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'A Really Tough Sell': Proposed Health Tax On Oregon Employers Likely Dead

<p>Oregon Gov. Kate Brown speaks to reporters in her ceremonial office at the Capitol in Salem, Ore., Monday, Jan. 14, 2019.</p>

Bradley W. Parks

Oregon Gov. Kate Brown speaks to reporters in her ceremonial office at the Capitol in Salem, Ore., Monday, Jan. 14, 2019.

As she hunted ways to fund the state’s health care system for low-income Oregonians last year, Gov. Kate Brown landed on what she billed as a $120 million solution: taxing businesses that don’t spend enough on their employees’ health care.

What Brown actually introduced was a far more sweeping proposal — a half-a-billion dollar behemoth that, she acknowledged Thursday, is not likely to live through this year’s legislative session.

“It raised substantially more money than we had anticipated,” Brown said. “We didn’t frankly need that much.”

The apparently dead bill, House Bill 2269, was designed to address employers with at least 50 employees that don’t offer sufficient health insurance benefits. According to the Oregon Health Authority, in mid-2017 roughly 90,000 people who worked for large employers were forced to seek coverage from the publicly financed Oregon Health Plan, Oregon’s version of Medicaid.

The proposal, put forward by a task force Brown convened to brainstorm Medicaid funding, would have forced companies that didn’t pay a certain amount for employee health care to pay into a state fund. The bill didn’t set a specific threshold employers needed to pay, but state officials said the intent was that employers spend at least 50 cents an hour for employees or pay into the new fund.

The problem? That mechanism raised far more than the $120 million Brown was looking for — up to $517 million per biennium, according to the OHA. Nearly $400 million of that would have gone not to Medicaid, but to subsidize Oregon workers’ coverage under other health plans.

Despite input from business, health care organizations and labor that went into the proposal, it rankled an array of organizations, who called the bill unwieldy and unfair. Others suggested Brown was trying to sneak the tax through, though she’d made the proposal a cornerstone of her plan to fund Medicaid for the next six years. For now, those arguments appear to have prevailed.

Brown on Thursday did not rule out bringing the proposal back in next year’s abbreviated legislative session. She also raised the possibility of putting the idea before voters.

“I think given the other conversations happening in the building that that is a really tough sell right now,” said Brown.

The acknowledgement comes days after Oregon Business and Industry (OBI), the state’s largest business group and one of the more vocal detractors to the governor’s bill, made a significant concession. The group announced it would remain neutral on a $2 billion business tax package aimed at bringing the state’s school system up to snuff, after last minute haggling over the deal.

That was lauded by some Democrats, who said they never believed OBI wouldn’t oppose the package. In the estimation of Brown and others, the group’s stance hurts the chances that the tax package will be defeated at the ballot, if it passes the Legislature.

Supporters of Brown’s employer tax say the idea could ripen in years to come.

“This was a new concept,” said Felisa Hagins, the political director for Service Employees International Union Local 49, which backed the bill. “It’s been talked about before … but no one has really sort of dug in and done the modeling around it. Like any major policy shift that takes a while.”

The new employer tax is potentially not necessary to fund Oregon’s Medicaid system in the short term. In releasing an initial budget framework earlier this year, the chairs of the Joint Committee on Ways and Means said they’d identified money to keep the program’s benefits and eligibility in place for two years without any new revenue.

That is in part because of another package of taxes on hospitals and health insurers the Legislature passed early in the session.

But Brown has been adamant Oregon should fund the program on a longer-term basis. That means the death of her employer tax might put more emphasis on another plan: a $2-per-pack tax hike on cigarettes and a subsequent increase on similar products, including Oregon’s first-ever tax on e-cigarettes.

“The cigarette tax is still in play,” Brown said. “It’s really hard to sustain funding for the Oregon Health Plan for more than two years and, frankly, maintain the level of benefits we have, without that additional resource.”

The governor’s tobacco tax bill, House Bill 2270, is currently before the House Revenue Committee with no hearings scheduled.

Copyright 2019 Oregon Public Broadcasting

Dirk VanderHart is JPR's Salem correspondent reporting from the Oregon State Capitol. His reporting is funded through a collaboration among public radio stations in Oregon and Washington that includes JPR.