President Obama struck a deal with labor leaders and others Jan. 14 to increase the thresholds of the proposed 40% health care plan excise tax for family plans valued at $23,000 to $24,000 and individual plans from $8,500 to $8,900, delay the effective date of the tax by five years for collectively bargained plans and public employers, and make dental and vision plans exempt starting in 2015.

In return, the labor leaders agreed to support the legislation. EBA asked our health reform panelists to weigh in on the situation.

While The Washington Post reports that workers with collective-bargaining agreements and government employers would be exempt from the excise tax until 2018, giving them time to renegotiate their contracts, the whole concept is flawed, says Andrew Butler, president, Iowa’s Butler Benefit Service. “The 40% surcharge on ‘Cadillac’ plans is a poor idea in general,” he says. “Such an idea reflects the fact that our politicians don’t feel that groups that have such quality plans deserve them.”

CPA Doug Powers questions how to evaluate an unusually generous health plan to begin with. “What constitutes an unusually generous health plan policy for employee only, employee plus spouse, employee plus children and employee plus family?” he posits. “Is it measured in terms of low premiums, deductibles and other point-of-service payments such as copayments, or by benchmarking to other plans in the same industry?”

Meanwhile, Dave Lapka, president of logistics consulting company D360, says benefits such as dental and vision plans — excluded from the tax or not — should not be considered safe from cutbacks. “Given the levels of behavioral control that pure medical gives the [Democrats] versus vision and dental, they will almost surely be initially bypassed,” he says. But if health care reform passes, “in five to 10 years dental and vision will be government-controlled (taxed) as well.”

Pat Carpenter, vice president, business development with Sequent Retirement & Benefits Group, shares a similar opinion: “Nothing is safe when Congress is in session.” However, “dental and vision are usually money ‘going around in circles.’ In other words, if someone were to pay for this care out of pocket, it would be about the same as the total premiums spent, unless there was lots of dental work to be done. When the employer subsidizes this coverage, it is a benefit to the employee, but rarely ‘unusually generous.’”

The real question lies with the “big dollars” generated by core medical coverage and whether or not the Federal Employees Health Benefits Program will be exempt from any excise tax, adds Carpenter: “Many of the options there certainly qualify as ‘unusually generous.’ Until our public servants are subject to the laws they make for other people, this is simply a power grab, one that will cost us for years to come.”

The issue of the necessity of $23,000-plus plans aside, Bob Shupe, president of the Shupe Center for Healthcare Reform, says there are plenty of other obstacles to address before any kind of health care reform can be called a success. “Those obstacles would include disproportionate health care premiums from state to state and region to region, and a small annoying matter called ERISA,” he says. 

Shupe points out that, for example, a $23,000 family premium in Tennessee has a very different impact than one in New Jersey — an issue dealt with in the negotiations by raising the threshold for taxation by at least $3,000 in high-cost states — but he questions why a fixed dollar amount is needed at all. “If a union plan, or for that matter any plan, is spending $23,000 for a family health plan they need a good consultant — not a tax break,” he says.

As for dental and vision care, “why not throw in plastic surgery? All three will be virtually unaffected by anything that is going on in Washington,” Shupe believes. “These coverages have always withstood changes because they are self-limiting in coverage and high-profit products. Offering to exclude these is like agreeing to a back rub as punishment.”

For more on the excise tax, listen to our podcast with American Benefits Council President Jim Klein, recorded just hours before the negotiations.