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NEA Steps Up Pressure on Excise Tax

"Tax the millionaires, not teachers and bus drivers," says Eskelsen

By Tim Walker

Thursday, December 10, 2009 -- With the U.S. Senate hunkered down in intense negotiations over its version of health insurance overhaul, the National Education Association is joining other labor organizations in ratcheting up the campaign against one of the bill’s key financing provisions: the excise tax on higher cost health plans.


At a Thursday rally on Capitol Hill, NEA Vice-President Lily Eskelsen called the measure a tax on the middle-class that would penalize people who have the quality health care that all Americas should be afforded. Eskelsen stood by other labor leaders and Senator Bernie Sanders (I-VT) to support Sanders' amendment to strip the tax from the Senate bill.

“We are in favor of health care reform,” Eskelsen told the crowd, “but the hemorrhaging middle class should not have to foot the bill. We should tax the millionaires, not teachers and bus drivers.”

NEA analyzed the effect the excise tax would have on a variety of large and small health plans, covering a total of 300,000 educators in 14 states, and determined that the tax would result in drastic reductions in health benefits, even eliminating entire classes of coverage. These findings are reinforced by a recent independent survey

of health plan sponsors by the Mercer consulting firm. According to the report, nearly two-thirds of employers, jockeying to avoid paying the tax, would opt to cut covered benefits.

In addition, arguments for the excise tax, say NEA policy analysts, are built on faulty assumptions - namely that reductions in benefits would be offset by salary increases, made possible by realized savings.

NEA argues that the assertion that state and local government employers will favor higher salaries over lower deficits, especially during a time of severe budget restraints, is not realistic. Indeed, the Mercer survey found that only 16 percent of employers said they would convert their savings into higher pay for employees.

"Even in the best of times, it's hard to convince employers to offer salary increases when they are demanding benefit give-backs," explains Barbara Keshishian, president of the 200,000-member New Jersey Education Association. "In this economic climate, that's nothing but a pipe dream."

Beyond the debilitating effect the excise tax would have on health benefits, NEA says the tax is simply bad policy. The contention that it will help reduce health care costs is based on the flawed premise that generous benefits are fueling higher premiums. A new report published in Health Affairs, however, pinned the blame on the cost of delivering care and other factors. According to the report, “only 3.7 percent of variation in the costs of family coverage can be explained by benefit design.”

While issues such as the public option and abortion have dominated the direction of the health care debate (on Tuesday night, Senate leaders reached a deal that might resolve the impasse over the public option), NEA and other labor organizations hope the Sanders amendment will help push the excise tax to the forefront. As the process enters its final weeks, the challenge is making key lawmakers fully aware of the tax’s ramifications - not to mention, according to polling, how unpopular it is with the general public.

“I’m a teacher and I give tests,” Eskelsen said on Thursday. “The Senate is facing a very high stakes test. The wrong answer is to penalize working families.”