The Republican Governors Association is urging lawmakers to exempt Medicaid managed care plans from the health reform law's controversial health insurance tax set to go into effect in 2014. The insurance industry as a whole has been working to repeal the tax, and Medicaid managed care plans also back a full repeal but say they would support a narrower exemption for Medicaid plans if that is the only option.
The RGA also supports a full repeal. "They have messaged on the impact that the health insurance tax will have on Medicaid and CHIP plans in their states, however, this health insurance tax adversely impacts individual consumers and small businesses, and accomplishes the opposite of affordable health care reform, " Marie Sanderson Director of the Republican Governors Public Policy Committee said in an emailed statement.
GOP governors Bobby Jindal (LA) and Scott Walker (WI), in a March 22 letter to congressional leaders written on behalf of the RGA, ask them to exempt Medicaid and CHIP plans from the tax as part of deficit reduction or tax reform efforts. "To meet federal actuarial soundness requirements for Medicaid managed care, the fee's costs will be borne by states and federal taxpayers," the governors wrote, stressing that neither the Congressional Budget Office nor the Joint Committee on Taxation accounted for the tax's impact.
The tax is set at $8 billion in 2014 and will increase to more than $14 billion in 2018.
Walker and Jindal note that a Milliman analysis found the fee will cost Wisconsin and Louisiana alone a total of $931 million over 10 years, and will cost all states $13.6 billion over 10 years. The analysis also found that the fee would cost the federal government an additional $24.8 billion dollars over 10 years.
Joe Moser, interim executive director of Medicaid Health Plans of America (MHPA), says the group agrees that the tax should not be placed on Medicaid because doing so would result in additional costs to the states and federal government. Actuarial soundness rules say that payments to managed care plans must cover not only medical costs, but also administrative costs as well as any taxes or fees. This means that Medicaid health plans will be paid with state and federal dollars to cover this fee owed as a result of the health reform law, he says. "Further, this fee is nondeductible and counts as taxable income, which only exacerbates the cost," Moser wrote in twin letters to Sen. John Barrasso (R-WY) and Rep. Charles Boustany (R-LA) expressing support for the lawmakers' legislation to repeal the health insurance tax.
Moser also notes that the National Governors Association had requested a similar exemption in a letter to the congressional "supercommittee" in 2011.
The issue likely is gaining more attention now because states are finalizing their fiscal 2014 budgets, Moser says.
Meanwhile, the National Urban League earlier this month reached out to the National Council of La Raza in order to raise awareness of the tax. "We strongly and unequivocally support the ACA and Medicaid expansion, which we believe are key changes to reducing health disparities and improving the health and quality of life (for) the communities we serve," Urban League President Marc Morial wrote in an April 4 letter to La Raza.
"We recognize that revenue mechanisms, including fees, are critical to achieve the savings that the ACA aims to accomplish. However, due to the possibility that the fee may restrict the ability of states to expand their Medicaid programs through insurers that provide Medicaid and CHIP overall, we believe that an exemption for this plans should be considered," Morial says in the letter.
La Raza could not be reached for comment and the National Urban League was unable to comment by press time on the letter.
America's Health Insurance Plans, which also represents some Medicaid managed care plans, believes that the fee should be repealed in its entirety, and has made repeal a key priority this session. The tax is a fixed fee, so any carve outs will only result in higher prices in other markets, including Medicare Advantage and Part D as well as Medicaid plans, an AHIP spokesman says.