by Anne Galloway vtdigger.org News spread quickly — within hours of testimony on Wednesday — that the Senate Finance Committee is considering an increase in the employer assessment. Nothing draws a crowd at the Statehouse quite like the rumor of a tax — of whatever size — on any item, service or income.
Sen. Tim Ashe, D/P-Chittenden, is chair of the Senate Committee on Finance. Photo by Roger Crowley/for VTDigger
On Thursday afternoon, it was standing room only in Senate Finance as committee members heard testimony on the proposal, which will raise about $3.5 million and close the budget gap in the Senate Appropriations bill. The employer assessment currently raises about $14.2 million a year for the health care resources trust fund. The increase would bring the annual total to $17.8 million.
The employer assessment increase is a substitute for a $1.2 million proposal in the House Ways and Means Committee that would tax snuff and e-cigarettes and a plan in the governor’s recommended budget that would have raised $14 million through a fee assessed to every health care claim transaction.
Business lobbyists testified against an increase the employer assessment on large businesses that do not offer health insurance as a benefit to workers. The tax, known as the employer assessment, has been in place since 2006, when Catamount Health an insurance plan for low-income, uninsured Vermonters was created. The rate at that time was roughly $1 per day or $365 per year.
Businesses must make quarterly payments for each full-time equivalent worker. The indexed rate for 2014, which includes increases in the costs for the subsidy program, is $133.30, four times a year. Under the Senate Finance proposal, the assessment would stay level for businesses with less than 50 workers, while employers with 50 to 249 and 250-plus would pay slightly higher rates, the equivalent of $137 to $182 per quarter per employee. About 2,366 employers pay the assessment on roughly 31,000 employees, according to estimates from the Joint Fiscal Office. Out of those totals, there are 1,853 small employers with 11,743 workers.
The proposal would also require payment from companies that offer insurance but whose workers can’t afford the benefit and qualify for Medicaid. At least 3,800 full-time equivalent workers would be affected by that provision. The assessment on those employers, which would bring in $1.8 million in revenues, is baked in to the $3.5 million total raised.
The employer assessment is supposed to be “indexed,” reflecting the cost of the Catamount Health program.
Catamount was eliminated last year as the state implemented the health exchange. People who were in Catamount are now subsidized by the state at the silver plan level in the exchange.
A separate bill under consideration in House Ways in Means would increase the assessment by 11.99 percent on July 1 and by 11.99 percent again on January 1. The increases are necessary in order to bring the index levels up to cover the cost of the silver plans for former Catamount beneficiaries. The aforementioned rate of $133.30 per quarter per employee includes the indexing increase, regardless of business size.
Sen. Tim Ashe, D/P- Chittenden, chair of Senate Finance, said the new tiered system with modestly higher assessments for large employers will create a fairer playing field for businesses.
“The committee would prefer to make a slight adjustment in the employer assessment on companies that do not provide insurance for employees,” Ashe said. “The alternative is to ask all Vermonters to pick up the tab for a subset of companies that don’t pay.”
The largest increases in the state budget are from health care spending increases for low-income Vermonters, and Ashe says it’s appropriate for the Legislature to ask large businesses to pay a “de minimus” amount to help cover the cost for employees who don’t get insurance through their employer or earn so little that they qualify for Medicaid.
Cathy Davis, a lobbyist for the Lake Champlain Chamber of Commerce, testified against the Medicaid provision. She said that employers who offer insurance and pay a livable wage of $12.50 an hour may have some employees who are single parents who could qualify for Medicaid.
Davis said the 12 percent increases in July and again in January for all employers is also a double whammy for businesses who are also facing a higher minimum wage rate next year (the Legislature is considering several proposals that would increase the rate from $8.73 to more than $10.)
Ashe said Vermont taxpayers pick up $3,000 of the cost for each Medicaid patient (the cost to federal taxpayer is an additional $4,000, he says). His bill asks employers to pay $480 for each worker who is on Medicaid.
Jim Harrison, executive director of the Vermont Grocers Association, said it would behoove the Legislature to consider the impact of the assessment changes on employers in the runup to the state’s implementation of a universal health care plan.
“We’re making a pretty significant change for two years,” Harrison said. “I ask you to consider that. Somehow you seem to think the more employees you have, the richer you are and the more you can pay. Does that mean we should charge families with 10 kids more taxes because they’re bigger?”
Beginning next year employers with more than 50 employees that do not offer medical coverage will have to pay a federal penalty for uninsured employees of $2,000 per year.
“We’re the only state that is charging businesses twice with our current assessment,” Harrison said. “And not only do we want to charge twice, we want to charge more.”
Harrison, who represents general stores and large grocery stores, engaged in a back and forth with Ashe over the impact of the changes on large supermarket chains that operate in Vermont.
“The majority of businesses you represent are going to be completely unaffected by this proposal,” Ashe said.
Ashe said the state’s taxpayers pay $5 million toward Medicaid programs for workers of grocery stores with more than 100 full-time equivalent employees. The companies, he said, pay about $650,000 toward the cost.
“You are assuming businesses have $5 million to pay for this,” Harrison said.
“I’m not sure Vermonters have it,” Ashe retorted.
Harrison said it is just another tax shift that will impact consumers.
“Do you think price of Cheerios will go from 2.99 to 3.01?” Ashe asked.
Harrison reiterated that the state assessment comes on top of the federal penalty.
“We’re the only state that penalizes them twice, and now you’re asking them to pay even more when no other state charges,” Harrison said. “You’re making it very expensive to do business here.”