A Medicaid tax for PA health insurance companies

Lobbyist say a proposal to help the Medicaid program will hurt small business.

Pennsylvania’s Medicaid program is facing a looming $200 million budget gap and state officials are proposing to fill that hole with a new tax on health insurance companies.

Listen: [audio:090618teinsure.mp3]

For years the Commonwealth helped pay for the Medicaid program by taxing insurance companies that manage health benefits for low-income and disabled residents. But the federal government says taxing only those companies is unfair. That federal match ends September 30th.

State officials want a 2 percent tax on nearly all health insurance companies to keep federal dollars flowing. Opponents say that levy will be passed along to customers, but Department of Public Welfare chief Estelle Richman disagrees.

Richman: The insurance companies will tell you everything you do will trickle down to higher rates, but that has not been the case in other states, and I’m not sure why we would believe Pennsylvania would be an exception to that.

The insurance industry has a counter proposal to levy a 6 percent sales tax on just the Medicaid managed care companies. Richman isn’t convinced federal regulators will accept that solution.

Insurance industry lobbyist Sam Marshall says that levy will be passed along to individual customers who are already struggling with healthcare costs.

Marshall: Shouldn’t we in Pennsylvania be looking at every, every possible conceivable alternative before we look to raise taxes on people for buying their own health insurance?

The Pennsylvania Chamber of Business and Industry says the proposal will hurt small business. Samuel Denisco is the chamber’s director of government affairs.

Denisco: This two percent, broad based tax on virtually every health insurance premium in the Commonwealth will be passed down to employers and employees. Employers are already struggling to provide affordable, quality health care to their employees. Especially in this time when we have a current economic recession.