Health Care

House committee delves into Shumlin’s proposal to double health insurance claims tax

Lawmakers on the House Ways and Means Committee say they are skeptical of the Shumlin administration’s proposal to double the health care claims tax to fill a $14 million hole in the state’s health care fund.

“I’m not sure (the claims assessment tax) is the right option,” said Rep. Carolyn Branagan, R-Georgia.

Branagan and several other committee members said they want to know exactly how much needs to be raised. They question the $14 million figure in Shumlin’s budget and how the claims assessment money will be spent.

The committee rejected the same proposal last year, but did not come up with an alternative revenue source.

As a result, when the Legislature approved a health care spending package, a $14 million deficit was left in the state’s Health Care Resources Fund. The fund pays for Medicaid and other Department of Vermont Health Access programs.

Representatives Blue Cross Blue Shield of Vermont and MVP, Vermont’s two main health care insurers, told the committee Wednesday that any increase in the claims assessment tax will result in a greater cost shift to the privately insured.

The tax is assessed to the insurers who then build it into the premiums paid by customers.

Doubling the tax would cost Blue Cross Blue Shield $8 million to $9 million, which would add to the premiums of the 220,000 Vermonters it covers, said Kevin Goddard, BCBS vice president for external affairs.

State and federal assessments already account for 4 percent of every Blue Cross premium, he said.

Susan Gretkowski, a lobbyist for MVP, estimated the tax increase would result in a $1 million increase in premiums spread across its 45,000 members in Vermont.

Money flows into the fund through a variety of sources such as a cigarette tax, a hospital provider tax and assessments on employers and health care claims. That money is then pooled and drawn from to pay for a wide array of state health care expenses.


However, the assessment only amounts to a cost shift if it’s considered on its own, said Robin Lunge, state director of health care reform.

If the Legislature approves a 2 percent increase in Medicaid reimbursement rates, as the administration’s budget calls for, then the result would be a net reduction in cost shift, she said.

Medicaid’s lower reimbursement rates to providers are the primary source of the cost shift; doctors and hospitals look to make up the difference when they negotiate payment rates with private insurers.

The higher rates charged to the insurers is passed on to their customers.

The health care spending package approved last year included a Medicaid reimbursement rate increase, money to pay for the operation of Vermont Health Connect — the state’s online insurance market — and additional premium subsidies beyond what was required by the Affordable Care Act.

The administration included the same $14 million spending package in this year’s budget and again wants to pay for it by doubling the claims assessment tax.

What members of the Ways and Means Committee said they wanted to know before they approve the increase is where exactly that money goes.

“We like to tie revenue sources to results,” said Rep. Alison Clarkson, D-Woodstock.

But the way the Health Care Resources Fund is structured that’s not possible, state officials said.

Money flows into the fund through a variety of sources such as a cigarette tax, a hospital provider tax and assessments on employers and health care claims. That money is then pooled and used to pay for a wide array of state health care expenses.

“I don’t think you could take a dollar from the claims assessment and follow it to a given program,” Lunge said.

If lawmakers want to see where each dollar goes, they could split the different revenue sources into separate funds, said Mark Larson, commissioner of the Department of Vermont Health Access.

“That’s really a financial management question, and whether the administrative burden would be worth it,” he said.

Rep. Patti Komline, R-Dorset, expressed frustration with the administration, which she said is trying to obfuscate where the claims assessment money is going.

Committee members said once they have more information they plan to examine several alternatives.

“We welcome their thinking on it,” Lunge said.

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  • Kathy Callaghan

    “However, the assessment only amounts to a cost shift if it’s considered on its own, said Robin Lunge, state director of health care reform.”

    How’s that again? So 265,000 Vermonters will pay $9 – $10 million more in higher premiums to help fund Medicaid, and that’s not a cost shift to them?

  • krister adams

    what happened to no broad-based taxes? Everytime we Vermonters turn around we find another assessment, tax, upcharge, fee…

  • This just all goes to show how important it is to get to single payer not tied to an insurance company with huge overhead and administrative costs ASAP! The ACA has made it much more difficult for Vermont to further our most important goal, Healthcare for ALL….

    • Cheryl Pariseau

      Do you think with single payer these fees/taxes are going to go away?

  • Craig Powers

    And people wonder why the costs goes up year after year.

  • Mary Martin

    Another step in the wrong direction. It was voted down before, say NO again.

  • Bob Sterling

    This is seems like a joke, add a tax on claims. That will sure keep healthcare costs down!

  • John Howard

    More taxes?
    More “alternative revenue sources?”
    More “cost shifts?”
    When does Montpelier look at spending cuts?

  • Peter Everett

    The Legislature’s favorite 3 letter word…TAX!!! Is there not a tax that, those in power, do not like? Hell, why don’t they just take every last cent from us now!!! That’s their ultimate goal anyway. They want an unnatural “equality”. The only way they can reach their goal is to take it all and put everyone on Welfare, each getting the same amount per person. When we all get smart and either stop working or leave the state, then what will they do for revenue??? Ain’t Socialism great???
    Just think how this country thrived 120 years ago before all these taxes(and fees) were imposed on the working class. There were surpluses in the Federal budget back then before the tax and spend philosophy became the mantra of the politicians. Oops, I had it backwards, its spend, then tax to pay for it.
    Maybe we should be like the gov’t…spend and not worry about our out of control deficits. Can you imagine a town surviving if every home owner refused to pay property taxes state wide or claim 20 dependents on our withholdings. Do you think Montpelier would panic. Think of the fun we could have disrupting things.
    Maybe we’d all wind up in jail!!! 3 squares a day, free healthcare, cable tv, gym, library. Granted, the housing may not be the best, but, it would be free. What the heck, non violent crimes, maybe we could wind up in a “country club” facility like Martha Stewart served her time in. Unfortunately, one person acting alone would be foolish, but, if we all rebelled, what a statement we could make!!! I know its foolish, but, its fun to think about the constituents regaining the power the founders envisioned for us. Gov’t is too far gone and the people feel they cannot do anything about it. Sad.
    Just spouting off at the thought of another tax, another way they steal from us without us putting up a stink about it.
    Great if they raise the minimum wage. The only winners will be the state and fed coffers. They receive additional revenue while we must pay higher prices to offset the higher wages. Most small businesses are barely making it. Where I work will be closing the doors the end of the month. The owners have had it, too hard to do business in rural areas as it is, let alone being forced to provide sick time and or higher wages. I’ll bet more will be following suit in the near future.
    The Legislature and Congress really cannot comprehend what it really is like in, as Howie Carr says “the dreaded Private Sector”. Most are and have been on the Public Dole their entire careers, living off the backs of the hard working “common folk”. Man, we really are as stupid as they think we are…we keep putting them back in office election after election. No wonder they treat us as they do….with no regard to the REAL daily hardships we face, while they live the good life while if office, and, maybe better after they decide to retire. Some lush position will be given them for thanks by some company or whatever. They’re set for life…living off of us.

    • Dave Dempsey

      Great comment. I think about the same things often and I wish I new what I could do about it. I like the idea of everybody claiming 20 exemptions and nobody paying taxes. That might get the attention of the liberal politicians that have never seen a problem that the state shouldn’t get involved in.

  • Dave Bellini

    “…the assessment only amounts to a cost shift if it’s considered on its own, said Robin Lunge,..”
    This reminds me of Kenneth Lay explaining the financial status at Enron.