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Economy | Business

Employers, Insurers Gear Up For Premium Tax

This year, Oregon lawmakers passed new taxes on gasoline, businesses, hospitals, upper-income earners, and even snuff users.  But the tax that might affect people first is one on health insurance premiums.
The money will fund health care for uninsured children.  Most insurance customers will end up paying the cost for that.  But supporters say expanding health coverage will bring down the price of health care for everybody.  Salem Correspondent Chris Lehman reports.

So how much will this tax cost, anyway?

Colleen Thompson:  "We expect the premium tax to have an average impact of about three dollars per month."

That's Colleen Thompson with PacificSource, one of the largest health insurers in Oregon. 

Other insurance companies couldn't give an exact breakdown of the cost per person, but it's expected that most will pass the cost of the tax along to their customers when it takes effect in October.

The tax applies to health insurance plans, like the kind you might get through your employer — employers like Modern Building Systems.

Here at the company's factory in Aumsville, Oregon, workers assemble modular buildings for everything from school classrooms to convenience stores.

President and CEO Jim Rasmussen says his company provides health care coverage to his 100 employees.  And that won't end with the new tax.

Jim Rasmussen:  "I don't think it's going to adjust how we view health care on its own."

But, he says, it makes the overall cost of doing business that much more expensive.  And he says that puts his company at a disadvantage.

Jim Rasmussen:  "As costs continue to escalate, we have to adjust to be able to remain competitive with factories that we compete against elsewhere, and if Oregon companies are less competitive then we tend to get less work."

Rasmussen says the premium tax is small compared to the overall increase in the cost of health insurance.  Health care experts say runaway medical inflation is caused by all kinds of factors. 

Rasmussen blames government regulations.  But health care advocates like Cathy Kaufmann say that's not the real issue.

Cathy Kaufmann:  "One of the reasons why our health care costs continue to grow is because we continue to allow too many people to go without health care coverage, to go without preventive treatment, and to get their only medical care in an emergency room."

Kaufmann is with Children First for Oregon, but she's getting ready to take on a new job with the state.  Her job will be to see that the uninsured children the new tax is supposed to benefit actually do get covered.  She says if all goes as planned, by 2011 about 95 percent of Oregon's children will be covered by some form of health insurance. 

That's a laudable goal, say opponents of the tax.  But Betsy Earls of the business group Associated Oregon Industries says it's unfair to reach that threshold on the backs of employers.

Betsy Earls:  "It looks like $60 a year here, $70 a year there, but really when you look at all of the new taxes a business has to pay, it comes out to be quite a bit of money."

One of those new taxes Earls is referring to is a newly passed hike in the corporate income tax.  That's the target of a possible referendum by people who want to overturn it.  Unlike that tax measure, there's been no public effort so far to overturn the premium tax. 

One reason is that this tax will expire in four years.  So what happens to all of the children who get signed up for medical insurance between now and then? 

Cathy Kaufmann predicts they won't be left out in the cold.

Cathy Kaufmann:  "I don't know that the goal would be for this funding mechanism to go away.  I think the idea is that in four years, we expect the world to change enough that it's worth revisiting."

Of course, that's a reference to possible federal health care legislation.  Oregon lawmakers figured it's impossible to know what Congress and President Obama will settle on and what that would mean for this state. 

In the meantime, they're banking that people who already have health insurance are willing to pay more to cover children who don't.

About 42 percent of Oregonians are covered by health insurance plans that are affected by the tax.  Companies that are self-insured are exempt from the tax.

A quarter of Oregonians received health insurance receive insurance from a government program like Medicare.  The state estimates about 15 percent of Oregonians are uninsured.

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