Cadillac Tax Gets All Sorted Out.

So the White House and congressional leaders got together with union representatives, and came to an agreement on the so-called "Cadillac tax" provision of health reform, the one labor was opposing because it could tax their benefits. Some of the details, as Jonathan Cohn explains, are as follows:

-- Exempting vision and dental benefits from the calculations of plan value

-- Raising the threshold at which the tax kicks in, from $23,000 a year for a family plan to $24,000 a year. (The threshold for individuals goes from $8,500 to $8,900.)

-- Making additional adjustments to the formula based on age and gender

-- Allowing unions to shop for health plans through the new insurance exchanges

Those are some pretty modest changes. And to top it off, collectively bargained agreements (i.e. union contracts) would be exempt until 2017. As Igor Volsky observes, while this looks like a big favor to a special interest, it also makes a lot of sense – since union contracts typically get renegotiated only every few years, a delay gives them and their employers time to adjust their mix of salaries and benefits to avoid paying the Cadillac tax.

That, along with the other adjustments, means that the tax will collect somewhat less than it would have in its original form. But let's not forget the real rationale for this tax. It's not raising money. It's putting downward pressure on premiums. The idea is that in order to avoid paying the tax, employers will be more likely to choose less expensive plans. If more time allows unions and employers to do that, it's a good thing. Everybody wins -- except for insurers, who won't be selling as many gold-plated plans.

A few days ago, people were saying that it would be so difficult to resolve this issue that it could jeopardize the entire bill. But after a long night of negotiations, they seem to have solved the problem to the satisfaction of the White House, Democrats from both houses of Congress, and one of their most important constituencies. It turned out it wasn't so hard after all.

--Paul Waldman

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