House bill targets people with money, no health plan

Those with above-average pay, no coverage would be penalized

March 16, 2005|By M. William Salganik | M. William Salganik,SUN STAFF

Legislators intent on reducing the number of Maryland residents without health insurance took a different - and unprecedented - tack yesterday: penalizing those with above-average incomes who don't buy coverage.

Up to now most efforts have focused on providing subsidies to the poor or prodding employers to offer coverage.

But under a bipartisan bill under consideration in Annapolis, individuals with incomes above $55,900 or families making more than $83,850 who don't buy health coverage would pay a penalty.

Studies nationally and in Maryland show a higher-than-expected proportion of the uninsured are in the middle-to-high income range.

The Maryland Health Care Commission estimates that 22 percent of uninsured Marylanders are above the income levels set in the bill.

"Persons earning these kinds of salaries should be required to take on the responsibility of providing health insurance for their families," Del. Donald B. Elliott, a Republican from Carroll and Frederick counties, told a joint hearing of the House Ways and Means and Health and Government Operations committees.

Elliott is the prime sponsor of the legislation, but his co-sponsors are Democrats - John Adams Hurson of Montgomery County, the influential chairman of the Health and Government Operations panel, and Peter A. Hammen, from Baltimore.

Besides its bipartisan sponsorship, the bill won support at yesterday's hearing from two regular antagonists on issues of insurance coverage.

Vincent DeMarco, president of Maryland Citizens' Health Initiative, has supported a similar requirement for several years as part of a health-care-for-all plan, and spoke for the bill yesterday.

So did Robert O.C. Worcester, president of Maryland Business for Responsive Government, who has fought against DeMarco's more expansive efforts, but called the bill yesterday "a marvelously bipartisan approach to an otherwise intractable problem."

Worcester, however, said the bill should include not just a penalty but a tax credit for individuals who buy insurance, putting individuals on a par with employers, who get a tax break when they buy coverage for their workers. DeMarco said the tax break would be "a budget buster."

The accord yesterday was in contrast to a "play-or-pay" bill for large employers - its supporters say only Wal-Mart Stores Inc. would be penalized - that drew heated opposition from several business groups at a hearing this month.

While the bill targeting higher-income individuals has bipartisan backing - and while no witnesses opposed it at yesterday's hearing - no state has adopted such legislation, according to Richard Cauchi, health program manager for the National Conference of State Legislatures.

Hawaii requires employers to offer insurance, Cauchi said, and California also adopted a so-called "play-or-pay" law for employers, but it was repealed in referendum before it became effective.

Efforts to expand coverage haven't focused on the higher-income uninsured because "there is some dispute about how real the numbers are," said Karen Pollitz of the Institute for Health Care Research and Policy at Georgetown University.

The count, she said, includes some who appear to have means but may have trouble affording coverage, such as relatively low-paid adult children who "move in with Mom" but are not eligible for inclusion on their parents' policies, and people who had a high income in the previous year but have lost their jobs.

"It's not as much of a problem as it looks like," said Gary Claxton, vice president of the Kaiser Family Foundation. "It's not clear that there are people consuming a lot of uncompensated care because they don't want to buy insurance."

Higher-income people don't stay uninsured as long as lower-income people, he said.

Whatever the numbers of people involved, supporters of the bill at yesterday's hearing said it's unfair that people who can afford coverage are going without, pushing health costs onto others.

Harold A. Cohen, an economist testifying in support of the bill on behalf of CareFirst BlueCross BlueShield, estimated that those above the bill's income thresholds accounted for $25 million to $30 million a year in uncompensated hospital care in Maryland.

Those costs are built into hospital rates paid by the insured - including perhaps $3 million a year paid by the state's Medicaid program, he said. The bill, Cohen testified, would "prevent the rest of us ... paying for care for the relatively well-to-do."

The penalty would be 1 percent of income for individuals and 2 percent for families that exceed the income threshold and don't buy coverage.

The state comptroller would be empowered to grant exceptions in special circumstances, such as the newly unemployed or those who have trouble getting coverage because of pre-existing health conditions.

Although the penalty would be imposed through the tax-collection system, Elliott said it was "not a tax."

Elliott said he became interested in the problem of the affluent uninsured after Nelson Sabatini, then state health secretary, showed a pie chart of the uninsured during a 2003 "health summit." Hammen and Elliott sponsored a similar bill last year, which failed to win passage.

Elliott said the bill failed last year because lawmakers' attention was consumed by other measures and there was "not enough time for it to be digested." He said he had "no idea" if the bill could pass this year, but was pleased by the support yesterday.

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