Insurance tax proposal would tax every claim in Illinois

House Republicans are on board with an insurance tax to generate hundreds of millions of dollars that an insurance broker said will benefit the state as long as the money is earmarked for Medicaid to capture matching federal dollars. The Center Square

House Republicans are on board with an insurance tax to generate hundreds of millions of dollars that an insurance broker said will benefit the state as long as the money is earmarked for Medicaid to capture matching federal dollars.

Last week, House Republicans said there’s around $2.6 billion in new revenue they would support for the upcoming budget that begins July 1. In addition to revised income and sales tax revenue of $845 million, Republican said they’d support legalized sports betting to bring in $212 million, delinquent tax amnesty to bring in $175 million, shifting funds from the refund fund to the tune of $375 million and a managed care organization assessment to capture over $1 billion. That would include federal matching dollars and funding that wouldn’t impact the General Revenue Fund.

Roseland Community Hospital CEO Tim Egan said the tax is an assessment on every claim paid.

“And now that we’ve handed over all of the Medicaid lives to the MCOs and they are woefully behind in paying us I don’t see a problem with putting a tax on them,” Egan said.

Earlier this year, credit rating agency Fitch said the proposed insurance tax is “the most significant” recurring revenue stream proposed by Gov. J.B. Pritzker, which could bring in $400 million. Pritzker’s administration earlier this year said it would bring in $390 million.

Davesurance.com insurance broker Dave Castillo said consumers can expect to pay more if such a tax passes, but that money will be matched dollar for dollar by the federal government.

“So I think it might be a reliable source of revenue,” Castillo said. “I don’t think it’s enough to cause major discontent in the marketplace.”

Egan said the proposed managed care organization tax makes sense.

“The way we termed this three years ago when we pitched it to the legislators – it is a Michigan lookalike tax,” Egan said. “They did this with a Republican governor, a Republican-controlled legislature, they got that passed and it generated hundreds of millions of dollars for Michigan, so it’s the same idea to do it in Illinois.”

Castillo said one proposal at the statehouse has the revenue earmarked only for Medicaid.

“It’s important because we know what happens with things that end up in the general [revenue] fund, they end up being spent for other things,” Castillo said. “If this can help keep that money in the Medicaid world, great.”

As of Monday, there was nearly $7.4 billion in backlogged bills at the Illinois comptroller’s office, much of which is for medical services. The most recent Debt Transparency Report from the comptroller said “long-term care providers believe hundreds of millions of dollars in payments are owed for services, due to the delay in agency processing of patients seeking eligibility for Medicaid services. Of the more than $1.288 billion in reported General Funds estimated pending liabilities at the Department of Healthcare and Family Services as of March 31, the department attributed about $48 million to costs related to processing long-term care applications.”

House Bill 272, which would impose a 1 percent tax on claims paid by health insurance carriers or third-party administrators to be solely used for funding Medicaid services, remains in a House committee.

The Center Square

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