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Articles | 16 Employee Groups Urge Congress to Reject 40% Tax on Cadillac Health Plans
16 Employee Groups Urge Congress to Reject 40% Tax on "Cadillac" Health Plans
Sixteen federal unions and employee groups urged leaders in Congress yesterday
to drop a provision in the Senate's version of the health care reform bill that
would impose a 40 percent excise tax on so-called "Cadillac" health
If passed, the tax would start in the year 2013 affecting individual health
plans with annual premiums greater than $8,500 and family health plans with
annual premiums greater than $23,000.
The employee groups -- which state this tax would affect some federal
employees in the Federal Employees Health Benefits Plan (FEHBP) -- sent a
letter to several congressional leaders on January 12 (see text of the letter
National Treasury Employees Union (NTEU) President Colleen Kelley noted
separately to the letter, "even though the tax would not become effective until
2013, and its financial thresholds would increase every year, those increases
very likely would not be enough to offset medical inflation."
"The result," Kelley added, "would have FEHBP enrollees facing benefit cuts,
and higher premiums and co-payments as insurance companies simply pass along
this increased cost."
January 11, 2010
Our organizations represent the nearly 9 million federal and postal
employees and retirees and their families who participate in the Federal
Employees Health Benefits Program (FEHBP). The FEHBP is the largest
employer-sponsored health benefits plan of its kind in the United States.
Established by Congress in 1959, it serves as a beacon in recruiting and
retaining quality individuals to federal and postal service. The FEHBP has
succeeded in providing enrollees with adequate health care coverage at
competitive price levels.
As you work to craft a final health care bill, we want you to know that
our members support your efforts to contain medical costs, but insist upon the
preservation and integrity of FEHBP as a program designed principally for
federal and postal employees and annuitants.
Towards this end, we believe the final bill must:
Include the Senate's FEHBP protections. If House and
Senate negotiators agree to include a Senate provision to require the Office of
Personnel Management (OPM) to administer multi-state health plans, we urge you
to retain the provisions in Sec. 1334 (g) of the Reid amendment to the Senate
passed bill, entitled "Continued Support for FEHBP" . Federal workers and
annuitants have often heard that "if you like the health insurance coverage you
currently have, you can keep it." FEHBP protections in the Senate-passed bill
would uphold that principle and would ensure that the health insurance earned by
federal workers and annuitants continues to offer comprehensive coverage with
affordable and predictable premiums.
OPM's role in administering a national health plan for non-FEHBP
participants is the most significant expansion of its duties in the agency's
history. For that reason we ask that you allow us, as representatives of the
federal employee and annuitant community, to review and comment on the final
agreement between the House and Senate so that we can ensure our members that
the integrity and administration of the FEHBP remains intact.
Drop the Excise Tax on "High Value" Health Insurance.
According to the Federal Times, 1 a study has recently been completed on the
effect of the excise tax on FEHBP. It and other projections demonstrate that the
most popular plan, Blue Cross/Blue Shield Standard (BS/BS) plan, would be
subjected to the tax. While the excise tax is slated to be imposed on the
insurers on so-called high cost plans, the tax will be passed on to enrollees in
the form of higher premiums, co-pays or reduced benefits. BC/BS plans cover
approximately 48% of FEHBP enrollees, or nearly 3.8 million Americans. Single
enrollees would be subject to the effects of the tax in 2013, while families are
hit in the third year. Including other, non-BC/BS plans, more than one-half of
active and retired enrollees will face the effects of these taxes that
accumulate to thousands of dollars in the middle to out years of the
Senate-passed bill. Because we understand the value of all health care is
counted towards the threshold amounts, enrollees with dental or vision coverage,
or a Flexible Spending Account, could reach the thresholds even sooner and feel
the effects of this tax earlier.
Characterizing this tax proposal as a "Cadillac tax" is a misnomer. It
hits the average blue collar and white collar employee or annuitant. FEHBP
insurers will simply reduce coverage and, as the taxes increase, a downward
spiral toward less coverage will ensue, which is antithetical to health care
reform's stated purpose. Penalizing FEHBP enrollees with this tax is a huge
disincentive to qualified applicants seeking federal or postal employment. It is
bad for the government and bad policy overall.
Clarify that FEHBP plans must provide dependent coverage for
children up to age 27. We are concerned the House and Senate bills are
not clear enough on the requirement for group health plans to expand dependent
coverage to the FEHBP. To recruit and retain the best and brightest workers, the
federal government, like private employers, should be able to offer its
employees FEHBP coverage for their dependents up to age 27.
Thank you for taking these concerns into account as you work to merge the
House and Senate health care reform legislation. Our members strongly support
affordable health care for all Americans and believe that goal can be attained
without undermining the health coverage already secured by millions of active
and retired federal/postal workers.
American Federation of Government Employees (AFGE)
Foreign Service Association (AFSA)
American Federation of State, County and
Municipal Employees (AFSCME)
American Postal Workers Union (APWU)
Managers Association (FMA)
Laborers' International Union of North America
National Active and Retired Federal Employees Association
National Air Traffic Controller Association (NATCA)
Association of Letter Carriers (NALC)
National Association of Postal
National Association of Postmasters of the United States
National League of Postmasters of the United States
Postal Mail Handlers Union (NPMHU)
National Rural Letter Carriers'
National Treasury Employees Union (NTEU)
Professional Aviation Safety Specialists (PASS)