Administration Hopes Payroll Tax Will Pressure Exempt Companies To Join Single Payer

November 09, 2014

 VPR: Gov. Peter Shumlin says he'll unveil his financing plan for a single-payer health care system at the end of this month and the administration has made a critical decision to impose new payroll taxes on large companies that are exempt from being part of the Green Mountain Care program.

"You can not force them to participate in Green Mountain Care if they want to maintain they own program but on the flip side you can not leave them out very easily on the pay in side." - Administration Secretary Jeb Spaulding speaking about large companies that self insure their health care coverage.

Currently, about 20 percent of all employees in Vermont work for large companies that self insure their health care coverage. They're known as ERISA companies, named after the federal law that regulates this program.

Shumlin says it's very likely that his plan will include a payroll tax on all Vermont businesses. But because these ERISA businesses are federally regulated, the administration can't force these companies to participate in the state's single payer program.

But Administration Secretary Jeb Spaulding says the state can impose the new payroll tax - now estimated at between 6 and 9 percent - on these companies. Spaulding hopes these businesses will then see the benefits of being part of the state's new health care system.

"You can't force them to participate in Green Mountain Care if they want to maintain their own program,” said Spaulding. “But on the flip side you can't leave them out very easily on the pay-in side."

Spaulding says employees of these ERISA companies will also have to pay whatever income tax surcharge is included in the governor's financing plan. He thinks this will motivate the employees to drop their corporate coverage.

"A lot of our employees are going to say, 'I don't want our plan any more because as a resident I'm paying for Green Mountain Care and I want Green Mountain Care,'” said Spaulding.

Betsy Bishop is the president of the Vermont Chamber of Commerce. She thinks forcing ERISA companies to pay the new payroll tax is a mistake.

"But saying as an economic development strategy that we're going to tax businesses for something that they don't need or want or going to use because they already have that benefit is not promising," said Bishop.

Retired Middlebury College political science professor Eric Davis thinks a number of the ERISA companies will be very unhappy with the governor's plan.

"The businesses are going to be concerned that they are going to be continuing to pay for insurance because they operate in multi states but then may be assessed additional taxes by the state of Vermont," said Davis.

The initial single-payer plan is not expected to include dental or vision services but the administration will outline the cost of folding these services into the Green Mountain Care benefit package.