Who Will Pay Cost of a Georgia “Health Tax?”

September 25th, 2008 by Leave a Comment

By Kirk McGhee

The Georgia Department of Community Health (DCH) recently announced its intention to apply a new tax on private health insurance. This proposed tax could potentially increase the cost of private health care coverage for hundreds of thousands of Georgians by up to 5.5 percent and open the door to even higher increases down the road.

The DCH asserts that health insurers must pay “civic rent” in the form of a tax in order to do business in Georgia. DCH argues that the tax is necessary because “someone” must cover the virtually unlimited cost of treating uninsured Georgians who cannot afford private health care.

The health and well-being of Georgians is an issue near and dear to the heart of every health plan leader operating in the state. Currently, we shoulder a significant portion of the costs of treating uninsured patients when health care providers have no choice but to pass many of the costs of treating those who can’t pay along to patients with private insurance. Furthermore, Georgia health plans annually donate millions to charitable organizations across the state that focus on providing health care and assistance to those less fortunate as well, as valuable medical research and education. And we continuously strive to develop innovative products that will make care more affordable to Georgians not covered by group plans.

The Department is entirely correct in asserting that too many Georgians are uninsured and that rising health care costs are a significant contributing factor. But what do proponents of this new tax expect to happen when they drive up the cost of private health insurance by as much as 5.5 percent in one year, on top of the already high inflationary costs that impact most households with respect to health care? This is a civic rent that most Georgians simply cannot afford.

If this proposal is implemented, more Georgians at the economic margins will become unable to purchase private coverage. In particular, small businesses may decide that group health insurance represents an unaffordable luxury in tough economic times. In other words, the proposed “solution” to the problem of the rising number of uninsured Georgians will basically make things worse by putting private health insurance out of reach for many more people who otherwise would receive it through their employers or through a private policy.

On top of driving people away from private insurance, this new tax may also force health plans to renegotiate reimbursement agreements with Georgia health care providers from sole practitioners to major hospitals. For health plans, costs for virtually every component of care rise dramatically every year. Like any other business facing a steep tax hike, health plans have no choice but to share some of the costs of new taxes with customers and suppliers. 

If the Department truly believes it requires additional funding, there are many other options available for consideration. First, its leadership could aggressively lower costs through internal reductions in travel, staffing, facilities, consulting and the elimination of unnecessary programs. Second, the Department could shift the full Medicaid population into a managed care model, a strategic move projected to save tens of millions of dollars. Finally, the Department could choose to make its case to the Governor and taxpayers that providing services to the Medicaid population requires an increase in state appropriations and other funding sources that support the program.

The Department apparently believes it can implement this tax without any approval or authorization from the state Legislature. This means Georgians must now rely on Governor Sonny Perdue, our state’s courts or pre-emptive legislative action next year to block this tax increase. We remain hopeful that the Governor and the Legislature will act decisively on this issue and continue their strong record of protecting private health care and the needs of Georgia constituents, by keeping consumers in charge of their coverage, while providing the funds necessary to maintain valuable state-run health programs.

A veteran health care attorney, Kirk McGhee currently serves as Executive Director of the Georgia Association of Health Plans. The Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (September 25, 2008). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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As an employer, and a parent and a graduate of Georgia public schools, I am pleased that the Foundation has undertaken this project. (The report card) provides an excellent tool for parents and educators to objectively evaluate our public high schools. It will further serve a useful purpose as a benchmark for the future to measure our schools’ progress.

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