The Palmetto Insider

The blog of the South Carolina Policy Council

Archive for the ‘General Assembly’ Category

Health Care Law Already Hitting Home for HSA Consumers

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Even as foes of Obamacare celebrate their recent victories at the polls, more and more of the regulations mandated by the federal health care takeover (otherwise known as the Patient Protection and Affordable Care Act) are hitting their start date, and the reality is setting in quickly – we are all going to be affected by this law, and most of us for the worse.

Take HSAs, for example, which we have previously extolled as a tool to bring down health care costs. HSAs provide greater cost-saving incentives to consumers, who may roll over unused health care dollars from year-to-year and even use remaining dollars for retirement. But Health Savings Accounts are being marginalized by the new healthcare law.

The way HSAs work is like this. Imagine if you had insurance with which to buy a new car – much like we have health insurance to cover health-related expenditures. Well, if the new car is covered by insurance – and you pay a hefty premium to have this insurance – you will likely want to maximize the “benefits” you receive. So does everyone else in the insurance program.  Eventually, your choice and the collective choice under this plan will eventually jack up the cost and the price of your “car purchase insurance”. So when the next insurance bill comes in, everyone is complaining that their “car purchase insurance” is ridiculously expensive.

In short, you’ll buy the most expensive new car your plan allows and it is not secret that there is a price hike. But if instead you have a “car HSA” plan, you might think to yourself: “Should I spend all of my allotted car dollars on this one purchase? Or should I save some of that money in case I want to buy a second car later – or if this first car breaks and I need a new one?”

Based on these incentives, consumers with HSAs tend to only use the health care they need. Instead of over-consuming health care (which sometimes happens with regular insurance plans), HSA consumers weigh the costs and benefits of their health care decisions.

Unfortunately, the utility of HSAs is quickly deteriorating. As of January 1, 2011, over-the-counter purchases will no longer be HSA eligible. Consumers who don’t want to pay out-of-pocket for these items (about 15,000 in total, according to Fox News) will need a doctor’s note.

As Max Borders writes in the Washington Examiner, we have lobbyists to thank for this stomach punch to consumers:

First, Big Pharma (drugs) and the AMA (doctors) were both mixed up with writing Obamacare. This was clear from the start, but the progressives looked the other way. So, an army of lobbyists made sure that if a bunch of people were going to be forced by the feds to buy health insurance, they’d want to get some goodies out of all these newly minted HSA holders. How could all those lobbyists find a way to divert all those new customers into more expensive drugs and make them to go to the doctor more? Take them out of the driver’s seat. It has nothing to do with primary care paternalism. This is good old fashioned rent-seeking at its finest.

Additionally, this is another one of the ways the government has proposed paying for Obamacare. Which in essence, makes it a tax increase.

Other mandates are also making HSAs less affordable.

  • Covering children: Several major health insurers have dropped child-only policies because of the intense mandates that have gone into effect.
  • HSAs must cover 60 percent of actuarial benefit: According to the Heritage Foundation, only the Health and Human Services Department Secretary Kathleen Sebelius can know whether HSAs are viable under this plan. Will contributions count? If not, then HSAs will “no longer be viable.” Why is that? Because the HSAs revenue/expense system functions in exactly the opposite manner of traditional health insurance products. In traditional health insurance plans, premiums are the major revenue stream and deductible and co/pay are supplementary to cover the medical expense. In HSAs, contribution from members (function similar as deductible) is the major revenue stream while premium serves as a supplementary to cover the cost.
  • Medical loss ratio (MLR): Obamacare has mandated the health insurance companies spend at least 80 percent (85 for bigger companies) on “your health care.” What this does is limit choice in the market, by forcing some companies out of business who don’t meet this 80 percent level. It will also discourage spending on fraud prevention, because that will not be counted in the 80 percent. So every dollar spent on fraud prevention hurts an insurance company’s ability to hit the 80 percent level. Fewer choices in the market means fewer HSA plans. Fewer HSA plans means more expensive HSA plans. Either way, it’s bad for consumers.

HSAs are still a viable option for state-based reform. The South Carolina General Assembly could create a better tax environment for consumers who choose these health plans.

One example of a bill that was already introduced is S 998 from last session, which never made it out of committee. This bill – sponsored by Sen. Mike Rose and Sen. Shane Martin — would have allowed a 100 percent tax deduction or HSA premiums and created a fast-track approval process for new HSA plans that have already been approved by other states. Both of these items would add up to more choices for consumers.

Another way the state could counteract federal burdens on HSAs would be to create state-level exemptions. For example, the federal government removed tax-exemption from over-the-counter purchases. But there’s nothing stopping the state legislature from enacting a state-level exemption for South Carolinians.

South Carolina has at times been at the forefront of HSA legislation. The damage done to HSA plans by Obamacare opens the door for more state-based reform.

