In early April, legislative negotiators quietly announced their decision to forgo a claims tax for Oregon Health Plan funding, and instead adopt a 1.0-1.5% tax on health insurance premiums to finance expansion of the Oregon Health Plan.  Their intentions may be laudable: proceeds would be dedicated to providing insurance to 80,000 Oregon children who currently lack coverage.  Unfortunately, this tax falls squarely on the shoulders of Oregon’s small businesses (who lack the option of self-insuring to avoid the tax), and their workers, precisely at a time when Oregonians can least afford it.

Legislative leaders are counting on the notion that raising taxes to provide health coverage to children is emotionally and politically appealing---and that such appeal is strong enough to carry the day even in the midst of a statewide recession with the highest (12%) unemployment in state history, and a $4.5 billion dollar revenue shortfall.

On April 23rd, the AOI Board voted to oppose the premium tax.  While efforts to expand funding for the Oregon Health Plans should receive serious consideration, such consideration should be conditioned on the use of a broad-based and equitable funding source.  A premium tax fails that test.

These same legislators are also engaged in discussions to “re-invent” the state’s existing tax on hospitals.  Currently this program uses a small tax on hospital revenue to leverage federal matching funds, then repaying the hospital tax liability through increased Medicaid payments.  This mechanism--direct offset of tax liability and increased payments--is critical to our interests: only when this formula is followed is business spared an increase in the cost-shift.

Now, however, legislative negotiators are planning to tax hospitals beyond what the state can repay through increased rates.  Their proposal would require hospitals to pay a tax of close to 4%.  This tax is far beyond what the state is allowed to repay to hospitals under federal guidelines, and would thus be passed on to commercial purchasers.
 
The hospital tax has been worthy of the business community’s support in the past—it funds health care for uninsured adults, and it does so without an increase in the cost shift to business.  However, AOI Board voted on April 23rd to oppose the current proposal to increase the hospital tax because it goes beyond the amount that can be directly and equally offset with increased payments.