The Facts about the Oregon Tax on Healthcare

oregon healthcare tax

A controversy is brewing in Oregon surrounding a bill that passed the state legislature last June and that involves taxes on certain health insurance plans and health care organizations. While the original bill passed with bi-partisan support, its opponents didn’t give up the fight, and now the measure is facing a potential repeal vote in an upcoming special election.

The Original Bill

House Bill 2391 passed the Oregon state senate by a vote of 20-10, and was promptly signed into law by Governor Kate Brown. The measure was developed as part of a compromise to try and close a $1.4 billion shortfall in the state budget for 2017-2019, and independent evaluations estimated it would provide up to $900 million in revenue towards that goal.

The bill itself is partly an extension of an existing tax on hospitals as well as an expansion of that tax. In addition, it also increases the reach of the tax to include some health care plans and certain managed care organizations. The previous hospital tax had been a popular way to fund the state’s Medicaid program, in part because it generated matching federal dollars.

Specifically, the HB 2391 was intended to ensure that the Oregon Health Plan, which provides insurance to about 1 million low-income Oregon residents, would have reliable funding for at least the next two years. About 350,000 of those served by the Oregon Health Plan were recently added when the Affordable Care Act (ACA) allowed states to expand their Medicaid programs. Funds generated by this tax also would help keep open a new psychiatric hospital serving hundreds of patients.

Arguments for Repeal

Those opposed to this new tax argue that it’s unfair because it only applies to some health insurance plans, and so is forcing a small segment of the population to contribute an unfair share. While they also support providing funding for the Oregon Health Plan, they prefer to find a different type of budgetary solution. One option that’s been floated along these lines would involve forcing public employees to purchase their health insurance through the state exchange, which would allow the state to save significantly.

Another argument for repealing the bill centers on the fact that there has been so much debate and uncertainty on the federal level about the fate of the ACA. With factions in Congress working hard to repeal all or parts of the federal health care law, opponents of HB 2391 in Oregon claim that it doesn’t make sense to implement something like it now when the entire national health insurance landscape may be completely different in 6 months to a year.

Arguments against Repeal

Those in favor of the original bill and arguing against repealing it maintain that the revenue from the expansion of the tax is necessary to ensure that hundreds of thousands of low-income Oregonians don’t lose their health insurance. They also point to the fact that implementation of the bill will lead to a state reinsurance program that can help to stabilize the current insurance marketplace.

Opponents of repeal also point to the fact that getting rid of the tax would suddenly rip a hole in the state budget. That could lead, not only to a loss of health insurance coverage for many in the state, but also to cuts in other areas including subsidies to public colleges and universities. This, in turn, would cause those institutions to raise tuition costs, presenting new challenges for their students.

Additionally, the claims made by proponents of repeal that other measures could just as effectively solve the problem ring hollow, according to those in favor of keeping the bill, because none of them have come up with any concrete proposals that would practically tackle the issue.

Why a Special Election Is Being Held

The repeal measure, now officially Measure 101, qualified to be placed on the ballot because opponents of the bill collected more than the required number of 58,142 signatures. However, that would not have necessarily triggered a special election. Democrats in the state legislature, who oppose repeal of the bill, fought to have a special election to settle the issue rather than wait until regularly scheduled elections are held in November, however, because they argue that if the measure is repealed, they want to get started on a budgetary solution right away.

Proponents of repeal would have preferred that Measure 101 be placed on the ballot in November instead because they feel not as many people are paying attention, which will drive down turnout for the special election. They also argue that a special election will cost the state money unnecessarily. Nevertheless, the special election is scheduled to occur on January 23, 2018, at which point the voters of Oregon can decide whether to repeal HB 2391 or allow it to go into effect.