Proposed tax on health care premiums expected to fund HealthSource budget

ANYA RADER WALLACK, DIRECTOR of HealthSource RI, explained that the new assessment on health care premiums for individuals would be 3.76 percent and 1 percent for small businesses. She is shown at a recent PBN Summit on health care reform and the insurance exchange. Panelists included from left to right, Sam Slade, president of USI Insurance RI's Employee Benefits Division; Peter Marino, president and CEO of Neighborhood Health Plan RI; Wallack; and James J. Raiola, a career agent with MassMutual and advisory board member of HealthSource RI. / PBN FILE PHOTO/RUPERT WHITELY
ANYA RADER WALLACK, DIRECTOR of HealthSource RI, explained that the new assessment on health care premiums for individuals would be 3.76 percent and 1 percent for small businesses. She is shown at a recent PBN Summit on health care reform and the insurance exchange. Panelists included from left to right, Sam Slade, president of USI Insurance RI's Employee Benefits Division; Peter Marino, president and CEO of Neighborhood Health Plan RI; Wallack; and James J. Raiola, a career agent with MassMutual and advisory board member of HealthSource RI. / PBN FILE PHOTO/RUPERT WHITELY

PROVIDENCE – A new assessment on health care premiums for individuals and businesses included in Gov. Gina M. Raimondo’s fiscal 2016 budget is expected to generate $11.2 million annually, money that would be used to fund HealthSource RI’s budget, its director said Wednesday.
The assessments would be levied on plans purchased both inside and outside of the exchange.
HealthSource RI Director Anya Rader Wallack said the changes would take effect in coverage year 2016, which begins Jan. 1, if the legislature approves the budget proposal.
The assessments would add a 3.76 percent surcharge to premiums of all health plans purchased in Rhode Island by individuals and a 1 percent surcharge to premiums of all health plans purchased by small employers.

Wallack said she was asked by the governor to look for ways to run HealthSource for as much or less as the federal Healthcare.gov site as well as create a revenue stream that would cover that smaller cost. The assessments are one approach to solve the second part of that charge.
HealthSource RI is currently federally funded, but starting in January 2017, Rhode Island has to take over the cost of its operation, estimated to be $11.2 million per year.
Said Wallack, “Rhode Island ratepayers have to pay for the expense of operating an exchange no matter what. We have a choice as a state to either [run] a state-based exchange or use the federal exchange.”

HealthSource RI’s budget was $52 million this year, which includes $24 million to Deloitte for continued design, development and implementation of its technology platform, as well as $10 million for Optum to continue development of the exchange’s call center.

In fiscal 2016, its budget will be $30.8 million, of which $6.2 million are expected to be state funds. The calendar year 2016 assessment would generate the revenue to cover HSRI’s operating costs in fiscal 2016 ($6.2 million) and the first half of fiscal 2017 ($5.6 million), said HealthSource RI spokeswoman Maria Tocco.
Tocco said Wallack worked closely with the governor’s office to “right-size the organization” and arrive at the $11.2 million figure for fiscal 2017.
While there has been some criticism regarding the new assessments for small business owners, Wallack said they are mostly fielding questions from people wanting to understand how they would work and why this particular approach was considered.
Wallack said she believes the assessments already would have been charged if the federal exchange had been in place.
Massachusetts uses a 2.5 to 3 percent assessment while Connecticut has a 1.35 percent assessment, for both individuals and small businesses.

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If the state were to switch to the federal exchange, a fee on health care premiums would still be imposed on individuals and small businesses, Wallack explained. She said those rates range from .52 percent to 4.54 percent on the small business side, and vary by carrier.
HealthSource RI is recommending the same fee for small businesses across all carriers, she said.
Individuals who fall under 400 percent of the federal poverty level would not have to pay the assessment, Wallack said. That translates to an income limit of $47,080 for an individual and $97,000 for a family of four.
The current average premium cost for an individual is $361.48 per month. For those individuals who qualify for the federal premium tax credit, that average changes to $237.06, she said.

Wallack said 88 percent of the individual enrollees receive advanced premium tax credits, which are applied if they meet the 400 percent poverty level threshold. She said 23,600 Rhode Island households received federal subsidies in 2014, with the average amount being $4,600 per year.

There are approximately 30,001 individuals on the exchange and 454 businesses, representing 3,282 covered lives, for a total of more than 33,000 participants receiving coverage through the exchange.
While the deadline has passed for individual enrollments, businesses can continue to enroll throughout the year.
Enrollment numbers have grown. During HealthSource RI’s first year of operation, which ended Dec. 31, 25,085 individuals enrolled. Comparing February 2015 with February 2015, 342 more businesses signed up, bringing the total to 464.
Enrollment on the small business side has grown, Wallack said, because HealthSource RI offers a “full choice model.” Rhode Island is the only state that offers this model, she said. Through the full choice model, employers can enroll their employees in the exchange and pick the amount they want to contribute toward coverage. Employees then can choose their own plans, she said.
“It’s been a real selling point for us,” Wallack said.
Wallack said HealthSource RI also tries to make the enrollment process as easy as possible and provides a support team of specialists to work with employers to help them.
“Things are going very well in terms of connecting Rhode Islanders with affordable coverage,” Wallack said.
Marie Aberger, a spokeswoman for Raimondo, said in a statement that Raimondo’s priority “is making sure we are delivering quality, affordable health care services to Rhode Islanders.”
“HealthSource RI has been very successful in providing uninsured Rhode Islanders with access to care, and the governor believes we should work to keep this program in the state. Her proposal focuses on right-sizing this initiative by establishing a sustainable, more streamlined budget. We have new leadership at HSRI in Anya Rader Wallack and she is committed to working with the Governor to make it a sustainable organization that provides clear return-on-investment to Rhode Island families and employers,” Aberger said.

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