An agreement to tax high-cost, employer-sponsored health insurance plans, announced with fanfare by the White House and labor unions last month, is losing support from labor leaders, who say the proposal is too high a price to pay for the limited health care package they expect to emerge from Congress.
But the White House is still urging Congress to adopt the excise tax as a way to help pay for President Obama’s ambitious health care proposals.
With support for the tax eroding, Congressional leaders are searching for alternative sources of revenue.
The search has some urgency because Mr. Obama has said he hopes House and Senate Democrats can resolve their differences and come up with a final version of the legislation before he convenes a bipartisan meeting on the issue on Feb. 25.
When the tax agreement was announced on Jan. 14, White House officials described it as a breakthrough that would help clear the way for passage of sweeping health legislation.
Besides producing a substantial amount of revenue, they said, the excise tax on the most expensive insurance plans would slow the growth of health costs by giving consumers a powerful incentive to shop for cheaper policies.
Under the agreement, which builds on a provision in the larger health bill passed by the Senate on Dec. 24, the federal government would impose a 40 percent tax on the value of employer-sponsored health coverage exceeding certain thresholds. To win the endorsement of labor leaders, White House officials agreed to changes in the tax that would lessen its impact on workers, including union members with collectively bargained health benefits.
But labor leaders have backed away from the proposal in the wake of the special Senate election in Massachusetts.
“I do not believe there will be an excise tax enacted,” said Larry Cohen, president of the Communications Workers of America. “It appears that the administration and Congress will be taking a much more modest approach to health care reform. The cost and value of such reform would not justify using an excise tax.”
A wide range of House Democrats continue to criticize the tax as bad policy, even with the changes negotiated by labor leaders and the White House.
Moreover, House Democrats said, the tax is bad politics because it would set the middle class against the poor — people struggling to keep health insurance against people struggling to get it.
Revenue raised by the tax would help finance coverage for people who are uninsured.
Reid H. Cherlin, a White House spokesman, said he was not aware of any erosion in support for the tax among administration officials.
“The president,” he said, “continues to believe that charging insurance companies a fee for their most expensive polices — an idea that has the support of experts from both parties — will help achieve the core goal of health insurance reform: putting downward pressure on long-term health costs while ensuring that we aren’t placing new burdens on hard-working middle-class families.”
But as a practical matter, labor leaders said, the excise tax was killed by the election in Massachusetts, where the Republican candidate, Scott Brown, won the Senate seat long held by Edward M. Kennedy.
In opinion polls and in conversations with lawmakers, Massachusetts voters expressed deep hostility to the excise tax.
Members of union households voted for Mr. Brown over his Democratic opponent, Martha Coakley, according to a telephone poll conducted on election night for the A.F.L.-C.I.O. He won 49 percent of the vote from union households, while she got 46 percent, the survey found.
Michael A. Podhorzer, deputy political director of the A.F.L.-C.I.O., said Massachusetts should be a warning to Democrats, like “a canary in a coal mine.”
“Fully 42 percent of voters believed the health care bill would tax employer health benefits, and these voters supported Brown by two to one,” Mr. Podhorzer said.