Rich Harvie wants to see universal publicly financed health care succeed in Vermont, but he’s not sure a payroll tax is a good way to get there, the co-owner of Montpelier Pharmacy said Friday.
Harvie has 41 employees at three locations, and though some are part time, he pays the full premium for health insurance bought on the exchange for 16 of his employees and, in some cases, their families.
That comes out to roughly 8 percent of his total payroll, Harvie said, the same rate VTDigger reported Gov. Peter Shumlin is considering as a starting point for financing roughly half of his planned single payer program.
“I don’t have a problem with the 8 percent,” Harvie said, “but I don’t think it’s the best way to go, because the business community will fight tooth-and-nail on this.”
For many employers, especially those who don’t currently offer health care, those costs could be difficult to cover, he said.
“It’s possible that it actually could lower my costs,” Harvie said, but he added, “There are a lot of other marginal businesses in Vermont that are going to go out of business because of this.”
Rep. Chris Pearson, P-Burlington, said the basic financing structure, with a payroll and income tax, wouldn’t come as a surprise, but the governor’s actual proposal is likely to include details that could cast the plan in a different light.
The idea of exempting a business’ first $100,000 or $200,000 in payroll from the tax, for example, is one way that legislators and policymakers have discussed easing the burden on businesses that don’t currently pay for health care, he said.
“Those are the kind of details that make businesses go from ‘Are you out of your mind?’ to ‘OK, that might work for us,’” Pearson said.
He acknowledged that the Shumlin administration is in a difficult spot “threading the needle” between employers that pay nothing more than a small tax for not offering health coverage, and those that pay close to 20 percent of their payroll toward employees’ health insurance.
Agency of Administration Secretary Jeb Spaulding did not address an 8 percent payroll tax directly, speaking on VPR Friday, but he did say a payroll tax is likely and that businesses should expect it to be phased in.
Vermont won’t attempt to go “from zero to 100” all at once, he said.
Spaulding also said self-insured companies will be required to pay the payroll tax to encourage their participation, though federal law will allow them to continue to offer their own health plans. However, employees for those companies will also pay the income tax, and may therefore be motivated to drop their employers’ coverage and use Green Mountain Care.
Many of Vermont Businesses for Social Responsibility’s member businesses already pay as much or more than the state average of 13 percent of payroll toward employee health care and would welcome an 8 percent payroll tax as cost savings, according to Dan Barlow, public policy manager for the group.
But he also acknowledged that there are others who, because of their size, business model or industry, don’t offer health benefits and may struggle to meet those costs, and as a result, Barlow said, ensuring an “orderly and measured” transition to Green Mountain Care is a priority for VBSR.
Major shift
Art Woolf, a University of Vermont economist, said people should not underestimate the economic dislocation that could result from transferring roughly $2 billion in privately financed premiums to public taxes on income and payroll.
“Even if the total dollar amount is the same, it’s not an economic wash,” he said. Some Vermonters will fare better or worse under Green Mountain Care.
That will be true for businesses and individuals, as the finance structure Shumlin is poised to unveil dramatically shifts the percentage of health care premiums paid by each.
Darcie Johnston, an anti-single player advocate who runs Vermonters for Health Care Freedom, says that a payroll tax that starts at 8 percent “can go anywhere, mostly up when the government gets involved.”
“This is likely to put a further strain on Vermont and Vermonters who are struggling in a weak economy,” Johnston said.
Currently, businesses in Vermont on average cover 78 percent of premium costs and individuals pay only 22 percent, according to 2012 figures from the Kaiser Family Foundation.
If the costs of Green Mountain Care are split evenly between an employer payroll tax and an income tax, that ratio would become close to 50-50, shifting close to 30 percent of the estimated $2 billion spent on premiums to individuals.
Were that to be the case, it would be “the biggest single reduction in disposable income for working families in Vermont history,” said John Franco, a Burlington attorney who has been active in health care reform for 25 years.
That potential shift has raised concern among advocates for health care reform at the Vermont Workers’ Center, which was behind Act 48, the law that set the stage for implementation of a universal health care plan.
Center officials said in a statement Friday that they would urge the governor to “refrain from financing health care reform through a massive cost-shift to workers and patients.”
“Vermont cannot afford to reduce the contributions of big businesses to our health care system,” the statement continues, calling it “unconscionable” to make workers and lower- to middle-income people shoulder the burden for a system that is meant to be a public good.
The group also expressed concern about the level of cost-sharing that could be included in Green Mountain Care, arguing middle-income earners can’t afford to pay 20 percent of their medical costs, which is the most they could pay for health services under single-payer.
People’s view of the health care system has to shift from looking at it as an industry, to looking at it as a public good, or the financing for the program is unlikely to be equitable, according to longtime health reform advocate Deb Richter, of the advocacy group Vermont Health Care for All.
“My feeling is it’s not about paying for other people’s care, we’re paying for services, this is something that’s missing from the conversation,” Richter said. “We’re not paying for Joe, we’re paying for a nurse, and that nurse could be caring for you tomorrow.”
