March 13, 2010

Drink-tax repeal on ballot targets method of funding Dirigo


— By . COVER

Kennebec Journal

AUGUSTA — With the Nov. 4 election fast approaching, voters have a lot of decisions to make.

In addition to the presidential race, congressional seats and legislative contests, voters in Maine will be asked to decide three ballot questions.

What follows are questions and answers on one of those measures: Question 1, the repeal of a new tax on beverages to pay for Dirigo Health.

n What is the ballot question?

''Do you want to reject the parts of a new law that change the method of funding Maine's Dirigo Health Program through charging health insurance companies a fixed fee on paid claims and adding taxes to malt liquor, wine and soft drinks?''

n Why is it on the ballot?

A group called Fed Up With Taxes gathered more than 55,087 signatures to put the question before voters.

The group, which includes beverage industry associations, convenience store owners and the Maine State Chamber of Commerce, launched the petition drive after lawmakers passed the bill in April.

n Why are lawmakers trying to change the funding for Dirigo?

The current source of funding for the program is the savings-offset payment, which is paid by insurance companies and hospitals in the state. The premise is that by providing health insurance to more people, hospitals and insurance companies see a drop in the cost of providing care to those who don't have insurance. Also, hospitals agreed to voluntary limits on expenses.

Each year, the savings to the state's health care system that can be attributed to Dirigo is calculated, and the money is returned to the Dirigo program. However, insurance companies and business groups have sued the state over the savings offset payment, saying it exceeded any actual savings.

The state has spent more than $1 million defending the calculation in court. That's why the program is looking for a new, more reliable, less litigious way to pay for Dirigo.

n Is it true there was no public hearing on the bill?

The bill passed by lawmakers, L.D. 2247, had a public hearing March 13. However, at that time, the proposed funding source was an increase in tobacco taxes.

When the bill reached the House and Senate, it did not have enough support to pass with the tobacco taxes included. Amendments to the bill changed the funding source to beverage taxes.

n What do beverage taxes have to do with paying for Dirigo?

A blue-ribbon commission appointed to study Dirigo recommended in 2006 that the program could be funded with a variety of sources, including ''earmarked taxes on behaviors and products that have a negative influence on health.''

The recommendations included an increase in the tobacco tax, a snack tax, taxes on bottled soft drinks and syrups, and a tax on beer and wine.

n What was the vote in the Maine House and Senate?

The final vote was 75-64 in the House, with 12 absent. Although largely along party lines, with most Democrats supporting the tax and most Republicans opposing it, 13 legislators crossed party lines on the issue.

In the Senate, all 18 Democrats supported it and all 17 Republicans rejected it.

The final House vote was taken at 11:35 p.m. and the final Senate vote at 11:39 p.m. Gov. John Baldacci signed it into law the following day, April 16.

n Would people lose health insurance if the taxes are repealed?

In the near term, those who are now covered by Dirigo would continue to get benefits. However, the current funding in place is not enough to open enrollment to allow more people to sign-up. There is a waiting list of 1,500.

The Dirigo Health Agency would also need to go back to the Legislature to amend the current funding system to address a cash flow problem, said Karynlee Harrington, executive director of the agency.

n How many people are covered by Dirigo?

Enrollment stands at 11,191 on DirigoChoice and 5,600 on Medicaid who are also part of the Dirigo program.

n What would the new taxes mean for me?

Here's the breakdown, according to Maine Revenue Services:

A liter bottle of soda: 11 cents.

A 16-oz. bottle of soda: 5 cents.

A can of soda: 4 cents.

A bottle of wine: 7 cents.

A six-pack of beer: 16 cents.

Also, the law puts in place a $4-per-gallon tax on syrup used to make soda, some of which may be passed on to consumers at restaurants.

Maine Revenue Services estimates the new taxes -- and a fee on paid insurance claims -- would generate $50 million the first year, an amount that increases to $58 million in future years.

Opponents have said it would generate $75 million a year, but that's based on a higher per-person consumption of the beverages than what was used by Maine Revenue Services.

n What is the ''fee on paid claims?''

Question 1 would also repeal a 1.8 percent fee on paid claims. As it is now, Dirigo collects an average of 2 percent from all paid claims, but could legally go as high as 4 percent. The new law is intended to set that at 1.8 percent, rather than letting it rise or fall from year to year.

Depending on the practice of your insurance carrier, that paid claim surcharge may already be passed on to you in the form of a higher premium.

n What does it mean if I vote yes?

A ''yes'' vote means the proposed new taxes would not go into effect. The Dirigo program would continue to be funded by the savings-offset payment, which is calculated each year by the state and approved by the superintendent of insurance.

The most recent calculation, if approved by the Dirigo board, would allow Dirigo to be funded at $48.7 million for the next year.

The amount of the payment from year to year would determine how many people can be enrolled.

n What does it mean if I vote no?

A ''no'' vote means the taxes would go into effect 30 days after the election results are certified by the governor.

By law, the Secretary of State's Office must present the governor with results no later than Nov. 24.

The new taxes and continued fee on paid claims are projected to provide Dirigo with $50 million the first year and would replace the controversial savings-offset payment.

It would also put in place a new program designed to get younger people to buy health insurance.

Because the repeal efforts delayed implementation, the program would not be able to be opened up to new enrollees until July 2009 or later, Harrington said.

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