The Real Story on the Excise Tax Framework

For the past 48 hours, the beltway press have woven together scraps of quotes and hearsay for stories about the excise tax. The week produced a lot of rumors - some true, some not - but most of which were decidedly premature. That was until yesterday afternoon, when labor leaders hosted a call with reporters describing exactly what framework had emerged from their talks with the White House.

The staging of the announcement - labor leaders convening a call with the press to formally announce a framework - understandably painted the picture of a win for unionized workers. And many media outlets framed their stories that way, calling it a "carve out" for union members. But nothing could be further from the truth.

In fact, the only aspect of the framework that is specific to labor is a transition period for workers with bargaining unit contracts to negotiate new contracts. It's not unlike the transition period awarded to employers, insurers, and individuals in adjusting to the new rules. (And to be fair, even this is not exclusive to union members. The eight-year transition period applies to state and local government employees, union and non-union, as well.)

From the beginning, health insurance reform has been about making sure all working people - their families and the communities they serve - could afford health care.

That was our goal - affordability. Because of Labor's commitment to improving this bill, America's middle class will get a fairer shake from insurers, and will no longer be at risk of losing dental or vision coverage due to a tax on benefits. To be clear, this applies to everyone. Not just union members.

People will not face a penalty because they are part of an older workforce or a workplace that is mostly women. And the threshold for the excise tax will be higher - now $24,000 per family, $8,900 per individual each year.

And, we're not done. This is not the final bill - we're going to keep fighting, keep working, keep pushing for the strongest bill possible that makes health care affordable.

The improvements agreed to by the White House and Labor on the excise tax include:

An Increase in the Threshold for Both Family and Individual Coverage. The threshold that the tax would impact for all employer based health plans was increased to $24,000 for families and $8,900 for individuals. The threshold will increase annually based on the inflation rate plus 1% starting in 2013 (excluding high cost states). If health premiums increase more than is currently expected between 2010 and 2013, the initial thresholds will be raised even more.
Thresholds would be Higher if Health Costs Rises More than Expected. If health premiums rise more than is currently expected, the initial thresholds will be raised so that plans would not be unfairly affected.
Safeguards for High-Cost States.The thresholds will be increased for the 17 states with the highest health care costs. Starting in 2013, the threshold for these states will be 120 percent of the regular thresholds, 110 percent for 2014, and 105 percent for 2015.
Permanent Adjustments. The thresholds would be increased to $9,850 for individual plans and $26,000 for family plans for retirees and workers in high-risk professions. They would also be adjusted to reflect unfair cost differences based on age and gender (see next bullet).
Protections for Women and Older Workers. Right now, women and older workers are unfairly discriminated against because of their gender and age. In addition to other protections part of health insurance reform, the threshold will be increased permanently for workforces that are older or predominantly female.
Transitional Adjustments. The thresholds for the 17 states with the highest health care costs would be 120 percent of the regular thresholds for 2013, 110 percent for 2014, and 105 percent for 2015. Plans for state and local government workers and provided through collective bargaining agreements would be exempt for five years to allow time for transitioning and to renegotiate.
Excludes the Cost of Dental and Vision Plans. Exempting dental and vision from the threshold is a significant improvement and it applies to everyone. Without this change, many employers would have dropped coverage for dental and vision. Essentially, adding the dental and vision exemption adds on average another $1,500 to $2,000 to the threshold.
Tax Only Affects Portion of Premium over Threshold. The tax would only touch the portion of the premium that exceeded the cap.