas Elmendorf told Congress the measure would "reduce health spending over time."
The AFL-CIO ad says: "Millions of working families would face higher costs and cuts in benefits." But that prediction leaves out the part about families getting a boost in their paychecks, when their employers pick less expensive plans.