Study finds significant non-union impacts for proposed tax on “Cadillac” health plans

Researchers at the University of California, Berkeley’s Center for Labor Research and Education report that an excise tax on high-cost employer health insurance plans as proposed by the U.S. Senate would affect more non-union than union workers.

Likewise, they say a majority of the savings from a reduction in the tax, as proposed by the White House and union leaders in January, would accrue to non-union workers.

The researchers’ policy brief, “Who Benefits from the Proposed Amendment to the Senate Excise Tax on Employer Health Premiums,” was released today (Thursday, Feb. 18) and is online at the Labor Center home page. Its authors include Ken Jacobs, chair of the labor center, and William Dow, a UC Berkeley professor of health economics and a former senior economist with President George W. Bush’s Council of Economic Advisers.

The U.S. Senate health reform bill passed late last year included a 40 percent excise tax on the cost of health plans exceeding $23,000 for families and $8,500 for individuals. When White House and union leaders in January negotiated an amendment to reduce the proposed tax, it was widely seen as a boon to labor.

But Jacobs and Dow report that because non-union workers comprise a much greater share of the number of employees with job-based coverage, 71 percent of the total savings from the proposed excise tax amendment would accrue to workers not covered by a collective bargaining agreement.

Some other key findings include:

  • Most employees impacted by the Senate plan or the proposed amendment are not covered by a union contract.
  • Union workers would be less likely than other, non-union employees to be affected by the tax initially, but that would change starting in 2019 under the Senate bill and in 2024 under the proposed amendment.
  • The proposed amendment of the excise tax would reduce tax revenues by $41 billion, with 71 percent of that reduction going to workers not working under a union contract.
  • Finance, government, healthcare and the service sector have the highest share of workers with plans that would be taxed by 2019 under either the Senate plan or its proposed amendment, while retail, construction and manufacturing sectors have the smallest.

Most studies of the excise tax to date have focused on its effectiveness for cost containment or for raising government revenue.

The labor center research examined 2008 and 2009 data from the Kaiser Family Foundation and Health Research and Education Trust Employer Health Benefit Survey, and calculated inflation rates for health plan premiums using Congressional Budget Office projections.

The labor center is a public service project of UC Berkeley’s Institute for Research on Labor and Employment. Its research was funded by a grant from The California Endowment, a private, statewide health foundation that provides grants to community-based organizations in California and by the Institute for America’s Future.