Health care claims tax eyeballed
By Neal P. Goswami
VERMONT PRESS BUREAU | January 31,2014
MONTPELIER — The Shumlin administration is making its initial pitch to lawmakers on doubling a behind-the-scenes tax paid by most Vermonters to fund growing health-care-related expenses.
Consumers are currently footing the bill for a 0.8 percent tax on all processed health-insurance claims. That tax bill is sent to insurance companies, but they recoup those costs by building the expense into insurance premiums.
Now, for the second year in a row, the Shumlin administration wants to double the health care claims tax — to 1.6 percent — to raise an additional $14 million in fiscal year 2015.
Gov. Peter Shumlin did not mention the new revenue in his budget address earlier this month, but it is factored into his proposed 2015 fiscal year budget. Although the tax — referred to as an assessment by the administration — will affect everyone with health insurance in Vermont, administration officials maintain that it is not a “broad-based” tax such as income, sales or rooms and meals.
Robin Lunge, the administration’s director of health-care reform, told the House Ways and Means Committee on Thursday that health-care reform efforts, particularly in Medicaid, are driving the need for additional revenue.
The revenue generated by the tax is funneled into the Health Care Resources Fund, a massive trust fund that pays for much of the state’s health-care spending. Lunge said the fund, of which only a fraction is supported by the health-care claims tax, covers the state’s Medicaid program, state-level premium subsidies for Vermont Health Connect insurance plans, exchange operating costs beginning in 2015 and other programs run by the Department of Vermont Health Access.
The administration is looking to fill a $14 million budget gap and wants to use the health care claims tax to do it, Lunge said.
About 33,000 Vermonters are moving into the Medicaid program from Catamount Health or the Vermont Health Access Plan after the program was expanded under the federal Affordable Care Act. That means the state’s portion of the shared state and federal program is increasing.
“This means they have lower premiums and better coverage than they had previously under Catamount or VHAP, but that does increase, then, the cost of the Medicaid program,” Lunge said.
Additionally, the administration included in the proposed budget a 2 percent increase in payments to Medicaid providers. The boost is aimed at easing what is known as the “cost shift.” The additional expenses require additional revenue, Lunge said.
In making her case, Lunge told the panel that doubling the health care claims tax is appropriate since it will fund health care expenses.
“It is tailored to the health insurance area,” she said.
The administration also sought a boost in the tax last year, but lawmakers rejected the request. Then, the administration needed funds to cover operational costs of the state’s online exchange, mandated by the federal health care reform law.
Approval this year is no guarantee, either. Lunge said Senate Finance Committee Chairman Sen. Tim Ashe, a Progressive from Chittenden County, characterized his committee as “cool” to the idea.
Ways and Means Chairwoman Janet Ancel, a Calais Democrat, said Thursday her committee reviewed “basically the same proposal” last year and rejected it.
“I don’t have any reason to think that that sentiment has changed a whole lot in the intervening year,” Ancel said.
Still, she said it is “early in the discussion” and the committee will give the proposal a fair review.
Lunge said the administration will need to raise revenue in other ways if lawmakers again reject the proposal.
“We certainly would need to fill the budget hole for Medicaid and other programs,” she said. “If not this fund then we need to figure out another way to either come up with the revenue or reduce costs in some way.”
Susan Gretkowski, senior government affairs strategist for MVP Health Care, said raising the tax will mean higher insurance premiums.
“From our perspective, obviously it’s passed on straight through premiums. We’re looking for ways to try to keep costs as low as possible and this is just going to increase costs. I think that’s the critical thing, that it’s going to increase costs for consumers,” she said.