Sam Brownback’s HMO Tax Hikes Hit A Major Speed Bump: A Furious HMO

Kansas Gov. Sam Brownback (R) proposed $136 million in taxes on health maintenance organizations as a way of closing the state’s budget hole. Now, that proposal is in danger thanks to an angry managed health care company —Aetna, Inc.

According to The Wichita Eagle, leaders at Aetna are warning lawmakers that if Brownback’s proposal goes into effect the healthcare company would be hit with $12 million in additional taxes and add $206 to an average HMO insurance policy holder’s bill. Brownback’s proposal is currently awaiting approval in a House-Senate conference committee.

The warning from Aetna is particularly significant given that it is the biggest of eight insurers that would be hit by Brownback’s HMO tax.

Specifically, Brownback is looking to raise a “privilege fee” on annual HMO premiums which is currently at 1 percent. Brownback wants to raise it to 5.5 percent in order to bring in $136 million in new revenues. The $136 million would then be used to replace $80 million in state funds currently going to Medicaid, according to the Eagle. Kansas officials argue that the tax has to go to all HMO companies that offer Medicaid through Kansas’s KanCare program.

“That bill is inequitable and not delivering on a level playing field,” Aetna spokesman Rohan Hutchings said. Aetna officials argue that Brownback’s proposal puts too much of a tax burden on them.

On Monday, new Kansas revenue estimates projected a $400 million deficit for the 2016 fiscal year. That deficit is projected to grow to near $500 million if lawmakers don’t pass new insurance taxes.

As TPM has previously noted, Brownback has had to reverse course after instituting tax cuts even many Republicans argue were too steep. He’s proposed raising taxes on liquor and cigarettes and has even been forced to consider expanding Medicaid through Obamacare, a cardinal sin among conservative Republicans, as a way of closing his state’s budget gap.