Benefits tax would hit federal workers hard

The benefits tax now included in the Senate's health reform bill would hit federal employees' most popular health plan, according to two reports released this week by CWA and other unions that represent public employees. The reports are further evidence that the so-called "Cadillac tax," described by its supporters as aimed lavish benefits enjoyed by a few workers, will actually impact a large swath of the middle class with decent, but not excessive, health plans.

"This tax is the opposite of health care reform - it represents a benefits cut and a middle class tax increase," said Larry Cohen, president of CWA. "The Senate should look to the House version of the bill for alternative ways to fund health care reform."

The reports were released this week by the American Federation of Government Employees (AFGE), American Postal Workers Union (APWU), and National Association of Letter Carriers (NALC) as well as CWA. They were joined at the press conference by Rep. Chris Van Hollen (D-Md.) and Rep. Gerry Connolly (D-Va.).

By the end of ten years, according to the reports, federal workers with family coverage in the federal Blue Cross Blue Shield Standard plan would be hit by taxes of $5,500 a year; those with an individual plan $3,500 a year. Like other employers, the federal government could pass on the tax to workers or cut benefits.  Already, nearly two-third of employers said they would cut benefits if the tax is passed.

The Blue Cross Blue Shield Standard plan covers about half of federal workers. Counting dependents and retirees, it enrolls nearly 3.8 million people.

"The excise tax is a direct tax on our members' benefits and will result in a huge benefit cut and increased co-pays and deductibles. We have a no-win scenario here; it's the wrong direction for health care," John Gage, president of AFGE, said.

The benefits tax issue is also the subject of a new blog by Richard (RJ) Eskew, a former insurance executive. It's called "No Middle-Class Health Tax," and it's worth checking out on a regular basis.  Eskew also lays out the case against the benefits tax for the Huffington Post.