Wednesday, January 13, 2010

Time to Re-think the Senate's Health Care Reform Bill

Associated Press writers Ricardo Alonso-Zaldivar and Erica Werner reported today that
there has been an outpouring of complaints from labor leaders angry over President Barack Obama's support for a tax on high-cost health insurance plans. The 40 percent levy would fall on employer health plans worth more than $8,500 for an individual or $23,000 for a family.

Zalvador and Werner reported that while President Obama terms the high-cost health insurance plans "Cadillac" plans, union leaders say many working-class Americans who have negotiated good benefits in exchange for lesser pay would be hurt.

The "Cadillac" tax is a cornerstone of the Senate bill's approach to controlling costs. Government analysts estimate the pain could be widely felt, with the tax hitting 22 percent of insured workers in 2019.

The idea is to nudge people into equally comprehensive, but cheaper, coverage. The problem is that, with no public option available in the Senate's version of the health care reform bill, the only choice for coverage will be State sponsored purchasing pools, but there is concern that states governed by Republicans may opt not to create them and some Democratic states may have trouble meeting yet another unfunded federal mandate.

The insurance industry supports the Senate approach.

If this version passes, employees will be angry because many gave up wage increases for employer sponsored health insurance that is now taxable.

Many healthy employees will opt out of the taxable employer plans and may or may not be able to get coverage from "purchasing pools", which their State may or may not choose to set up.

Many of the employees that remain in the employer sponsored health plans will be those with medical concerns. This creates what insurance companies call "adverse selection", which will cause the insurance companies to raise premiums substantially, forcing many employers to drop their health plans altogether.

AFL-CIO president, Richard Trumka warned "disillusioned union members might just not show up to vote if they fail to come up with a health bill labor likes". Trumka said labor groups prefer the approach in the House bill, which raises income taxes on the wealthy to pay for expanded health insurance coverage.

Harold A. Schaitberger, president of the International Association of Firefighters, commented "The president's support for the excise tax is a huge disappointment and cannot be ignored," he said in a statement. "If President Obama continues to support it and signs a bill that includes the excise tax on workers, we will hold him accountable."

Passing the Senate version of the bill will not only offend the union members and other progressive Democrats, but will anger the vast majority of working Democrats. Disappointed Democrats will just stay home on election day, causing catastrophic election defeats for Democratic party candidates similar to those in the 1994 elections.

President Obama and the Democratic Party leadership need to re-think this legislation and come up with a health care reform plan that does not add to the already substantial tax burden of working Americans, expands comprehensive health coverage to all Americans, and curbs the power of the big insurance and pharmaceutical companies. This is a huge, complicated challenge. The Democratic Party and the American people will be better served if we take the time to do it right. - BD

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