Exempting Federal Employees, Retirees and Congress from Some Health Care Costs

Health care has been in the forefront of the news recently despite having to compete with an economic recession and military conflicts overseas. The good news: Federal employees and retirees have been spared from bearing some of the initial cost of reforming the health care system in one of the health care proposals still floating around.

No one knows what will happen to the various proposals to change the American health care system in the coming weeks and months. We do know that the election of Scott Brown as the new Republican senator from Massachusetts has changed the dynamics of enacting changes to America’s health care system. "Reforming" health care had seemed inevitable as early as last summer and as late as last week according to various analysts who have stayed abreast of various controversial proposals.

But American politics is as unpredictable as ever. One of the most liberal states in the country has elected a Republican senator to replace Ted Kennedy—a very liberal Democrat and a long-time advocate of changing the health care system. The irony of the situation is obvious. With the new senator taking over the seat held for decades by Senator Kennedy, the health care reform movement is in disarray.

As it currently stands, House Democrats do not want to pass the Senate bill because of disagreement with portions of the that bill. Senate Democrats don’t want to start over on a new bill just to appease the House. And, from all indications, the White House isn’t telling Congress what it thinks should be done to fix the problem.

But, whatever the final outcome, it is clear that various groups, including federal employees, do not want to have to pay the 40% excise tax on Cadillac health plans as envisioned by the health bill that passed in the Senate. (See Paying for Health Insurance Reform: 40% Tax on Some Federal Health Plans)

While the tax would be forced on insurance companies, groups trying to ensure that federal employees are not hit with the extra costs associated with changing the health care system say the costs would just be passed on to policyholders. In effect, if you wanted to keep the higher end federal plan, it would cost you more money. The result would probably be more federal employees would opt for less expensive plans with decreased benefits.

While the Senate bill may never get passed, federal employees and those in Congress apparently don’t have to worry—for several more years anyway.

Last week the White House and congressional leaders reached an agreement that delayed the initial starting date for for the new tax from 2013 to 2018. That agreement did not include federal employees or Congress.

An agreement has now been reached to include federal employees and retirees in a health care compromise that provides short-term protection from an excise tax on insurance plans. The deal to delay the extra tax also includes Members of Congress and political appointees.

So, while the future of changing America’s health care system is still up in the air, federal employees, Congress, and the unions that supported the President have apparently been exempted from some of the initial costs in the proposed change.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47