Kathy Gregg has more details on Democrat Governor Gina Raimondo’s proposed tax on health insurance in Rhode Island in today’s Providence Journal, and it looks increasingly outrageous.  First is a little budgeting trick.  The tax kicks in midway through the fiscal year, so on an annual basis, it’s actually twice the cost that the budget advertises:

Targeted to take effect in January 2016, the premium surcharge that Raimondo proposes would raise an initial $6.2 million of the $30.9 million the Raimondo administration is proposing to spend during the year that begins on July 1 to operate the state’s “health-insurance marketplace’’ over the next year.

Over the first full 12 months, HealthSource RI administrators anticipate the surcharge will raise $11.8 million.

And the rate is outrageous, too — above what the federal exchange would charge, for most users:

It would be assessed on the premiums of all health plans purchased in Rhode Island by individuals (at a rate of 3.8 percent) and small employers (1 percent).

As Gregg reports, that will be over $400 per year for some members.  The rate is also higher than the similar taxes in Massachusetts (2.5-3.0%) and Connecticut (1.35%).

One thing that is misleading, I believe, is spokeswoman Maria Tocco’s explanation that, per federal law, “a premium assessment has to be levied this way, as premiums must be the same inside and outside the Exchange for the same products.”  As I explained yesterday, the governor’s proposed language imposes the rates based on market, not plan.  In other words, the governor is taxing all plans whether or not they are offered in the exchange.

I imagine she’s doing that because the rate they’d have to charge in order to follow the method of the federal exchange and still pay for HealthSource would have made Rhode Islanders eyes pop (and further prodded the exodus of productive people from the state).  As healthcare expert Sean Parnell estimated for an article I wrote, last year, applying the federal rate to Rhode Island’s exchange would generate around $5 million.  Roughly speaking, Raimondo’s tax is more than twice as costly, so if it were structured like the federal fee, the rate would have to be up to nearly 8%.

Obviously, more plans and more people means a lower rate.  That’s why Massachusetts and Connecticut can charge less even though their exchanges cost more.  But none of this is news.  The RI Center for Rhode Island has long been saying that Rhode Island’s market is simply too small to justify its own health benefits exchange.

Even agents of the state of Rhode Island admitted this, back when they were free to be honest.  Last June, I quoted from a 2009 report reviewing the lieutenant governor’s proposal for an exchange like HealthSource.  Their conclusion back then?  “Insufficient scale to justify investment. Do not pursue.”

What’s changed that has a supposedly financially savvy governor touting this as economic development?  Perhaps that they think they can get away with it, now.