- The Washington Times - Sunday, December 25, 2005

ANNAPOLIS — The roughly $40 million tax that Democrats in the Maryland legislature levied on the state’s health-maintenance organizations soon will be passed along almost entirely to consumers, state regulators say.

The 2 percent tax on HMO premiums, which the General Assembly passed over Gov. Robert L. Ehrlich Jr.’s veto, will cost a family of four about $200 more a year.

Mr. Ehrlich and other Republican leaders warned last year that the tax would be paid by patients and called it a “misguided tax” from an anti-business, Democrat-controlled legislature.

“Unfortunately, patients in Maryland, not the tax-and-spend General Assembly leadership, are the only ones who will pay for this costly lesson in basic common-sense economics,” said Sen. Andrew P. Harris, Baltimore County Republican and the Senate’s only physician.

However, House Speaker Michael E. Bush said the tax succeeded in stopping the increases in malpractice-insurance rates that purportedly threatened to drive doctors out of business.

“It has worked,” said Mr. Busch, Anne Arundel Democrat. “Those who voted against it are grasping at any straw or vine to support their position.”

Malpractice-insurance rates have stabilized in Maryland.

Medical Mutual Liability Insurance Society of Maryland — the state’s largest insurer of doctors — increased rates 66.8 percent since 2003, but has not filed for a rate increase for next year.

The company collected more than $27 million this year from the subsidy funded by the HMO tax, according to the Maryland Insurance Administration, which administers the fund.

James V. McMahan III, the administration’s acting commissioner, said it is too soon to judge the program’s success.

“The question is whether the rates will come down in the long run,” he said.

The fund stops subsidizing medical-malpractice insurance in two years, but HMOs will keep paying the tax into a Medicaid fund that now gets only some of the tax.

CareFirst BlueChoice, the state’s largest HMO, is the latest insurer to announce rate increases to recoup the added expense.

Starting next month, CareFirst’s roughly 366,000 Maryland customers will join members of Optimum Choice Inc., Aetna Health Inc., United Healthcare Mid-Atlantic Inc. and three smaller HMOs in paying for the malpractice-insurance subsidy.

The relatively small Delmarva Health Plan Inc. and Elder Health Maryland have not passed on the tax through higher rates. Neither has the 150,000-member Kaiser Foundation Health Plan, which isn’t taxed because of its nonprofit status but still pays an equivalent amount into the Medicaid fund.

The tax cost CareFirst nearly $20 million this year.

CareFirst executive Jeff Valentine said the company cannot continue to absorb such an expense on top of increasing health care costs.

“No one likes to see their premiums go up. We are trying to hold the line on cost as best we can,” he said. The tax “was obviously something the state felt it needed to do.”

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