Handling and funding of state health program gets mixed reaction at hearing

PROVIDENCE — Health-Source RI enjoyed plenty of support for remaining a state-based Obamacare exchange at a State House hearing on Wednesday. But funding it with a proposed premium tax drew a mixed reaction from the audience at a meeting of the Senate finance committee.

In her spending plan for next year, Governor Raimondo proposed an assessment on certain health plan premiums purchased both through the exchange and on the private market. The tentative rates would be 3.8 percent for individuals and 1 percent for small employers.

The revenue stream would allow the state to keep Health-Source RI running as federal aid — on which it has been entirely supported — trickles to nothing in the next year or so. The other option would be to join the federal exchange, a move that also comes at a cost, including a premium tax of 3.5 percent, HealthSource Director Anya Rader Wallack told the committee.

Still, some weren’t convinced the assessment is the way to go while others reluctantly accepted it but with qualifications.

Sean Donahue, a lobbyist for Blue Cross & Blue Shield of Rhode Island, said that while the premium assessment for Rhode Island is portrayed as comparable to the federal one it actually apportions the costs differently among the insurers that sell policies through HealthSource RI. That difference is not favorable to Blue Cross, he said, in objecting to the proposal.

R. Kelly Sheridan, a lobbyist for the Greater Providence Chamber of Commerce, said his organization would prefer a different funding source, for HealthSource, such as the state’s general fund. But if the assessment were to be approved, he said the chamber would like to see the tax rate on small employer plans capped at the federal level.

Albert Charbonneau, executive director of the Rhode Island Business Group on Health, said he didn’t favor an “open-ended” assessment over a budget that can be adjusted from year to year.

When federal funds dry up in 2017 (unless residual funds are allowed to be carried over), the assessment is expected to fund a budget estimated at $11.2 million. That will be a drop from the proposed $30 million for 2016, including $6.2 million to be generated from the premium assessment beginning Jan. 1.

Linda Katz, policy director of the Economic Progress Institute, called the assessment “a reasonable way to pay for Healthsource.” She said that having a local exchange is vital because consumers can enjoy “one-stop shopping” to determine their eligibility for Medicaid and federal premium tax credits. She added that HealthSource’s program for small businesses, unique among local exchanges, allows employees to select the plan that best suits them and to pay extra for richer plans.

James Beasley, policy analyst for Rhode Island Kids Count, said his organizations “strongly supports” keeping Health-Source RI open and has no issue with the premium tax.

The tax “seems to be the best way to do that,” added the Rev. Don Anderson, executive minister of the Rhode Island State Council of Churches.

Echoing some other comments, state Sen. Louis DiPalma said that it would be preferable that the existence of Health-Source and its funding be dictated by statute instead of by the executive order that former Gov. Lincoln Chafee used to create it.

Sen. Daniel DaPonte questioned whether the projected growth in enrollment at Health-Source — particularly among small businesses — would actually be realized since falling short could result in financial shortfalls. He also asked about trying to get employees from municipalities and quasi-state agencies to move onto the exchange.

Conversations about doing that “have begun,” Wallack said.

— rsalit@providencejournal.com

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