King County health-care costs may rise

The federal health-care overhaul will bring medical coverage to nearly 153,000 uninsured King County residents, but it also could be a gut-punch to county finances.

Unless the county tames the growing cost of its employee-health plans, it could be forced to pay $18 million to $33 million in new taxes on "Cadillac plans" starting in 2018, a Metropolitan King County Council analyst warned Wednesday.

Supporters of the health-care law signed March 23 by President Obama say that's a good thing — because it provides an incentive for County Executive Dow Constantine to negotiate reduced health plans with labor unions.

In one of the council's most partisan debates in months, opponents of the law argue the "Cadillac tax" puts the county's precarious financial position in even greater danger.

Constantine, who has declared a long-term goal of reducing spending growth to the rate of inflation, proposed a sales-tax increase Wednesday to prevent deep cuts to police, prosecutors, courts and public health next year.

Shortly before he announced the proposal, legislative analyst Wendy Soo Hoo told council members the county will have to begin paying a 40 percent tax in 2018 on health-care spending above $10,200 a year for individuals and $27,500 for families.

County-health spending is below those thresholds now, but if costs go up 8 percent a year, the county would have a 2018 tax bill of $18 million. With 10 percent inflation, the tab would hit $33 million.

Soo Hoo briefed the council as it considered a motion declaring that the health-care law "will directly benefit many King County residents" and opposing state Attorney General Rob McKenna's participation in a lawsuit challenging the constitutionality of the law.

Council members defeated a series of amendments introduced by Republicans and endorsed the motion sponsored by Democrats Bob Ferguson, Larry Phillips and Larry Gossett — all by 5-4 votes along party lines.

"I want to remind everyone that we are a functioning nonpartisan body," said Councilmember Reagan Dunn, a Republican, eliciting guffaws. Voters in 2008 made County Council elections nonpartisan but didn't end partisan behavior.

Dunn sponsored an amendment that would have repudiated the "Cadillac" health-plan tax. "We're talking about a huge hit to the county," he said.

Dunn said the county's health-care plans — which shifted more costs to employees this year but still don't require them to pay a share of premiums — is "simply too generous."

Councilmember Julia Patterson, a Democrat, agreed the plans are too expensive but defended the tax as an incentive to reduce those costs. "There should be a tax on 'Cadillac' plans like King County's," she said, adding that the county should consider dropping doctor-prescribed massages as a benefit.

Caroline Whalen, county administrative officer, said the county may be able to avoid the "Cadillac" tax by renegotiating health benefits for most of the county's 13,000 employees in two bargaining cycles between now and 2018.

She said the new law "sets a reasonable national threshold from which we can bargain benefits. That's very helpful to management. I think it gives labor a clear signal of what is considered to be reasonable."

The county's federal tax liability also could be reduced if sheriff's deputies and jail guards are deemed "high-risk" employees eligible for a higher tax threshold.

Keith Ervin: 206-464-2105 or kervin@seattletimes.com