Montana Viewpoint


Statewide School Health Insurance Pool and Taxes to Fund Seniors’ Programs Fail the Fairness Test

March 31, 2003

Every once in a while a legislator is faced with having to vote against legislation that’s popular with his constituents. Recently, I’ve had to do that twice; this article is about how I made my decisions to vote against a tax on soft drinks to fund senior services (SB 433), and a statewide insurance pool for school districts (HB 302).

Like any legislator with a lick of common sense, I’ve always supported funding services for seniors. This year I’m carrying the AARP endorsed bill for prescription drug discounts, which has just passed the Senate. In the past I carried a bill to increase funding for the Area Councils on Aging. SB 433, which proposed to dedicate a portion of the $19 million it would raise through a 5 cent tax on soft drinks, was wrong for two reasons.

First and foremost, it was bad budgeting practice. Dedicating a particular tax to fund a particular service is known as earmarking, and does not allow legislative oversight of the earmarked money. If the earmarked revenue exceeds the realistic needs of the program it funds, the legislature can’t spend the revenue on other worthwhile projects. Sometimes programs waste earmarked money, and since the program has total control over spending it, the Legislature has little ability to intervene. The two most obvious examples of earmarking are the Department of Transportation, which is funded entirely by the gas tax, and the Department of Fish, Wildlife, and Parks, which is 99% funded with earmarked money from licenses and fees.

Secondly, getting seniors’ hopes up about increased money for senior programs was unkind. The Governor has pledged to veto tax increases. Even if she didn’t veto it the bill would surely have been amended to put the money into the General Fund. It’s not right to get people’s hopes up for something that won’t happen.

Deciding my vote on the School Health insurance pool was even more difficult, especially since I was a co-sponsor of the legislation. The need for such a program is patently obvious; many school districts cannot afford to offer any—never mind decent—health insurance to their employees. In many schools where it is offered, the employees’ share of the premium is beyond their means. I based my decision on two things; was it fair to all school districts, and did the benefits outweigh the risks. Unfortunately, it flunked both tests.

The idea of the bill was to employ the basic principle of insurance which is to spread the risk over as large and varied a group as possible. This keeps costs down because the healthy subsidize coverage for the less healthy.

To minimize the risk and premium, HB 302 made joining the insurance plan mandatory. That makes good sense, but it penalized school districts which had long ago decided to self-insure and already had successful programs in place. In many self-insured districts, employees had even passed up pay increases in favor of putting more money into their insurance program to build up reserves and strengthen the program.

Those districts would have to give up their insurance programs to join the statewide pool. They believed this would increase their premiums and decrease their benefits. That would serve the pool well, but not those school districts which had been prudent and already had good coverage. Many of those districts did not want to join, and the bill’s proponents would not support amending the bill to allow them to stay out. It’s a question of giving up something you’ve worked hard at to make it a success, and then giving it up in favor of the greater good.

Secondly was the soundness of the proposal. I had a talk with the John Jones, who is the Executive Director of Managed Care for Billings Deaconess Hospital. His concerns, coupled with the concerns of the Legislative Auditor convinced me that the risks outweighed the benefits for all school districts. The plan offered was a proposal only, and the benefits and premiums were best estimates, not fact. It’s like signing up for insurance without knowing exactly what the coverage would be or how much it would cost.

Jones felt that the way the bill was written would be condemn the project to failure and the state would have to take it over sooner than later. About 100 school districts were too small to afford to offer insurance, but the bill said they would have to offer it. Even though all school districts would have to offer coverage, employees did not have to accept it. This meant that if healthy folks thought the premium was too high, they would drop out, increasing the proportion of less healthy members and increasing their risk of loss.

The need is still critical, however, and something must be done. I’m co-sponsoring a “study resolution” to set up a committee to bring a workable, low risk, and fairer plan to the next legislature. I know some will be disappointed by the failure of these bills, but I believe the legislature made the best decision for everyone.

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620