Written by SCPC

November 24, 2010 at 12:47 pm

Budget Crisis Long in Coming

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Despite all the rhetoric about budget cuts and employee furloughs, South Carolina’s FY10-2011 budget was the largest in state history. The total state budget was $21.149 billion. This includes: $8.268 billion in Federal Funds; $7.766 billion in Other Funds; and $5.115 billion in General Funds. That’s an increase of $500 million or 2.19 percent over last year. The increase comes mostly from increased fine and fee revenue and one-time federal stimulus dollars.

But this year’s budget increases are not an isolated phenomenon. Over the past 10 years:

  • The total state budget increased by 44.49 percent (FY2002 to FY2011).
  • The budget increased by 4.14 percent annually.
  • The budget increased every year, except one (FY2010).
  • In the five-year period (FY2003-FY2008) prior to the beginning of the current recession, the total budget increased 34.56 percent, going up by more than $5 billion.

According to the Mercatus Center, South Carolina’s state and local government spending relative to personal income is 26 percent – 5th highest in the country. In other words, local and state government spends 26 cents of every dollar earned by South Carolina’s people. Similarly, government spending accounts for 23 cents of every dollar of Gross State Product (GSP) – 4th highest in the country.

Debt is another serious problem. South Carolina government is carrying $40 billion in debt, including state, local, and school district debt, as well as unfunded liabilities on public employee pensions and post-retirement health benefits. State and local governmental outstanding debt accounts for 22 percent of GSP – again, 4th highest in the nation.

So we have high spending and high debt relative to income and GSP. What does that get us?

An unemployment rate of 11 percent – 6th highest in the nation (as of September 2010) and a median household income of $42,442, which is 42nd lowest in the nation (as of 2009). Our surrounding neighbors have unemployment rates of 9.6 percent (North Carolina), 8.9 percent (Alabama), 10 percent (Georgia), and 9.4 percent (Tennessee). A pretty uncompetitive situation for the Palmetto State.

It goes without saying that South Carolina is suffering from a budget and spending crisis – and it’s good to know governor-elect Haley recognizes this. But the crisis is not new. It comes from years of fiscal mismanagement and poor budgetary practices. None of these problems were addressed during the 2010 session. It’ll be interesting to see how legislators respond in 2011.

Written by SCPC

November 22, 2010 at 10:15 am

Governor-elect launches website to address budget crisis

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In January, Nikki Haley will be sworn in as the new South Carolina governor. Like nearly every other governor across the nation, she is inheriting a budget crisis.

One of Haley’s first actions was to establish a task force with the goal of addressing budget challenges. (Disclaimer: South Carolina Policy Council president Ashley Landess is one of five appointees to this task force.) The task force will, “assist Haley in identifying the most pressing fiscal challenges facing the state.”

Additionally, Haley’s team launched a website – http://www.scbudgetcrisis.org – that will solicit suggestions from taxpayers about ways to balance the budget. Individuals can submit ideas – anonymously if preferred – the task force can consider in working toward streamlining government.

This evokes images of the movie Dave, where an average Joe becomes president for a short time and in one scene, spends an afternoon with his friend trimming $650 million in fat from the federal budget, in order to save a homeless shelter. As the fake president and his friend (an accountant) look through the budget, the accountant quips:
“I’ve been over and over this stuff. It doesn’t add up. Who does these books? If I ran my office this way, I’d be out of business.”

Sums it up exactly.

Hopefully, the budget task force and website will bring that common sense approach to budgeting next year.

To that end, here are three easy fixes to get the ball rolling:

1) Cut agricultural marketing funding. The General Fund provides $562,000 for Marketing & Promotions to the Department of Agriculture. Yet the Clemson PSA receives $62 million already for these and other purposes. Let alone the fact that government does not need to be marketing farms, there is already substantial funding for these activities. And without profit motives, you get things like Palmettovore.

2) Cut state-funded tourism. Proviso 39.12 of the FY10-2011 budget funnels leftover tax dollars from the Motion Picture Incentive Wage Rebate Fund into tourism marketing. Proviso 39.1 allocates $1.375 million for tourism promotion, including money for private chambers: $105,000 for the Georgetown Chamber of Commerce; $50,000 for the Myrtle Beach Chamber of Commerce; and $20,000 for the Williamsburg Chamber of Commerce. These funds are in addition to $10.05 million for tourism advertising already allocated in the total state budget. Tourism marketers and private chambers should have to pay their own way, instead of forcing other taxpayers to subsidize their marketing and advertising.

3) Close the Statehouse Gift Shop. For some reason, each year legislators protect the Statehouse Gift Shop from budget cuts. This is absurd. Why continue to subsidize a business that keeps losing money? Stop this ongoing bailout for the gift shop and let private sector vendors fill the void. That’s how you create a stable job base. Moreover, anyone ever heard of priorities?

These ideas are just a start. And you can find plenty more on our website – for instance, here and here. But we encourage you to submit your own ideas to www.scbudgetcrisis.org.

