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Cadillac Tax Compromise: Win, Lose, Or Draw?

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After three days of intensive eyeballs-to-eyeballs negotiations between union leaders and the President of the United States over the Administration's worker unfriendly tax on healthcare benefits, the unions blinked Thursday night.

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Though not a full surrender as much as a compromise by labor to buy some time for its members, nonetheless the union chiefs will have a possibly daunting task of convincing their members that the still alive, though softened Cadillac tax is not a betrayal of them by both their union leaders as well as President Obama.

According to AFL-CIO President Richard Trumka, the terms of the deal struck are:

(1) The threshold for families that would be hit by the Cadillac tax was raised from plans costing $23,000 to $24,000, starting in 2013, with proportional increases for individuals in high-cost individual plans

(2) Health care inflation costs will be taken into account

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(3) Adjustments will be made for high-cost plans in companies that have large numbers of women or older people, whose plans tend to cost more even if they offer no additional benefits

(4) No state and local employee plans, nor plans in collective bargain negotiations, would be subject to the tax until 2018

(5) Collectively bargained plans will be allowed to participate in the health insurance exchange, starting in 2018

(6) To encourage employers not to drop supplemental benefits, the compromise would allow the cost of dental and vision coverage to be excluded from the calculation beginning in 2015.

White House officials confirmed the agreement not long after labor officials announced it.

"Negotiations of this kind are obviously filled with compromises on both sides," said American Federation of State, County and Municipal Employees (AFSCME) President Gerald McEntee. AFSCME was, perhaps, the most determined of the unions to kill the excise tax because of the nearly two million state, county and municipal workers who might be eventually forced into the tax on benefits.

The Obama Administration supports the excise tax on healthcare benefits because the tax is seen as a deterrent for companies to offer expensive plans that potentially waste health care dollars.

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With his announcement of the deal, Trumka said, "We've been at this for 60 yrs and we are extremely proud of the constructive role that labor's played in advancing healthcare reform." He declared the compromise a "step along the way in a quest for real reform."

"We believe we are going to actually implement a healthcare plan that is good for American families," said Anna Burger, secretary-treasurer of the Service Employees International Union.

American Federation of Teachers President Randi Weingarten says the deal "protects working families that may have high cost plans but not high end plans."

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Retired, Robert Arend was president of an AFSCME local from 1997-2007.

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