February 25th, 2009

On Monday, Feb. 23 the House Appropriations Committee held a budget hearing with the Dept. of Insurance; fielding questions for the Dept. was Insurance Commissioner Joel Ario.

Rep. Scott Petri stated that Rendell is asking for $350 million from the Healthcare Provider Retention Account to be moved to the General Fund, for other state uses.  He asked Ario if they would be “changing course with this proposal”

Commissioner Ario responded that the plan is intended to pay the back end of Mcare (a state fund to help doctors pay for their malpractice insurance) in order to get back to a traditional market.  He said that by 2013 the government will no longer be managing Mcare. 

Rep. Petri then asked if the Dept. is encouraging Pennsylvanians to buy Long Term Care Insurance.

Ario responsed that the Dept. is encouraging people to buy Long Term Care Insurance during their “productive” years, since nursing homes are not covered under Medicaid.  He stated that federal legislation will be proposed to provide a tax credit to individuals who buy this insurance. 

Rep.  Petri said that he would be re-introducing similar state legislation this year.

Managed Care Organizations (MCO’s)

Rep. Tom Killion asked if the Dept. thought of any other options besides the proposed 2% sales tax on MCO’s.  Ario said that they should talk to the Dept. of Welfare more about this, who would have more knowledge about MCO’s than his Dept.  He did say that the Feds stated that the assessment Pennsylvania has it is not valid because it  is only aimed at Medicaid.  Therefore the Dept. will lose its matching Federal grants by October if it doesn’t make changes to this assessment.

Rep.  Killion also raised his concern that if the state taxes managed care products this will hurt community health reinvestment funding, which is a source of money for the adultBasic insurance program.  He asked what the alternative for this funding will be.

Commissioner Ario said that the Blues’ insurance companies said they will pay either CHR or the new assessment, but will not cover both of them.   A way to make the Blues’ pay for both would be to levy a broad-based tax. 

Rep. Brian Ellis asked if the state would need a federal waiver in order to get matching funds for the expansion of Mcare. 

Commissioner Ario responded that no additonal state money will be at risk because adultBasic is not an entitlement program.  Therefore its expansion is dependent on federal money.  He stated that the Dept. has been talking with its Federal counterpart and  and that they are trying to get the federal government to fund 2/3 of the adultbasic program. 

Rep. Mario Scavello said that he thinks the MCOs will just pass the 2% tax onto consumers by raising premiums, and asked what protection will be put up against them doing so. 

Commissioner Ario noted that this depends on the demand curves and said that indeed some of the cost may be passed on. 

Rep. Scavello then asked what affect expanding adultBasic to include prescriptions and behaviorial drug coverage will have. 

Commissioner Ario said that more consumers in this pool will drive costs down because of the size of the pool. He also said that often prescription medicines can keep people out of the hospital, which will also cut costs.