Wednesday, March 18, 2009
Chamber Opposes Health Care Payroll Tax
Two key Maryland General Assembly committees will hear legislation this week that would create a universal health care system in Maryland, funded primarily by an annual $2.5 billion employer payroll tax (SB 813/HB 951). Defeating this legislation is a Maryland Chamber priority.
The proposal would significantly restructure the health insurance market in Maryland by:
- Combining the individual and small group health insurance markets;
- Subsidizing the cost of insurance for low income individuals;
- Expanding Medicaid eligibility;
- Imposing an individual mandate for persons to purchase health insurance; and
- Creating a reinsurance pool for high risk individuals. The bill would impose an annual $2.5 billion 2 percent assessment on the FICA wage base of all employers to pay for 85 percent of the expanded health care benefits.
“The Maryland Chamber supports market-based reforms to make health insurance more affordable,” Vice President of Government Affairs Ron Wineholt said. “This bill creates a $15 billion health care program for the next five years that is heavy on spending and weak on incentives for cost controls.”
In his testimony to the Senate Finance Committee, Wineholt stated that the Chamber opposes this proposal for the following reasons:
- Health Insurance Pool is Flawed - The bill would combine a currently healthy individual health insurance market with the weak small group health insurance plan. The resulting “Maryland Health Insurance Pool” will include all of the attributes that have been stifling participation and competition in small group: community rating, guaranteed issue, no consideration of health status and tight rating bands that cause a heavy subsidy from the healthy to those that use large amounts of health care. The result will simply transfer the problems of the small group market to the individual market and cost the state $140 million over five years to administer the pool.
- Assumptions of Cost Savings are Unrealistic – The bill has many assumptions for cost savings that are undocumented and unrealistic, including:
- 10 percent assumed savings from reinsurance pool
- 2 percent assumed savings from HSCRC actions
- 4.7 percent assumed savings from “value-based purchasing”
- 4.3 percent assumed savings from lower administrative costs for employers
If these “savings” fail to materialize, or are likely offset by further health care utilization, the new payroll assessment on employers will simply reflect added costs for employers.
- Waiver of Individual Mandate – As with the Massachusetts health care law, this bill allows a waiver of the individual mandate for persons who cannot afford to buy the state’s new and improved health care plan. Massachusetts provided a waiver for 20 percent of their uninsured due to the state’s inability to produce an affordable health insurance product. How many of Maryland’s uninsured will likewise be relieved from buying health insurance when the promised cost savings fail to materialize?
Payroll Assessment for All - The bill would impose an annual $2.5 billion payroll assessment on the FICA wage base of all Maryland employers. This assessment is imposed regardless of whether an employer currently sponsors health insurance for their employees or not. Failure to make the payment when required will result in an additional penalty on the employer of up to $250,000.
The payroll assessment will impose a burden on Maryland employers that does not exist in any other state in the country. Most small employers do not currently offer health insurance today because they cannot afford to do so. The current recession has already cost Maryland 39,000 jobs in the past year. Adding a 2 percent payroll assessment to their existing costs will simply cause many small employers to close their doors. Lacking meaningful cost controls, the 2 percent assessment will inevitably be raised in future years as pressure builds to fund enhanced levels of benefits.
Rather than undertaking the massive expenses and controversy caused by this bill, the Maryland Chamber supports the more realistic health care reforms embodied in SB 637 and HB 674. Those bills would focus the help where it is most needed – revitalizing the small group health plan to make it more affordable for small employers.
For more information, contact Ron Wineholt at .(JavaScript must be enabled to view this email address).
