Reporting from Washington — The White House and labor leaders agreed Thursday on a formula to tax high-cost insurance plans, removing one of the last obstacles to President Obama's healthcare overhaul, officials said.
Under the agreement, reached after an intense round of negotiations this week, union leaders dropped their opposition to the so-called Cadillac tax in exchange for concessions to limit its scope. Organized labor had bitterly opposed the healthcare tax, arguing that union members had negotiated generous benefits in lieu of pay increases.
The compromise would raise the threshold for family plans subject to the tax from $23,000 to $24,000 and exempt the cost of dental and vision plans.
It also would postpone the tax's application to healthcare plans negotiated under union contracts.
"This is a milestone," said AFL-CIO President Richard Trumka, who helped lead the negotiations.
Senior Democrats must now take the proposed financing package to rank-and-file lawmakers in the House and Senate -- and find revenue sources to offset reductions in the Cadillac tax. Late Thursday night, Democratic leaders returned to the White House to try to reconcile differences between the House and Senate healthcare bills.
Labor leaders also will have to convince their members that the watered-down Cadillac tax is not a betrayal of Obama's campaign promise to oppose new taxes on their benefits.
Addressing the House Democratic Caucus at the Capitol on Thursday, Obama candidly acknowledged the political challenges the healthcare overhaul would pose for lawmakers ahead of November's midterm elections.
"Believe me, I know how big a lift this has been; I see the polls," Obama said. But he reassured party lawmakers that the climate would shift once voters learned more about the bill's effect.
"If Republicans want to campaign against what we've done, by standing up for the status quo and for insurance companies over American families and businesses, that is a fight I want to have," Obama said.
Republicans immediately criticized the Cadillac-tax compromise, especially the provision postponing its application to union health plans until 2018. Labor leaders said that transition time was needed to accommodate unions and employers with multiyear agreements.
