An $80 million piece of Republican Gov. Sam Brownback's plan for balancing Kansas' next budget is in trouble because a major health insurance company opposes it, and a GOP lawmaker said Wednesday the measure probably should be dropped.
The proposal would increase a fee paid by HMOs to 5.5 percent from 1 percent. The state would use the new revenues to capture additional federal funds for its Medicaid program, which provides health coverage to about 368,000 needy and disabled residents.
Continue Reading Below
Three private health insurance companies managing the Medicaid program would pay most of the estimated $136 million in new fees during the fiscal year beginning July 1. But they'd also get enough money to offset an extra tax imposed under the 2010 federal health care law, making the state's net gain about $80 million.
But another company, Aetna, with about 52,000 HMO customers in Kansas, estimates it would pay $12 million more a year in fees. Two Aetna executives sent a letter to legislators in mid-March — after the Senate overwhelmingly approved a bill increasing the fee — saying the cost would be passed onto consumers.
The measure has stalled in the House, and Insurance Committee Chairman Scott Schwab, an Olathe Republican, said he won't support measures raising taxes for health insurers because they'll drive up premiums for consumers.
"The bill overall is in trouble," Schwab said. "He's going to have to come up with a different proposal."
Budget Director Shawn Sullivan said in a statement Wednesday that the governor's office "has been in active discussions" with Aetna, legislators and the Kansas Insurance Department.
The state is wrestling with budget problems that arose after lawmakers slashed personal income taxes in 2012 and 2013 at Brownback's urging in a bid to stimulate the economy. Sullivan said the state also must cover additional Medicaid costs linked to the federal health care law, including the tax for health insurers.
The $400 million budget gap that must be closed in the next fiscal year assumes lawmakers approve the HMO fee increase, Sullivan said.
"Everybody's been counting on that," said Rep. Jerry Henry of Atchison, the ranking Democrat on the House Appropriations Committee. "They've already booked that money."
Aetna spokesman Rohan Hutchings said the company views the proposed fee increase as "inequitable" because it targets only a narrow segment of the industry. He said a fee or tax for all health insurers would be fairer.
The company said the fee increase would increase premiums for its HMO consumers by an average of $206 a year, which could prompt them to seek other coverage or lead their employers to self-insure.
"There's a better way to come to a level playing field," he said.
But Blue Cross and Blue Shield of Kansas, the largest health insurance company, opposes a broader tax increase, spokeswoman Mary Beth Chambers said. She said no increase is ideal, but the one for HMOs at least would be paid mostly by the Medicaid managers, who'd also benefit from new revenues.
Blue Cross would pay $2.5 million in additional fees under Brownback's plan, but fears its increase could be several times larger under a broader proposal. About 19,000 of the 702,000 Kansas residents covered by Blue Cross are in an HMO plan started in January.
"There's a lot of pressure on premiums right now, and this would be added pressure," she said.
Brownback's proposal: http://bit.ly/1OHQh87
Follow John Hanna on Twitter at https://twitter.com/apjdhanna .