Sam Stein at Huffington Post is reporting that Congressional Democrats might be working on a deal about the excise tax on employer-provided health insurance. This deal would go further than just provide a carve-out for labor unions.

A revised version of the so-called “Cadillac tax” would exempt holders of health-care policies that were negotiated through collective bargaining, meaning that union workers wouldn’t get hit. But in a sign of how much labor leaders have dug in their heels, they are also pushing to exempt non-union workers who earn less than $200,000 a year. In addition, negotiators are also working out a separate compromise that could exempt state and municipal employees in right-to-work states.

“This is not simply just a deal for unions,” said one of the sources briefed on the conversations. “This will take the burden off middle-class individuals as well.”

How much would this change reduce the amount of revenue that the CBO projects the excise tax will collect over the next decade?

That is tough to say. In the first years, the excise tax would collect very little money, only $7 billion, because it would only hit a relative few of the most expensive plans in the country. The issue is that the excise tax is not indexed to medical inflation, so, each year, it would affect more and more plans. By 2019, it would start hitting many people in the middle class, as well as union members. That is also the year it really starts pulling in the money, collecting $35 billion.

The CBO scored the excise tax in the Senate bill as collecting $149 billion. If I were forced to make a very rough guess based on very limited information, I would speculate these changes would cut the money collected from the excise tax in half. It would probably not really affect the amount of money the tax collected in the first year, but would prevent that tax from really picking up steam in the last few years.

The negotiators will need to find a place to make up for this lost revenue. I would personally prefer they go with the House’s stronger employer mandate (which collects $100 billion more than the Senate’s free rider provision), but the rumors seem to point to a Medicare payroll tax on money earned from investments. I still think it is important that the excise tax takes into account some form of age and health status adjustment to make sure it is hitting “generous” plans, and not just expensive plans from companies that happen to have a lots of older employees.

Update – CNN is reporting a tentative deal has been reached but there are currently no offical details