Health pushes firms’ tax up

State to double levy to keep fund solvent in 2010

'MAJOR BLOW TO EMPLOYERS' Michael Widmer of the Mass. taxpayers group said the state has one of the highest jobless insurance costs in the nation. 'MAJOR BLOW TO EMPLOYERS'
Michael Widmer of the Mass. taxpayers group said the state has one of the highest jobless insurance costs in the nation.
By Kay Lazar
Globe Staff / November 26, 2009

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The Patrick administration intends to double a key tax on employers in an effort to save health insurance for thousands of laid-off Massachusetts workers, after a fund to help them has been virtually drained by the highest unemployment rates in three decades.

The administration’s plan would also require the unemployed to shoulder more costs for certain doctors’ visits.

The emergency measures would keep the Medical Security Trust Fund solvent through the end of 2010 and preserve roughly $300 million in federal Medicaid reimbursements that Massachusetts would lose if the program failed, Labor and Workforce Development Secretary Suzanne Bump said in a telephone interview yesterday.

“There are hundreds of millions of dollars of federal reimbursement that hang in the balance,’’ Bump said.

Without changes, the trust fund, which is the pool of money that pays for health insurance for the unemployed, would finish next year more than $80 million in deficit.

The health insurance program, which is funded solely by a tax on employers, helps lower- and middle-income people who fail to qualify for other state-subsidized health care programs designed for the poor. The program covers roughly 34,000 unemployed residents.

Businesses pay $16.80 per employee, per year into the trust fund, a tax that will double to $33.60 under the administration’s plan. To cushion that impact, the administration also intends to ask the Legislature to lessen the planned increase in another tax businesses are required to contribute for unemployment benefits.

Businesses were facing an automatic 40 percent increase in that second tax, triggered by an increase in unemployment benefit payouts. Instead of hiking the tax as much, the Patrick administration will propose borrowing the difference from the federal government.

“We are aware that the ability of the business community to shoulder these burdens is finite,’’ Bump said. “We really felt the need to offset an increase in the Medical Security Program contribution with a lower [unemployment tax] rate for next year.’’

The proposal to lessen the planned increase in unemployment taxes, from 40 percent to roughly 30 percent, would need legislative approval. Even if passed, employers would still end up with a net increase in what they now pay.

A three-member board - Patrick’s commissioners of insurance, Medicaid, and unemployment assistance - are scheduled Monday to approve the plan to double the business tax to keep the health insurance program afloat. That increase would take effect in January.

Yesterday, business leaders seemed resigned to the hikes.

“It’s a good-faith effort by the administration to try and cushion the impact here, but it’s still going to be a major blow to employers,’’ said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business group. “We already have the highest unemployment insurance costs in the nation, we and the state of Washington.’’

The administration’s plan would also require the unemployed to pay more for doctors’ visits, if they choose providers deemed by the state to be a higher cost, lower-quality caregiver. However, patient copayments would remain level if they remain with preapproved providers.

The state’s largest health consumer group, Health Care for All, expressed mixed emotions over this cost-saving approach.

“We think this is a good temporary solution to get the state over the really severe funding crunch,’’ said the group’s research director, Brian Rosman. “Given the really difficult budget challenges, we see this shared responsibility solution with businesses also paying more, as an attractive option.’’

But Rosman questioned the criteria that will be used to determine which physicians are lower-quality and higher-cost providers.

“We want to make sure that patients have enough information to make informed choices, based on their individual needs, and not just the copay differentials,’’ Rosman said. “We also think the providers should have full knowledge of the criteria used to place them into the tiers.’’

A report last week by the Massachusetts Budget and Policy Center, an independent think tank, found that the Medical Security Trust Fund would not be going broke if taxes on employers had kept pace with inflation, as required by the 1988 law that created the program, the report stated.

But Bump disputed that reading of the law.

She said the fees the state charged businesses would have been sufficient if the recession had not dragged on for so long and if Congress had not repeatedly extended unemployment benefits. Those extensions have drained about $60 million from the fund since July 2008, according to the state.

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