2012 -- S 2362 SUBSTITUTE A

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LC01333/SUB A

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO HEALTH AND SAFETY -- TAXATION OF HEALTHCARE SERVICES

     Introduced By: Senator Walter S. Felag

     Date Introduced: February 14, 2012

     Referred To: Senate Health & Human Services

It is enacted by the General Assembly as follows:

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      SECTION 1. Findings. - The general assembly finds and declares that:

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     (1) The state of Rhode Island funds programs that provide immunizations for children

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and adults and that make available certain services to children with special needs, as well as

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raises general revenue, through taxes and assessments on premiums for health care coverage.

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These are established in Rhode Island general laws sections 23-1-46, 42-12-29 and 44-17.1.

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     (2) These premium-based taxes impact the cost of health insurance coverage only for

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those Rhode Islanders purchasing fully-insured commercial insurance (individuals and typically

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small to mid-sized businesses). This current method of raising revenue fails to spread the burden

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to other tax payers. Out-of-state payers, self-funded plans, and self-pay individuals who benefit

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from the programs funded by these assessments do not make payments that support these

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services.

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     (3) In 2011, the General Assembly, recognizing the importance of ensuring that these

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important programs continue to have a stable and equitable funding source, directed the health

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insurance commissioner to examine these premium based taxes and possible alternatives for

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raising the same amount of revenue.

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     (4) Alternatives to the premium based assessments and taxes were evaluated in the April

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20, 2012 report to the general assembly by the Office of the Health Insurance Commissioner

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(OHIC) entitled "A Study of Alternatives to Health Insurance Premium Assessments." The report

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indicated that more equitable alternatives for collecting revenue for the various programs funded

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through these premium based assessments, such as through placing a surcharge on certain claims

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for healthcare services rendered in the state of Rhode Island, would be in the interest of all Rhode

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Islanders. Several other states have adopted such alternatives for generating revenue to support

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various programs.

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     (5) The OHIC, in a report entitled "Private Insurance Enrollment" (also published in

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April 2012) indicated a steep and uninterrupted decline in the number of Rhode Islanders covered

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under fully insured health plans. The report states that there has been a twenty-two percent (22%)

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decrease in fully insured enrollment, or 88,604 fewer participants since 2005. That means that the

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funding base for the health programs described in (1) has shrunk from 411,044 in 2005, to

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322,440 insurance covered in 2011. As the number of people covered under fully insured plans

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continues to decline, the per capita assessment and tax rate will have to increase to raise the same

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amount of revenue.

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     (6) In order to consider and ensure an orderly transition of these premium based

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assessments to a claims based surcharge, the general assembly seeks further information from the

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executive office of health and human services and the department of revenue.

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     SECTION 2. Comprehensive analysis and implementation plan. – The executive office of

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health and human services and the department of revenue, in consultation with the health

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insurance commissioner, are directed to draft an implementation plan for transitioning the current

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assessments levied upon health insurance premiums, including the child and adult immunization

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assessments, the children's health account assessment, and the premium tax on health insurers

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including non-profit hospital and medical services corporations, health maintenance

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organizations, and accident and sickness insurers, to a surcharge based on health care claims. The

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implementation plan shall include a financial impact analysis, a timeline for implementation, and

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a draft work plan for implementation of such a surcharge.

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      The executive office of health and human services should direct the tax administrator as

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to the amounts needed to be raised to fund the immunization programs for children and adults and

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for the child services programs and to continue the present process under which funds for those

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programs would be placed into restricted receipt accounts. The plan shall also minimize the

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burden of administering any collections and payments by health care facilities.

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     All departments and agencies of the state shall furnish advice and information,

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documentary or otherwise as is deemed necessary or desirable to facilitate the purposes of the

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analysis.

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     The executive office of health and human services and the department of revenue shall

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present an implementation plan including findings and recommendations to the senate president,

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speaker of the house, and chairpersons of the house and senate finance committees no later than

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February 15, 2013.

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     SECTION 3. This act shall take effect upon passage.

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LC01333/SUB A

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO HEALTH AND SAFETY -- TAXATION OF HEALTHCARE SERVICES

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     This act would provide that an implementation plan be drafted with the cooperation of the

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executive office of the Department of Health and Human Services, the Department of Revenue

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and the Health Insurance Commissioner to transition current assessments levied on health

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insurance premiums to a surcharge based on health care claims. The plan must be presented by

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February 15, 2013.

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     This act would take effect upon passage.

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LC01333/SUB A

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