MARY LAND Always thinking ahead.

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MARY LANDAlways thinking ahead.

• A Look at Marylands Fair Share Health Care Fund
  Act
• Kristin Jones
• SCI Workshop for State Officials
• Chicago, Illinois
• August 3-4, 2006

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I. Fair Share Health Care Fund Act, HB 1284 /
SB 790, 2005II. Health Insurance Premium
Subsidy Program, HB 1121, 2006
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Fair Share Health Care Fund Act, 2005

• Bill Text http//mlis.state.md.us/2005rs/bills/hb
  /hb1284e.pdf
• Fiscal Note http//mlis.state.md.us/2005rs/fnotes
  /bil_0004/hb1284.pdf
• General Information http//mlis.state.md.us/2005
  rs/billfile/hb1284.htm

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Fair Share Summary

• Applies to employers with 10,000 or more
  employees effective January 1, 2007.
• Imposes a tax on employers equal to 8 of payroll
  (or 6 for non-profit employers) to help fund the
  state Medicaid program.
• Employers can avoid paying all or some of the tax
  based on the percentage of payroll spent on
  health care.
• Employers that spend less than 8 of payroll (6
  for non-profits) on employee health care can pay
  the difference to the state Medicaid program or
  increase amount spent.

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Fair Share Summary contd

• For the purpose of calculating amount spent
• employers must count both full-time and part-time
  employees.
• eligible health care expenses include only those
  deductible for federal tax purposes (e.g. medical
  care, prescription drugs, vision care, medical
  savings accounts, etc).
• employer may exempt from their calculation wages
  paid to each employee above the median household
  income (55,213) and wages paid to Medicare
  eligible employees.

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Fair Share Summary contd

• Employers must report data annually to Department
  of Labor, Licensing, and Regulation (DLLR)
• Penalties
• 250 per day for each day that employer data are
  not timely filed
• 250,000 for failure to remit payroll tax due

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Origin of Fair Share

• Concept of the legislation was part of a more
  comprehensive expansion plan that called for
• employer pay or play
• individual mandate for high-income
• Medicaid eligibility expansion
• small group market expansion
• prescription drug purchasing pool
• creation of a quasi-public insurer

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Why Now?Motivations for Passing Fair Share

• Pressures on public health programs
• Medicaid and MCHP account for approx. 17 of
  state General Fund expenditures
• Medicaid costs are estimated to rise at a rate of
  about 8 annually while revenues are forecast to
  grow at 5
• Potential federal government cutbacks
• Troubling trends in employer-based health
  insurance
• Cutting benefits and increasing employee cost
  sharing
• Dropping coverage especially retiree coverage
• Marylands unique position as the only state in
  the country with an all-payor hospital system
• Uncompensated care costs factored into hospital
  rates for all

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Fair Share Timeline

• 2/11/05 Fair Share Act Introduced
• 4/8/05 Final passage by MGA
• 5/19/05 Vetoed by the Governor
• 1/17/06 Legislature overrides veto
• 2/7/06 RILA files suit in U.S. Dist Ct
• 7/19/06 Dist. Ct. rules against state
• 7/21/06 State appeals to 4th Circuit

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Legal Arguments

• Retail Industry Leaders Association (RILA)
• ERISA
• Equal Protection
• State
• Tax Injunction Act
• ERISA
• Equal Protection Act

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And the U.S. District Court Says . . .

• Fair Share does not violate Equal Protection
  Clause
• Passes rational basis scrutiny
• State is permitted to approach a perceived
  problem incrementally

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But the U.S. Dist. Court Also Says . . .

• Fair Share Act is preempted by ERISA
• requires an employer to provide a certain level
  of benefits
• violates ERISAs fundamental purpose of
  permitting multi-state employers to maintain
  uniform nationwide health benefit plans and
  administration

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Link to U.S. District Court Decision

• RILA v. James D. Fielder, Jr., Secretary of
  Labor, Licensing, and Regulation
• Civil No. JFM-06-316
• In the United States District Court for the
  District of Maryland
• J. Frederick Motz, U.S. District Court Judge
• Opinion issued July 19, 2006
• www.mdd.uscourts.gov/Opinions152/Opinions/Walmarto
  pinion.pdf

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Where do we go from here . . .

• Wait for 4th Circuit to rule
• If District Court decision is upheld, use appeal
  courts guidance to craft legislation likely to
  pass legal muster
• Explore other incremental reforms

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Tax Incentives to Promote Purchase of Health
Insurance

• HB 1121 of 2006, Health Insurance Premium Subsidy
  Program
• Bill text http//mlis.state.md.us/2006rs/bills/hb
  /hb1121f.pdf
• Fiscal note http//mlis.state.md.us/2006rs/fnotes
  /bil_0001/hb1121.pdf
• Bi-partisan group of sponsors
• Legislation has been introduced in some form for
  past 3 years not passed out of committee
• Aimed at higher income uninsured

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HB 1121 Summary

• Creates an insurance premium subsidy program for
  individuals up to 300 FPG without employer
  sponsored or other group health insurance
• State subsidy for first year equals lesser of
• 40 of monthly health insurance premium or
• 100/mo for individual coverage or 200/mo for
  individualspouse or other family coverage

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HB 1121 Summary contd

• State subsidy after first year of eligibility
  equals lesser of
• 20 of monthly health insurance premium or
• 50/mo.individual coverage or 100/mo.
  individualspouse or family coverage
• Health department is directed to enroll children
  of eligible individuals in MCHP

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HB 1121 Summary contd

• Premium subsidy program funded by tax penalties
  imposed on higher income individuals who do not
  maintain health insurance
• Individuals whose federal AGI exceeds 500 FPG
  must pay an annual surcharge of 1000 (2000 for
  married couple), unless the individual
• Had creditable health care coverage for at least
  6 months of the taxable year

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HB 1121 Motivating Factors

• According to a 2005 Families USA report, the cost
  of providing uncompensated care in Maryland
  increases private health insurance premiums
• 332/year for an individual policy
• 948/year for group/family policy
• According to a 2004 Maryland Health Care
  Commission report
• 12 of states uninsured (82,800) have incomes
  between 400-600 FPG
• 15 of states uninsured (103,500) have incomes
  over 600 FPG

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2006 Federal Poverty Guidelines
Family Size 300 FPG 500 FPG
1 29,400 49,000
2 39,600 66,000
3 49,800 83,000
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Contact Information

• Kristin F. Jones, Chief of Staff
• Office of the Speaker
• Maryland General Assembly
• 100 State Circle
• Annapolis, MD 21401
• [phone] main
• [phone] direct
• [phone] fax
• Kristin.Jones_at_mlis.state.md.us