The Pennsylvania Chamber is urging state lawmakers to reject a proposed tax, which would increase the cost of health care at a time when more needs to be done to reduce costs.

As part of his 2009-10 state budget, Gov. Ed Rendell proposed a broad-based 2 percent tax on all Managed Care Organizations (MCO) in the state beginning Jan. 1, 2010. The proposed tax replaces the existing Medicaid-only MCO tax, which the federal government will discontinue on Oct. 1, 2009. According to the administration, the MCO tax will generate $200 million in fiscal year 2009-10 and $400 million in 2010-11.

While the governor's proposed budget claims to exclude any new broad-based taxes, the MCO tax is exactly that – a broad-based tax on all managed care organizations regardless of whether they provide Medicaid or not.

The PA Chamber, which has been meeting with impacted stakeholders to review the tax's potential impact and outline concerns, is opposed to the tax. The Chamber's opposition stems from the fact that the tax would:

• Target low-income individuals and small businesses. As proposed, the tax cannot be assessed on self-funded plans. This means that small business health-care plans, which are rarely self-funded, could bear the weight of this levy. It is also anticipated that enrollees in the state's Children's Health Insurance Program (CHIP) and AdultBasic could be assessed this new tax. These plans will likely pass the cost of the new tax directly onto participants – children and low-income individuals.
• Impact virtually every health insurance plan based on the definition of an MCO.
• Increase the cost of health insurance in Pennsylvania.

This proposal comes at a time when the economy is in recession and individuals are having difficulty affording health care. We need to address the cost drivers of health care in order to drive down the cost of health insurance, not place a direct tax on Pennsylvanian's access to care.

To read more about the proposed tax, click here.