Many federal workers won't benefit from insurance tax delay

By Joe Davidson
Wednesday, January 20, 2010; A13

At one point, the Federal Employees Health Benefits Program was looked to as a model for national health insurance reform. Now, in an ironic turn of events, the 8 million people covered by the plan may not get all the benefits from the proposed insurance overhaul legislation that other citizens would.

When the White House agreed last week to let state and local workers and union members off the hook from a proposed tax on expensive insurance plans until 2018, most federal employees were not included.

Federal union leaders, along with others from organized labor, had railed against the tax. But the main federal unions were not part of the negotiations that led to the compromise to move back imposition of the tax five years.

Now federal employee and retiree organizations are pushing all the buttons they can to get federal workers the benefit of that delay.

"NTEU is working hard to ensure that federal employees are included in a compromise to limit the impact of an excise tax," said Colleen M. Kelley, president of the National Treasury Employees Union. "At this point, we do not think anything is final and we are pressing to ensure that federal employees will be protected."

In a letter to House and Senate members, Kelley noted the hardships federal workers and retirees, along with others in the country, endure due to rising health-care costs. "Penalizing them even more," she said of the federal staffers, "by subjecting them to additional passed-along costs is burdensome and will simply serve as a disincentive to attracting a vibrant and talented workforce."

Allowing those in the Federal Employees Health Benefits Program to also benefit from a delay in the tax, she added, "is the equitable and right thing to do."

But the tax, in any form, and the effort to overhaul the nation's health insurance system now will be more difficult to accomplish because of Republican Scott Brown's victory in Tuesday's Senate race in Massachusetts. His win over Democrat Martha Coakley gives Republicans enough votes to block the legislation.

The 40 percent excise tax is part of Senate Democrats' plan to finance coverage for millions of Americans who do not have health insurance. Under the agreement, the tax would apply to family policies worth $24,000, and single policies worth $8,900, instead of the $23,000 and $8,500 thresholds proposed under the Senate bill. All federal plans are now below the lower levels, according to the Congressional Research Service. Health plans covering significant numbers of older people could get an additional break and that could help those with FEHBP coverage, because it also covers retirees.

The compromise would delay imposition of the tax from 2013 to 2018 for state and local workers and employees with health plans covered by collective-bargaining agreements. Many federal employees have collective-bargaining rights, but for most their pay and health insurance benefits are not covered by negotiated agreements. GovExec.com first reported that most federal workers were not included in the compromise.

"Federal workers and annuitants should not be left out of this compromise merely because they forgo collective bargaining rights with respect to these benefits as part of the commitment they make to public service," Margaret L. Baptiste, president of the National Active and Retired Federal Employees Association, said in a letter to President Obama.

It's not clear why federal workers were not included in the tax delay. Several labor leaders said members of Congress, who also are covered by FEHBP, may not have wanted to be seen giving themselves the benefit of the delay.

As admirable as that may be, the effect is to stiff the rank-and-file compared with their colleagues in state and local governments and to their unionized brothers and sisters in the private sector.

A spokesman for Rep. Steny H. Hoyer (D-Md.), the House majority leader, said he raised the issue of disparate treatment for federal workers, but that apparently went nowhere.

The agreement could have included federal workers, with an exception written in for those who are elected to their positions. That would have avoided the self-interest problem for representatives and senators. With all of the heavy issues that had to be resolved during marathon negotiations, that option apparently wasn't discussed.

The American Federation of Government Employees is pushing that option, said Beth Moten, the union's legislative director. Hoyer is, too.

"Federal workers and retirees should have the same transition period to adjust to changes in their health benefits as other public employees have," Hoyer said, "and I have made that clear in the negotiations on a final health reform bill."

Staff writer Eric Yoder contributed to this report.