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'Cadillac' Tax' Puts Obama on Collision Course With House Democrats

5 years ago
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Rep. Joe Courtney (D-Conn.), the leading voice in the House against the so-called "Cadillac tax" on high-dollar health plans, tells Politics Daily that the proposed excise tax on high-dollar insurance plans is generating heated and vocal opposition within the ranks of House Democrats as House and Senate negotiators work feverishly to meld the two versions of health care reform.

"The issue is far from resolved," Courtney (pictured) said in an interview. "The speaker understands there's tremendous opposition within the House caucus."

Senior House aides tell Politics Daily that during a conference call Thursday between House Speaker Nancy Pelosi and about 100 House Democrats on health care reform, about 25 members asked questions or voiced concerns to Pelosi, and the excise tax was the single largest area of concern.

At issue is the fundamental question of who will pay for health reform through higher taxes once the bill is passed. The House version of the bill increases taxes on the wealthy with a 5.4 percent income "surtax" for individuals making more than $500,000 annually and families making more than $1 million. The Senate, meanwhile, taxes upper- and middle-income earners through a payroll tax increase on family income over $250,000, as well as a new tax, namely the "Cadillac tax," on insurance companies' high-dollar health plans. It is expected that insurers would pass the cost of the tax on to employers and employees through higher deductibles and co-pays for beneficiaries, regardless of a person's income.

Health analysts and critics of the tax say the measure will indirectly tax millions of middle-class workers who have high-cost insurance because of their age, health or the make-up of their company's work force. Proponents argue the tax will eventually reduce the cost of health insurance across the board by discouraging insurance companies from offering the most expensive coverage.

Courtney says it will result in a middle-class tax increase any way you slice it. That's a notion most House Democrats can't support, especially in an election year.

Despite the growing opposition to the tax from the left, including labor unions, and the president's own criticism of the concept during the 2008 campaign, news came last week that Obama had endorsed the idea and urged House negotiators to accept the Senate's tax structure, including the excise tax.

The issue has become such a rallying cry for labor unions that President Obama will meet with leaders of the AFL-CIO, Service Employees International and other unions at the White House Monday to hear their concerns about the tax's potential effects on their members.

Numerous senators have warned recently that if health care negotiators stray too far from the Senate's narrowly passed version of the bill, they could endanger the health bill altogether. But Courtney said the Senate is not the only chamber that had barely a vote to spare.

"The House passed a bill by four votes, and that's as big a problem as the Senate passing the bill with 60. The House has the same problem as the Senate has," he said. Considering the fact that Courtney has secured 190 signatures from House Democrats on a letter opposing the excise tax, the numbers tell an ominous story for those who think the House will agree to the Senate measure whole cloth. "If you want to get a bill, both sides have to figure out another endgame."

The two compromises being discussed by negotiators now are either significantly raising the thresholds of plans that would trip the tax or establishing a means test to ensure that middle-class workers would be protected from the tax's effects. Both would reduce the amount of revenue the generated to pay for health care reform.

If the Senate insists on its version of the tax without changes, Courtney said Obama could lose the support of otherwise loyal Democrats who voted for the bill the first time around: "Yes, that was definitely articulated to the speaker."

Join The Capitolist on Twitter @1PatriciaMurphy.

Filed Under: The Capitolist

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