Coalition to Fight Taxation of Benefits : Health care: Major interest groups join forces to oppose a key element of Administration proposals for reform.

Representatives of labor, large corporations and the insurance industry have formed the first major coalition to publicly oppose the Clinton Administration on health care reform.

The group, calling itself the Coalition to Preserve Health Benefits, is planning an orchestrated campaign against an expected part of the emerging Administration reform plan: taxation of health care benefits.

“This is a White House that can’t get it right on choosing an attorney general. Why should we think they will get it right on health care, which is infinitely more complicated?” said Kenneth Feltman, executive director of the Employers Council on Flexible Compensation, whose board includes Citicorp, TRW, Hughes Aircraft, Kraft General Foods and Pepsico.

Feltman’s organization, along with the AFL-CIO and a group of small and medium-sized insurance firms, have scheduled a press conference today to unveil their campaign. The coalition plans rallies in six cities, beginning in Austin, Tex., on Thursday, to drum up support for its cause.

By creating a standard national package of health benefits worth $2,500 to $3,000 and taxing any benefits above that level, the Administration would pit workers against companies and cripple a firm’s ability to determine the best health care coverage for its employees, Feltman said Monday.

According to a senior member of the White House Task Force on National Health Care Reform, such a concept is “very much a part of (health care reform) discussions” and is being pushed vigorously by champions of managed competition.

Another White House official confirmed Monday that taxation of benefits through managed competition is “definitely on the table.”

The Clinton Administration is attempting to develop a basic benefits package for all Americans under a program of universal health insurance coverage. Likely to be a bare-bones package, given the costs, it would emphasize preventive and primary care, while including some level of hospital coverage, senior task force officials said.

Advocates of managed competition, who include some of Clinton’s closest advisers on the health issue, argue that a tax on benefits has two advantages.

It would raise billions of dollars desperately needed to help pay the cost of basic coverage for 36 million Americans who now lack health insurance.

And it would force workers and employers to choose less costly benefits packages.

Corporations now spend an average of $3,000 a person to provide health insurance coverage, while some firms spend as much as $6,000, Feltman said. The costs are deductible for companies and are not counted as taxable income for workers.

“We think that with all the policy wonks massaging health care and all the organizations coming up with solutions that, in essence, feather their own nest first, it’s about time we hear from the people who pay the bills and those for whom the health care system is designed, the public,” said Feltman, whose group includes some state employee groups, in addition to corporations offering a variety of health and pension benefits.

In addition to its anti-tax rally in Texas on Thursday, the coalition plans rallies in Indianapolis; New York; Portland, Me.; Kansas City, Mo., and Houston. Future demonstrations and protests will be held if President Clinton includes the taxation of benefits in his final plan, which is expected to be delivered in May, said Stephen Cook, the coalition coordinator. “If he drops the idea, we’ll disband and go about our way.”

Labor union officials consider the taxation of benefits an unacceptable tax increase on middle-class Americans that would penalize individuals who have benefits beyond the standard level devised by the Clinton planners.

Furthermore, health insurance firms argue, the managed competition plan, which envisions all Americans enrolled for their health care in one of several local networks of doctors and hospitals, is too restrictive.

“There will be very few choices, and if there is mismanagement in these large groups, they will be considered too big to fail and they will be bailed out,” said Greg Scandlen, executive director of the Council for Affordable Health Insurance, which represents companies that insure about 3 million people through individual or small-group policies.

Managed competition essentially would wipe out his segment of the insurance business, he said. Only the top 50 or 100 insurance firms and 200 or 300 health maintenance organizations would be expected to have the money and expertise to run huge patient networks, according to industry experts.

Also joining the coalition are the Society for Professional Benefits Administrators, which develops and runs health insurance programs, and the Self Insurance Institute of America, which includes companies that pay their own health and medical bills directly.

The Coalition to Preserve Health Benefits was created last year as a general discussion group for health issues.