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Lawmakers include feds in excise tax relief

But fate of health care bill is still uncertain.

Lawmakers agreed on Thursday 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 excludes members of Congress and political appointees, according to the office of Rep. Gerry Connolly, D-Va. Connolly and the National Treasury Employees Union both confirmed that federal employees and retirees now are part of the excise tax compromise. Connolly said it was a "glaring oversight" that federal workers initially were left out.

The excise tax, included in the Senate's health care bill, would impose a 40 percent tax on the value of health care plans that exceed a set premium threshold. While the tax would be levied on insurance carriers, critics claimed those costs will be passed on to middle-class policyholders and lead to decreased benefits and increased out-of-pocket expenses.

In response to that criticism, the White House and congressional leaders last week forged a compromise that pushed back the tax's start date for certain health care plans from 2013 to 2018. But that deal did not include federal employees initially because, in all but a few cases, their health care plans aren't part of collective bargaining contracts.

In addition, lawmakers expressed concern that if the five-year delay of the tax was applied to health care plans in the Federal Employees Health Benefits Program, it would appear to be a conflict of interest. Members of Congress are enrolled in FEHBP as employees of the federal government.

NTEU President Colleen Kelley said implementing the tax for feds in 2013 could have hurt federal recruiting.

"The imposition of such a tax in the immediate future -- which would have been passed on by insurance carriers in the form of higher premiums, co-payments and reduced benefits -- would make it more difficult for federal agencies to recruit and retain the high-quality employees so critical to the effective performance of their missions," she said in a statement.

The Senate bill contains premium threshold levels of $8,500 for an individual plan, and $23,000 for a family plan. According to the AFL-CIO, the deal will raise those limits to $8,900 and $24,000 respectively, and also will exclude dental and vision coverage from the tax.

Lawmakers had hoped the Senate would approve the compromise and send it to President Obama's desk to become law. But with the election of Massachusetts Republican Scott Brown to the Senate and the end of the Democrats' filibuster-proof majority on Tuesday, it's not clear how the compromise will be implemented. Brown has vowed to vote against the health care bill. One option would be to change the taxes through the Senate's reconciliation process -- a procedural maneuver for budgetary legislation designed to avoid a filibuster. Connolly said, however, that option was becoming less likely.

"I just think more and more members of the House Democratic Caucus are uncomfortable with that approach," Connolly said. "Given the glacial pace of activity in the Senate, trusting our future to Senate reconciliation is a dicey business."

Other options include passing the bill in smaller parts, or forging a deal to win Republican votes in the Senate, he said. But Connolly and the NTEU both vowed that the excise tax would include the exemption for federal employees if it were part of the final legislation.