Fed Health Care Changes Could Boost State Revenue

Minnesota could collect $42 million more over five years due to new federal health-care laws, although insurance companies and small businesses say new laws will cost them much more.

Much of the new state money would come from higher taxes and other expenses paid by Minnesota individuals and businesses, the state House Taxes Committee heard on Monday.

Insurance companies called for the repeal of a tax on premiums and U.S. Rep. Erik Paulsen, R-Minn., said Minnesota will be hurt if a tax on medical devices is allowed to continue. A bill to repeal the new medical device tax passed the House, but is stalled in the U.S. Senate.

Paulsen said 3,500 workers at Minnesota medical device companies could lose their jobs if the tax stays in place.

“I believe this is a tax on innovation,” Paulsen said.

While other Republicans joined Paulsen in opposing the added taxes, Rep. Diane Loeffler, DFL-Minneapolis, said the federal law also provides insurance coverage to people who otherwise would be treated at government expense.

“We expect they are going to catch things early when they are cheap and easy to cure,” she said.

Rep. Pat Garofalo, R-Farmington, said talk like that indicates state Democrats may want to raise medical device and other health-related taxes.

Rep. Steve Drazkowski, R-Mazeppa, said he is concerned about federal laws’ impact on small businesses because those with about 50 workers are penalized for growing.

New revenue the state can expect, which is tiny compared to the state’s $30-billion-plus two-year budget, would come in areas such as reducing itemized deductions for medical expenses. State lawmakers last year voted to go along with federal itemization law changes, giving the state $16 million more money in 2014-2015.

Reducing use of pre-tax flexible health-care spending accounts would provide the state nearly $28 million by 2015.

The figures came from nonpartisan Minnesota House staff members who studied how the Affordable Care Act would affect the state.