Written by Geoff Pallay

November 18, 2010 at 1:26 pm

More Bills Passed This Year, Than Last

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If you haven’t had a chance yet to check out this year’s Best/Worst, take a look over at SCPC. One thing you’ll see is that this year’s Best/Worst is longer than last year’s. In fact, it came as a surprise to us that the Legislature passed more bills in 2010 than 2009. At the same time, 2010 was a bit disappointing when it came to thinking creatively about free market health care reform, environmental reform and education reform. Not much fundamental budgetary or tax reform either.

Anyway, here are the numbers:

Bills Introduced, Passed and Vetoed During the 118th General Assembly

2010 (Second Regular Session)

1,052 bills and joint resolutions introduced

219 passed

46 vetoes (not including budget vetoes)

36 vetoes overridden

2009 (First Regular Session)

1,402 bills and joint resolutions introduced

205 passed

16 vetoes (not including budget vetoes)

16 vetoes overridden

As we observed in our special report on shortening session, the South Carolina Legislature passed about one bill a year/per legislator during the 118th General Assembly. Likewise, as a body, seven bills annually were introduced per legislator.

Written by Jameson Taylor

November 10, 2010 at 5:00 pm

Wiki website covers down-ballot elections

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This Tuesday, voters will go to the ballot to voice their opinions in the midterm elections.

Earlier this month, we mentioned that South Carolina had uncompetitive elections, as measured by the political encyclopedia, Ballotpedia.

On November 2, Ballotpedia will be tracking results for statewide ballot issues, Governor, Lt. Governor, Attorney General, Secretary of State, and House of Representatives in South Carolina.

Statewide election results will start to be posted 30 minutes after polls close.

Most media sources will be revealing who wins the big races — but for these down-ballot items, this site is a good resource for results and coverage.

Written by SCPC

October 28, 2010 at 9:37 am

Senate Select Committee on K-12 Education Funding

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The Senate Education Committee held their Select Committee on K-12 Funding on Tuesday. Senator Hayes commenced the meeting by remarking on the seven areas the meeting was to emphasize. Representatives of the Dept. of Education and the Education Oversight Committee delivered notable presentations covering issues that included the following:

  1. Statutory flexibility and statutory deregulation
  2. Comparison and reform
  3. Per pupil funding methods
  4. 4-K cost estimate on a statewide level
  5. Teacher pay flexibility
  6. S.C. public charter school funding
  7. School district consolidation

Janice Poda, Deputy Superintendent for Administration with the Dept. of Education was the first to present before the committee. Recommendations the department focused on were flexibility (so as to establish a new system of student-centered funding and the permanent codifying of current flexibility provisos), deregulation (as granted to charter schools so as to eliminate many elements of title 59, if not in its entirety), and public charter school district funding (so as to encapsulate funding into a broader funding methodology for public school choice, as to provide options and other avenues of choice to parents and children such as charter, magnet and Montessori schooling, among others).

For more information on weighted student funding, see chapter 10 of Unleashing Capitalism.

Dr. Jo Anne Anderson, Executive Director of the Education Oversight Committee, and Melanie Barton, Director of Policy Development and Evaluation, introduced a per pupil funding methodology based on the EOC funding model.  The State funding allocated in the presentation—based along three main premises—incorporated the programs the state wants to offer (the quality of the courses and their consistency based on statutory requirements or regulation), differences among students (the realization that considerable differences exist amongst students including students with disabilities, young adults, and gifted students, second language students, etc.), and the partnership between local and State funding entities (providing responsibility of the State for students based on an equity system in terms of resources and economic conditions of students). 

The full SC EOC report can be found here.

Written by SCPC

October 22, 2010 at 12:18 pm

South Carolina Good Ol’ Boys Face Little Competition

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According to Ballotpedia – a wiki website that covers state legislatures and ballot measures – South Carolina’s legislative elections for 2010 are remarkably uncompetitive.

Researchers for the site gauge competitiveness based on three measures:

  1. Did the incumbent run for re-election?
  2. Was there a primary opponent to the incumbent?
  3. In the general election, is there a Republican and a Democrat on the ballot?

Texas came in as the least competitive state, while New Hampshire was the most competitive.

How did South Carolina perform? Not well.

The state has 124 House seats up for election in 2010. The Senate is not holding elections.

Of those 124 House seats, only 11 incumbents are not seeking re-election: 8.9 percent. That is well below the national average of 18.6 percent.

Additionally, 87 incumbents faced no primary.

In fact, 70 percent of South Carolina seats up for election only fielded one major party candidate. That works out to 70.16 percent of the races – the highest percentage of one-party races in the country. Nationally, 32.7 percent of seats have only one major party candidate.

Overall, South Carolina ranks 41st among the 46 states that have state legislative elections this year.

As we all know, competition is key for a vibrant, prosperous and fair economy. The same holds true for political systems.

If legislators aren’t facing any competition in elections, what reason do they have to be accountable to the voting public?

Elections are a way for the public to remind political officials: “Hey, we’re watching you. If you don’t represent us, we will vote you out.”

But in South Carolina – and most states across the country – that’s not the case.

See here and here for more reasons why we need legislative reform.

Written by SC Policy Council

October 14, 2010 at 11:20 am

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