CapitolBeatOK Staff Report

Published: 10-Sep-2010

Taxpayers and state employees will see substantial savings as a result of the successful challenge of a new one percent tax on paid health claims, Insurance Commissioner Kim Holland said in a press release this week.

“We challenged the legality of the new tax because we believed it was unconstitutional, and we are glad to see Oklahomans will benefit from the money saved as a result of the ruling,” Holland said in her statement, which was sent to CapitolBeatOK. “More than $6 million dollars will be saved as a result, and the state and its employees will not be paying this expense in next year’s premiums.”

In July, the Oklahoma Insurance Department filed a lawsuit, challenging the constitutionality of House Bill 2437, which would have instituted a one percent tax on all paid health claims in the state. Holland’s challenge asserted that the measure was not passed in accordance with constitutional requirements.  Last month the state Supreme Court agreed, declaring the bill—and thus the tax—unconstitutional.

The Oklahoma State and Education Employees Group Insurance Board (OSEEGIB) had originally forecast that the new tax would cost the state’s health benefit plan (HealthChoice) an additional $6.2 million a year, and last month raised 2011 premiums to pay for it. With the tax being overturned, the Board voted last week to strike down the increase aimed at paying the tax.

As a result, the 2011 insurance premiums for state employee benefit plans, including HMOs, will be about one percent lower than anticipated before the court’s ruling.

The majority of state employee’s premiums are paid with a state benefit allowance that is derived from a statutory formula. Under state law, the benefit allowance is based on the average of the highest-cost HMO and HealthChoice plans, plus an average of the dental plans’ costs, the basic life insurance and disability premiums and 75 percent of dependents’ health insurance premium cost.

As a result of these premium changes the employee-only benefit allowance will be $603.29 for plan year 2011, a decrease from its $608.57 level for the current plan year. This reduction will result in a statewide savings of approximately $3.42 million.

Holland serves as a member of the Board and supported returning the money to the state and to policyholders in the form of lower co-pays, as well as the lower premiums. She supported reducing the copay to $25, but a vote to split the savings failed in the meeting. However, she indicated she is still pleased with the final results.

“Taxpayer dollars pay most of the premium costs for state employee health benefits, and employees pick up the rest.  Now state employees and all other taxpayers will see reduced costs.  It’s a win-win for the state and for state employees,” Holland said.