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.