A reported deal has been reached between the White House and union leaders regarding the proposed 40 percent excise tax on high cost (“Cadillac”) healthcare plans for inclusion in the final healthcare overhaul bill. This tax – first appearing in the Senate version of the legislation – is favored by President Obama, but has been heavily criticized by both House Democrats and organized labor.

According to the AFL-CIO, collectively bargained as well as state and local healthcare plans would be exempt from the excise tax until 2018, five years after all other plans would be subject to this tax. Collectively bargained plans would be able to take part in the health insurance exchange in 2017. In addition, the tax would apply to family health policies that cost more than $24,000, and single plans that exceed $8,900, up from the $23,000 and $8,500 thresholds outlined in the Senate bill. These threshold levels would be increased for plans that have significant numbers of women and/or older workers. The cost of dental and vision benefits would no longer be factored into healthcare costs for excise tax purposes starting in 2015.

These provisions, if included in a healthcare bill that ultimately passes, could make collectively bargained healthcare plans comparatively more attractive – an argument unions will no doubt employ during organizing campaigns.

Congressional leaders working on the bill are likely to continue negotiations through the weekend in order to submit a copy of the bill to the Congressional Budget Office (CBO) for review. The CBO needs to provide a cost analysis of the measure before Congress can vote on a final bill.

Proponents of healthcare reform feel a certain degree of urgency in developing a final bill, as Massachusetts is holding a special election on Tuesday to fill the Senate seat vacated by the late Ted Kennedy. Latest polls indicate that the race between Massachusetts Attorney General Martha Coakley (D) and State Senator Scott Brown (R) is a close one. Should Brown win the election, Senate Democrats will lose its filibuster-proof 60-seat majority, putting the fate of any healthcare bill in jeopardy.

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