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Insurance industry gets tax break from state

POSTED: January 1, 2009 12:17 p.m.
ATLANTA - Georgia's budget woes aren't stopping the state from ringing in the new year with a hefty tax break for the insurance industry.
Among the new Georgia laws that will take effect Jan. 1 is one that will eliminate the state and local taxes for insurance carriers that offer high-deductible health plans.
The tax break is expected to save insurers $146 million over five years. They lobbied hard for the measure, which passed on the final day of the 2008 session. It was derided by critics as a "sweetheart deal" for the industry.
Georgia is facing a budget shortfall that could top $2 billion for the current fiscal year and has been slashing programs, furloughing state employees and boosting fees for college students.
The tax break will reduce the money flowing into state coffers during tough economic times. Still, Gov. Sonny Perdue isn't pulling his support. The law was part of his legislative agenda last year. A Perdue spokesman said the governor continues to believe it will provide cost savings down the road by covering some of the roughly 1.7 million Georgians who lack health insurance.
"The whole thought behind this is that if we make these plans more affordable and that we get more folks insured," spokesman Bert Brantley said.
High-deductible health plans are a favorite of Republican health policy. Participants typically put money in tax-free health savings accounts to pay medical expenses out-of-pocket until they meet a high yearly deductible, which can be several thousand dollars. Some preventive care - like annual pap smears and "well baby" visits - are covered by the plans before the deductible is reached.
Such plans are particularly attractive to people in their 20s and upper-income residents. Participants are likely healthy and don't expect big medical costs but are worried about catastrophic coverage for something like an accident or cancer.
Critics question whether the plans will do much to reduce the number of uninsured in the state.
Most have modest incomes and would be unlikely to afford thousands of dollars in out-of-pocket health expenses, said Linda Smith Lowe, a Georgia consumer health advocate.
Lowe said it is more likely that the bill will encourage employers to switch their current health care coverage to riskier high-deductible plans.
A study by the nonpartisan Commonwealth Fund found that the plans discourage the use of prescription drugs and primary care visits because of the high out-of pocket expenses. The group also determined that while participation in the high-deductible plans grew in 2007 it is still just a tiny part of the market.
Alan Essig, executive director of the nonpartisan Georgia Budget and Policy Institute, said he's skeptical the tax break will lead to costs for the plans actually going down in the state.
"The only thing we know for sure is that they get a tax break," Essig said.
But Kirk McGhee, executive director of the Georgia Health Plans Association, said if the insurers want customers they will have to price the plans competitively.
"Cheaper products will get more people into the system," McGhee said. "And getting more people insured helps everyone."
McGhee acknowledged that the plans are aimed in particular at what he called "the young invincibles," those in their 20s who are healthy and shun coverage as a luxury item.
High-deductible plans are already being sold in Georgia. But the office of Insurance Commissioner John Oxendine said the state has no statistics on how many are in effect and if they have drawn consumer complaints.
 

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