By Martin Vaughan
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The U.S. Senate Finance Committee further trimmed a proposed excise tax on high-cost insurance plans Thursday by carving out certain employer benefits that offer insurance for specific diseases or costs associated with a hospital stay.
The change affects, among others, cancer-only plans and hospital indemnity plans offered by insurers including Aflac Inc. (AFL), Hartford Financial Services Group Inc. (HIG) and Unitedhealth Group Inc. (UNH).
Those plans wouldn't be subject to an excise tax on so-called Cadillac plans under an amendment to the proposal from Sen. Olympia Snowe, R-Maine, that the committee adopted by voice vote.
Such plans offer a fixed cash payout to cover costs arising from unforeseen medical events, including lost wages and transportation to and from treatment.
To help cover the cost of the carve-out for indemnity plans, senators dropped from the bill a tax benefit for employees who purchase long-term care insurance under a so-called cafeteria plan. Under these plans, employees are allowed to choose among a range of tax-favored benefits to meet their individual needs.
Senate Finance Committee Chairman Max Baucus, D-Mont., said he hopes to conclude committee work on amendments either late Thursday night or Friday. The committee won't take a final vote on the health legislation until next week, after the Congressional Budget Office has provided preliminary cost estimates for the bill.
The tax on Cadillac plans, which would be paid by insurers, would apply to plans that exceed $8,000 for individuals, or $21,000 for families. A 40% excise tax would apply to premiums above those amounts.
Senate Finance Committee members already agreed to changes to the tax to lessen its impact on retirees and on workers in high-risk professions such as firefighters and coal miners.
During debate Thursday morning Democrats beat back broader attempts by Republicans to strip tax increases out of the bill.
A defeated amendment from Sen. Mike Crapo, R-Idaho, would have shielded families with income of less than $250,000 from direct taxes in the bill, including the tax on Cadillac plans and a penalty on individuals who fail to purchase health insurance. Crapo said this would bring the health bill in line with President Barack Obama's pledge not to raise taxes on middle-class families. The Crapo amendment would reduce spending in other areas of the bill to offset the cost of shielding people from the taxes.
"If we can't do health care reform without taxing people in the middle class and in the lower-income category, then we've got the wrong plan in front of us," he said.
But Baucus said the Crapo amendment, in order to remain deficit-neutral, would trim health-care subsidies from the bill for those with modest incomes.
"In effect, this would be asking lower-income and middle-income people to pay for this," Baucus said.
-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@dowjones.com