With Democratic health care plans in the House and Senate in disarray, senators struggling to build a bipartisan plan without a government-run option are coalescing behind a tax on employers who provide insurance policies worth more than $25,000 to their workers.
The idea seems to have the crucial, though very tentative, support of key moderate Republicans and Democrats who blocked an earlier plan to tax employee health care benefits, and may deliver a compromise bill that some believe has the only real shot of making it to President Barack Obama’s desk this year.
“In a way, this could restrict many benefit packages from going through the roof,” Senate Majority Whip Richard Durbin, D-Ill., said. “The obvious question is, what impact does this have on premiums?”
While Obama worked, seemingly to no avail, to sell a group of skeptical House Democrats on a plan that would tax all high wage earners, a small bipartisan group of senators met in the office of Sen. Max Baucus, D-Mont., to hammer out a compromise bill.
That compromise includes the insurance excise tax to be paid by employers on each high-end policy they bestow on workers, plus a privately run health insurance cooperative. The president supports a public health insurance plan that is the central component of House and Senate bills. The co-op plan would be privately run but open to all.
Sen. Olympia Snowe, R-Maine., one of a half-dozen senators working on the bipartisan deal, said the insurance excise tax proposal should be taken very seriously.
“It is a better way to get at this issue and to discourage the high utilization rates that some of these plans provide,” she said.
Snowe, along with other senators and Obama, turned down an earlier idea to tax employees for health care benefits they received in excess of $17,000. Union groups led the opposition because many union members have expensive health care benefit packages that would have been taxed.
“My problem with taxing employee benefits is you are taxing the average worker,” Snowe said.
Sen. Kent Conrad, D-N.Y., a top negotiator on the bill and chairman of the Senate Budget Committee, said the excise tax would hit only 1 percent of all health insurance policies. He declined to reveal the proposed tax rate for such plans, saying it had not been finalized.
Both the House and Senate have begun to move away from taxing middle- and upper-middle-class earners as part of the health care reform effort, thanks to heavy resistance from moderate Democrats in both chambers.
House Speaker Nancy Pelosi, D-Calif., said Monday that she wanted the tax increase in the House bill to apply only to individuals earning $500,000, or $1 million for joint earners. The bill as written would tax incomes starting at $280,000.
