Gov. Matt Bevin can’t repeal a 1 percent tax he said was one reason to dismantle the state health insurance exchange before he was elected in 2015. So he’s planning to work with the legislature next session to remove the tax, which funded the now-defunct Kynect.
The tax was created to initially fund Kentucky’s high risk insurance pool back in 2000. When former governor Steve Beshear decided to go on its own to create Kynect under the Affordable Care Act, the tax then went to pay for its creation and maintenance.
“One of the arguments they were using was, why should everyone pay a 1 percent fee on something that only 90,000 people are using?” said Dustin Pugel, a research and policy associate with the Kentucky Center for Economic Policy.
It’s true: Every Kentuckian who has health insurance pays a 1 percent tax that still goes to pay for Kynect. It’s no longer functioning to sign individuals up for coverage, but it still exists for small employers. Any of the remaining revenue goes to pay for Medicaid.
Amanda Stamper, a spokeswoman for Bevin, said the tax is written into law, so the legislature would have to repeal it.
“The Bevin administration will work with the legislature during future sessions to help evaluate whether or not to keep the Kentucky Access assessment in place,” Stamper said.
Republican state Sen. Ralph Alvarado said whether the tax is eliminated also depends on what happens to the Affordable Care Act. The U.S. Senate is currently looking at a possible repeal and replacement of the legislation that allowed Kentucky to expand its Medicaid program, under which more than 400,000 low-income Kentuckians have since gotten health insurance.
In April, the House of Representatives came up with a version that would have progressively phased out expansion.
“Assuming the ACA is still in place, we’re looking at looming for Medicaid costs, we’re going to have to find a way to cover those costs,” Alvarado said.
The state is also facing a $113 million budget shortfall, and the governor’s office has indicated that Bevin is considering cutting state spending or dipping into the state’s reserve.
That doesn’t bode well for the prospect of the legislature cutting the tax.
Jim Waters, president of the conservative-leaning Bluegrass Institute, said he wants the tax repealed if it’s no longer paying for Kynect. However, he acknowledges that might be a hard sell.
“Have you ever met a government official that told you that we don’t need more revenue?” he said.