Obamacare's 'Cadillac tax' causing union strife

The draconian fee is targeted at high-cost health insurance plans, but unions are balking at reducing benefits. The result may be job losses.

By Aimee Picchi Aug 5, 2013 10:59AM

Image: Insurance Money (© Comstock Images/Jupiterimages)The Affordable Care Act's "Cadillac tax" won't go into effect until 2018, but it's already causing trouble. 

Some municipalities are now negotiating with unions on lowering their health-care spending, but labor groups aren't eager to come to the bargaining table, The New York Times reports. 

If municipal employees don't accept lower-cost health care plans, the Cadillac tax may lead to job losses and stagnant wages among municipal employees, and even higher burdens on taxpayers, the report notes. 

Here's how the Cadillac tax works: If an employer-provided health insurance policy costs more than $10,200 for an individual, the employer will be taxed 40% of what's considered an "excess benefit," according to insurer Aetna (AET). The tax kicks in for $27,500 in spending on family coverage. 

The thinking behind the tax is that the penalty will create an incentive to scale back excessive spending. Since state and local governments typically offer pricier health plans than private businesses, they may bear a bigger burden under the Cadillac plan.

That tax is pegged to provide $80 billion to the federal government over the next decade, according to a Congressional Budget Office report issued in May.

But that's likely to come at a cost for both taxpayers and municipal workers. 

Cities including New York and Boston are cautioning unions that without reductions in health care costs, the tax will result in possible job losses or a lack of raises, The Times notes. In New York City, the Cadillac tax could mount to $549 million by 2022, according to an estimate from the city's deputy mayor for operations. 

"In the end, it’s the taxpayer that’s going to bear that burden,” Jim Finley, the executive director of the Connecticut Conference of Municipalities, told the Times. 

Follow Aimee Picchi on Twitter at @aimeepicchi

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Aug 5, 2013 12:02PM

Well, the Obumers got just what they asked for.  A health plan that nobody in DC bothered to read before it was passed into law.  And the lackey unions and their sheep blindly walked off a cliff with Nancy and Harry leading the charge.


Good luck on this one. A true disaster in the making.

Aug 5, 2013 12:23PM
How 'bout a law to "scale back excessive spending" in DC? 
Aug 5, 2013 11:43AM
Just like Nancy, maybe they should have read it before they supported Obama.
Aug 5, 2013 11:41AM
Hey the Unions supported this.  Had they opposed this, it wouldn't be here.

The train wreck is coming, make sure every democrat is on the train....  Unions, government workers, socialists...   All aboard...  The train is leaving the station...   hopefully it's going as fast as that train in Spain...  
Aug 5, 2013 1:52PM
Just remember folks, the government can't give you anything they haven't taken first.
Aug 5, 2013 12:14PM
My sister had a kidney stone. 900 dollars to get 911 ride from home (she could not walk and had no one to take her in the middle of the night) to the hospital 20 miles away. She had the stone broken up with a laser and no incisions. 20,000 for that and one night stay. She went back to get a stint removed in doctors office that they had inserted up the Aretha (just pulled it out via bladder). no drugs, no incisions and a 20 minute office call. 3500. Costs are the problem.
Aug 5, 2013 2:04PM
Obama is doing what he set out to, complete and utter destruction of the middle class in this country. The idiots that voted him in are begging, "Yes sir, may we have another". Unbelievable, thanks Obama, with your plan we will be a third world country in just a few short years.....Great job.
Aug 5, 2013 1:19PM

Time to stop working, get a couple Obama phones, a bridge card and SS disability.  Live high on the Obama!!!!!!

Aug 5, 2013 11:25AM
This is what the stupid....sh..ts called unions voted for so let them eat it with the rest of us.  I have to say im around coal miners that are part of the unions and how they can vote for someone that tells them they want to get rid of their jobs is beyond me.  I mean Odumbo told these people he was going to kill the coal mines industry and here they voted him back in.   Real swift union.  This is like dumb and dumber.
Aug 5, 2013 2:13PM
This is the law the unions wanted, supported, and pushed for. This is THEIR law. Tell them to shut up and pay up, just like the rest of us.
Next time they vote for a Democrat, they should probably see what they have in store for themselves.
Aug 5, 2013 1:06PM
The DemoCracks fiscal and economic ignorance is pathetic and wasteful - and in the case of ObamaCare the decision will gradually ripple into a perpetual apocalypse
Aug 5, 2013 1:14PM
People the problem is Welfare Healthcare will Kill All Of US.  Sounds great in Principal but now all those poor who never went to the doctor until they were about dead, WILL now be going a lot more often and the costs to keep them alive will be PAID for BY ALL OF YOU.  Now everyone's screwed.
Aug 5, 2013 2:23PM
Hahahahahahahahaha! What did they think was going to happen?

This law is disastrous this is only the tip of the iceberg. No doubt that the healthcare system needs fixed but all this law did was break it further. there should have been years of study and a carefully drafted law to fix the issues. Not something that was drafted in a hurry, not read by anyone who voted on it, and pushed through the legislature before the midterm elections because the Dems thought they might loose the house.

Shameful display of governing by our elected officials.

Aug 5, 2013 12:35PM
This bill is just another example of privatizing profits and socializing losses.
Aug 5, 2013 2:00PM
amen to obummer's dumbocrats getting what they voted for. As for the rest of us,,, bend over, grab your ankles,, it's prostate exam time.
Aug 5, 2013 11:52AM
"In the end, it’s the taxpayer that’s going to bear that burden,” Any tax will be paid by the taxpayer which is why it is called a tax. Instead of reporting obvious fact why not report the number of people who currently receive over $10,000 in employer paid premiums? Why not report on what the tax money collected will be allocated to? seems like Aimee doesn't like to do any real investigative and just giving the readers vague ideas of what "could" happen.
Aug 5, 2013 12:06PM

Perhaps the solution is to see why private insurance administrative fees are so high (compared to medicare) and work to reduce their overhead?-- Good idea. The cost is what is killing people.

We have those that can afford any premium, copay, deductible, and max out of pocket. Then we have the Medicaid group which I think pay nothing. Then we have the Medicare group and they need a supplemental policy or get Medicaid too to pay off what medicare does not pay.  We have those that work for the gov and large corporations and have a huge advantage of being part of large groups which brings the cost down.  By the way the large corp's only supply 8% of our jobs. Not sure what the gov. number is. Then we have the middle class that gets screwed.

Aug 5, 2013 11:56AM

We need to get away from all healthcare by employer or gov. and purchase all on the open market thus getting the cost down. We are killing our companies with current and legacy costs.

The only thing unions and gov. and employers should be concerned with is workman's comp, disability,

and LT care, all having to do with getting hurt or disabled ON THE JOB.

Aug 5, 2013 11:41AM
The 40% tax will only be applied to money after the $10,000 thresholds so for example if you get $11,000 in employer paid premiums then only $1,000 of it will be taxed at the 40% rate. Most health care plans employer portion is around or less then $10,000 so most people will not be affected. From my experience from working in both the public and private workforce large private companies provide the best health insurance coverage. Perhaps the solution is to see why private insurance administrative fees are so high (compared to medicare) and work to reduce their overhead?
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