WASHINGTON_Legislation to be outlined next week in the Senate Finance Committee will likely include a new tax on workers with the costliest employer-provided health coverage, officials said Friday, but with implementation delayed until 2013 to minimize any political fallout.

Officials familiar with internal deliberations said the leading option under consideration by Sen. Max Baucus, D-Mont., the committee chairman, would mean higher taxes for workers whose family coverage costs $15,000 a year or more in premiums paid by employer and employee combined.

The provision could generate hundreds of billions of dollars over the next decade to help pay the $1 trillion or more the Obama administration has estimated is necessary under its plan to extend health care to millions of Americans who lack it. Cuts in projected Medicare and Medicaid spending are expected to make up much of the rest.

Officials cautioned that details of the proposal could change in the days before Baucus unveils his long-awaited outline. The Finance Committee and several other panels are expected to draft legislation this month, and Democratic leaders have vowed to pass bills in both houses before Congress begins its annual August break. Their objective is to forge a final compromise this fall.

President Barack Obama campaigned against taxing health benefits in last year's campaign, attacking Republican Sen. John McCain in television advertising when McCain proposed it.


But now, Baucus has told reporters, the president appears open to the idea. Another Democratic senator who attended a recent meeting with Obama said the president did not object when the issue was raised, saying he preferred an alternative he outlined last winter. A 2013 effective date would allow Obama to run for re-election before its impact is felt.

The senator spoke on condition of anonymity to avoid discussing a closed-door meeting at the White House, and officials who described the emerging legislation said they, too, were barred from publicly describing closed-door deliberations.

The drive to find $1 trillion or more in health-care financing is one of a handful of particularly contentious issues confronting lawmakers and the White House, along with issues surrounding proposed requirements for individuals to purchase coverage or for employers to provide it for their workers.

Perhaps the thorniest issue of all is a deadlock between Democrats, most of whom want a government-run insurance option on the one hand, and Republicans, many of them adamantly opposed to the idea. Key lawmakers in both parties are studying one possible compromise, a proposal for nonprofit cooperatives to offer insurance in competition with private companies.

Sen. Kent Conrad, D-N.D., is the leading sponsor of the idea, and an outline distributed by his office described a goal of providing "a coverage option for individuals and micro-businesses," those with fewer than 10 employees.

The federal government could provide seed money, but the outline says "there would not be ongoing government backing. Sources could include federal loans and grants. As a condition of grant approval, matching funds could be required from states, local communities, or prospective co-op members." A copy of the description was obtained by The Associated Press.

Democrats are hoping that the suggestion will interest Republicans whose support they seek for a bipartisan overhaul of the health care system.

At the same time, Baucus is under pressure from Democrats to include a government option in the legislation he is expected to unveil, and it is not clear whether he will include the proposal for health insurance cooperatives.

The Finance Committee is one of several panels in Congress at work on health care, and the one lawmakers in both parties are looking for bipartisanship.

By contrast, Democrats from three panels are cooperating on a House bill with little or no Republican input. Rep. Charles Rangel, D-N.Y., chairman of the Ways and Means Committee, told reporters during the day the legislation could call for as much as $600 billion in higher taxes over the next decade.

The Senate Health, Education, Labor and Pensions Committee is considering its own version of the legislation, but does not have jurisdiction over Medicare, Medicaid or taxes, the likeliest source of financing for expanded insurance coverage.

In the Senate, those areas are exclusively in the domain of Baucus' panel.

Obama has already outlined savings totaling about $300 billion from Medicare and Medicaid, and is expected to outline as much as $300 billion more in the coming days. In addition, his budget called for higher taxes on the highest-earning income tax payers, a recommendation that has drawn little support from Democrats in Congress.


In the search for alternatives, Baucus has long been the most vocal advocate of taxing health benefits.

Under current law, individuals are permitted to deduct the cost of their health insurance premiums. The proposal would require workers with family coverage to pay income tax on the amount over $15,000 in annual premiums paid by themselves or their employer combined.

Officials said the threshold was set so those purchasing one of the most widely selected options under the Federal Employee Health Benefits Program, the Blue Cross standard plan, would not have to pay a tax. According to committee figures, the $15,000 figure also allows for an additional 10 percent cushion to allow somewhat more robust plans to remain tax-deductible.

The issue could cause concerns among some Democrats, though.

Sen. Sherrod Brown, D-Ohio, a lawmaker with close ties to organized labor, met with Obama at the White House during the day and talked about the issue. "I expressed my concern, and he didn't have much to say about it," Brown said in an interview afterward.

It was not clear whether Baucus intends to exempt health benefits negotiated under union contracts from the tax. If he did, he would ease potential opposition among Democrats. On the other hand, it would also reduce the amount raised, and require lawmakers to find other sources of financing.

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Associated Press writer Erica Werner contributed to this report.