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'Cadillac' health tax costs draw big worry

New Hampshire Union Leader

June 06. 2014 6:29PM

MANCHESTER — The prospect of a $5 million tax on “Cadillac” health plans under Obamacare has city officials debating whether to seek a waiver from the tax, set to go into effect in 2018, or to use it as leverage to wring concessions from unions.

Mayor Ted Gatsas has sent a letter to the state’s congressional delegation raising concerns about the so-called Cadillac tax and calling for a waiver.

Gatsas wrote that while the Affordable Care Act, the official name for Obamacare, “was intended to help uninsured Americans gain access to health insurance, it is undermining the ability of employers, especially municipalities, to continue to offer quality health insurance while balancing their budgets.”

Gatsas said on Thursday that state officials are also concerned about the tax, and he expects other municipal leaders to raise concerns as well. “I don’t see this just as a burden on Manchester; it’s across the country, for states and municipalities,” he said.

Some aldermen, however, are pushing back against the waiver request, arguing it would undermine the city’s position in negotiating with unions. The matter was debated at Tuesday’s Board of Mayor and Aldermen meeting.

“This is ammunition in your hands when you’re negotiating, or whoever happens to be negotiating,” Alderman-At-Large Joe Kelly Levasseur said at the meeting. “If we don’t rein in these Cadillac plans, we’re going to be subject to a huge tax, and then that will break the tax cap, and there will be chaos.”

Levasseur added, “I like chaos. It makes people come to the table and negotiate in good faith.”

Gatsas said on Thursday that he wanted to be “ahead of the curve” in dealing with the potential for a $5 million tax bill rather than “worry about negotiating for it.”

Starting in 2018, the Affordable Care Act will levy excise taxes on employers whose health plans cost more than $10,200 for individuals and more than $27,500 for families. The plans will be taxed at 40 percent of the cost above those limits.

At projected rates of health care inflation, the city could face a $1.4 million tax on the health plans of municipal workers in 2018 and more than $5 million for those of school employees, according to Tom DeLacey, a principal with Workplace Benefit Solutions, the city’s human resources consultant.

Unions representing the majority of city workers have agreed to adopt health care plans that shift a greater share of premium, co-pay and prescription costs onto them. The union representing city teachers, however, has so far rejected similar changes.

“On the school side they still have rich plans, with the $5 office visit,” DeLacey told the aldermen on Tuesday. “Those plans are considerably more expensive and, looking at it going out, will be in jeopardy of the tax in 2018.”

The issue has immediate relevance for city officials since union contracts typically run three to four years. The teachers are working without a contract, and the contracts for most city unions expire at the end of 2015 fiscal year. Representatives of at least one city union have already indicated that they want to begin the negotiations process.

The aldermen voted to refer the Cadillac tax issue to the Committee on Human Resources for further discussion.

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