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On January 1, 2017, the KHI News Service became part of KCUR public radio’s new initiative, the Kansas News Service. The Kansas News Service will continue to cover health policy news and broaden its scope to include education and politics. All stories produced by the former KHI News Service are archived here. Stories and photos may be republished at no cost with proper attribution and a link back to KHI.org.

Senate health committee leader proposes state fee on healthcare.gov plans

By Dave Ranney | May 20, 2015

The chairwoman of the Senate Public Health and Welfare Committee has introduced a bill to allow the state to collect a 3.5 percent fee on health insurance policies sold to Kansans through the federal government’s online marketplace, healthcare.gov.

Sen. Mary Pilcher-Cook, a Republican from Shawnee, said the fee would generate between $18 million and $24 million annually.

The money, she said, would be deposited in a fund that would be used to offset costs associated with the state’s Medicaid program and its implementation of the Affordable Care Act, also known as Obamacare.

“We are doing this not because of the budget hole,” Pilcher-Cook said Wednesday, referring to the Legislature’s ongoing debate over how to fill a more than $400 million gap in the state’s budget for next fiscal year, which begins July 1.

Photo by Dave Ranney Sen. Mary Pilcher-Cook, a Republican from Shawnee, has introduced a bill to allow the state to collect a 3.5 percent fee on health insurance policies sold to Kansans through the federal government’s online marketplace.

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“We are doing this because of the increased costs that Obamacare has put on the state, and because of the costs of our managing Medicaid,” she said.

The fee, Pilcher-Cook said, would be retroactive, dating back to Jan. 1, 2015, and would be paid by the insurance companies currently selling plans on the marketplace.

“Whether that (fee) is passed on to the customer would be up to the insurance companies,” she said.

The fee, Pilcher-Cook said, would be collected by the Kansas Insurance Department.

The marketplace was established as part of the Affordable Care Act to provide access to health insurance plans for individuals and businesses. Nearly 100,000 Kansans purchased insurance through the marketplace for 2015.

Senate Bill 309, introduced Tuesday, will be the subject of a hearing tentatively scheduled for 1 p.m. Thursday at the Statehouse.

In Kansas, three companies sell plans on the state’s federally administered online marketplace: Coventry Health Care of Kansas, Blue Cross and Blue Shield of Kansas City and Blue Cross and Blue Shield of Kansas.

Federal law allows states to assess fees on plans sold through state-administered marketplaces. Whether states would be allowed to do the same with plans sold on federally administered sites — like the one in Kansas — remains to be seen.

Pilcher-Cook she was unaware of any other state having done what she’s proposed.

Also unclear is whether the federal government will allow the state to collect a fee on marketplace plans that it wouldn’t collect on those sold outside the marketplace or offered by employers.

“I don’t know if we can charge a fee on one and not the other,” said Sen. Jim Denning, an Overland Park Republican and chair of the Senate Ways and Means Committee’s subcommittee on social services. “I don’t think we can, but we’ll see. I suspect that’ll be addressed in the hearing.”

Mary Beth Chambers, a spokesperson for Blue Cross and Blue Shield of Kansas, said the company will oppose Pilcher-Cook’s initiative.

“While new taxes that result in higher premiums for Kansas are never ideal for Kansans, we are specifically concerned about this approach because it is, ultimately, double taxation,” Chambers said. “We pay a 3.5 percent tax on our ACA-compliant plan premiums to the federal government now, so this would double that. We would be paying 3.5 percent to the feds and 3.5 to the state.”

The increase, she said, likely would be passed on to consumers.

Also, Chambers said, marketplace insurers are required to offer identical plans — both in coverage and cost — to their individual and small-group customers. Adding 3.5 percent to the marketplace plans, she said, would force a corresponding increase on premiums sold outside the marketplace.

Sen. Laura Kelly, a Topeka Democrat and the Senate health committee’s ranking minority member, panned the proposal.

“This would be just one more tax on the poor, because we all know the insurance companies are going to turn around and build this into the premium,” Kelly said.

Consumers who buy insurance through the marketplace can be eligible for tax credits or subsidies, based on their income, that help cover the cost of insurance. Eighty percent of enrollees in Kansas received federal subsidies in the form of tax credits.

Lawmakers and other state leaders including Gov. Sam Brownback have resisted expanding the state’s Medicaid program to include all Kansans with annual incomes up to 138 percent of the federal poverty level: $16,105 for an individual and $32,913 for a family of four.

Rep. Barbara Bollier, a moderate Republican from Mission Hills and a member of the House Health and Human Services Committee, said Pilcher-Cook’s plan for offsetting some of the state’s Medicaid costs was ill-conceived.

“She’s wanting to rob Peter to pay Paul,” said Bollier, a retired anesthesiologist. “These are people who, for the most part, are getting a discount from the federal government on their health insurance — and now we’re going to charge them because they’re getting a discount? Because they’re getting insurance?

“If we’re really concerned about the money, then let’s bring in some real money,” she said. “Let’s expand Medicaid.”