- The Washington Times - Tuesday, January 25, 2005

Health maintenance organizations in Maryland have begun passing onto their customers a 2 percent tax on their premiums, just two weeks after the Democrat-controlled General Assembly enacted the HMO tax.

Earlier this month, Democratic lawmakers overrode Gov. Robert L. Ehrlich Jr.’s veto of a medical malpractice insurance reform bill that contained the tax, despite his warning that HMOs would pass the tax on to “those who can least afford to pay it.”

One of the state’s largest medical services providers — Aetna Inc. of Hartford, Conn. — will increase its premium rates and pass the full 2 percent tax onto its fully insured HMO customers in Maryland, spokesman Walter Cherniak told The Washington Times yesterday.

Aetna’s premium increase will affect about 130,000 of its 200,000 Maryland HMO members. Most customers will see their premiums begin to rise in March, Mr. Cherniak said, adding that Aetna is notifying its clients of the rate increase.

In addition, Mid Atlantic Medical Services LLC. will begin increasing its premiums on March 1, and Kaiser Permanente plans to increase its rates on April 1, the Baltimore Sun reported yesterday.

Meanwhile, Cigna Corp. of Philadelphia had not made any decisions about the HMO tax and its premium rates yesterday.

“We are analyzing the implications right now,” spokeswoman Gloria Barone told The Times.

CareFirst BlueCross BlueShield — based in Owings Mills, Md. — has not yet decided to increase its premiums but is considering doing so, spokesman Jeff Valentine said yesterday.

“We’re still exploring our options on how best to handle this additional burden,” Mr. Valentine said, referring to the HMO tax.

Company officials had said the HMO tax eventually would be passed onto Maryland customers.

Health insurers such as BlueCross have estimated that the tax will cost them as much as $20 million this year. The increased premiums will cost the average family about $200 more a year.

The Ehrlich administration yesterday criticized Democratic lawmakers who overrode his veto, saying they were “absolutely determined to raise taxes.”

But House Speaker Michael E. Busch yesterday said Democratic lawmakers did the right thing in overriding the veto, adding that he was surprised by the rising HMO premiums, which he said are “unjustified at this point.”

“Until there is a hearing before the insurance commissioner, I don’t think they can justify this pass-through tax,” said Mr. Busch, Anne Arundel County Democrat.

“I think the 85 members in the House and the 31 members in the Senate did what they thought was responsible,” the House speaker said.

Senate President Thomas V. Mike Miller Jr., Prince George’s County Democrat, could not be reached for comment.

In its medical malpractice reform bill, the General Assembly lifted a tax exemption on HMO premiums that had been in place to help the health insurers grow. Other types of insurers have had to pay the 2 percent levy on premiums.

The revenue from the HMO tax — about $64 million over three years — will be used to subsidize doctors’ malpractice insurance premiums, which have risen nearly 70 percent in the past two years.

Representatives of doctors and hospitals — including the Maryland Hospital Association — backed the General Assembly’s override.

Yesterday, Mr. Ehrlich chided the group, noting the HMO premium increases.

“The hospital association should be ashamed, and I am embarrassed for them,” the Republican governor said.

Hospital association President Calvin Pierson yesterday reiterated his support for the Democratic lawmakers’ measure.

“The General Assembly did the right thing in overriding the governor’s veto,” Mr. Pierson said. “It creates a shorter solution to lower physical liability premiums, and it’s a good first step in tort reform.”

Maryland doctors had complained that escalating malpractice insurance rates were forcing them to quit their practices or leave the state.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide