H.B. 2

VETOES

the collapse of Medical Mutual, a company originally established because there were
no commercial carriers in the State. This would mean that Maryland physicians
would have no insurance options available to them. This is unacceptable from a public
policy standpoint.

Other Insurance Issues

House Bill 2 arbitrarily limits producers' incomes by capping the amount of
commission that can be paid to producers of medical professional liability insurance.
It further requires Medical Mutual to become a direct writer with the commission,
less 1% for overhead, to be credited to the doctors' premiums which essentially cuts
producers out all together and will increase the costs of operating the company in
excess of the 1% authorized to cover these costs.

One aspect of the limitation on commissions that is particularly troubling is that
there was no public notice of this issue. This provision was first seen when the bill
was distributed to the House members on Monday evening, December 27 after 6 p.m.
By the early hours of Thursday morning it had passed the General Assembly. It is of
great concern that this provision could become law without the ability of any of the
individuals who may be affected by it to be heard until after the fact, particularly
those whose livelihoods would be impacted.

HMO Tax

As I stated above, the one issue on which we did not agree was how to fund the
Rate Stabilization Fund and the increases to the Medicaid program. I was willing to
explore a variety of alternatives. We discussed these alternatives over the course of
the negotiations, during the extraordinary session, and even presented them to the
conference committee. The over attainment from the Delaware Holding Company law,
which has brought in around $150 million in one-time funds to the State general
fund, $142 million more than anticipated, seemed to me to be an appropriate use of
these one-time funds for this short-term fix. The Cigarette Restitution Fund was
also considered and was offered as an amendment to the bill in the Senate. The use of
these funds to ensure access to health care seemed particularly appropriate. The
possibility of imposing a surcharge on drunk drivers and other motor vehicle offenses
was discussed, as was the diversion of some of the corporate tax money from the
Transportation Trust Fund.

Because of the affordability of Health Maintenance Organizations (HMOs), they
are the most attractive plans to many working class and middle class families. HMO
plans are among the most affordable type of private health coverage available in the
State. For this reason the one area that I was adamant could not be considered as a
funding source was a tax on health care plans. This of course is the tax that is
included in the bill. This tax will be passed on by HMOs through higher premiums
and will be paid by both businesses and the people of the State. The largest HMOs in
the State have already indicated their intention to increase premiums because of this
tax. It has been estimated that this tax will cost the average family approximately
$200 annually. This of course is in addition to increases in premiums due to rising
health care costs. The Fiscal and Policy Note to House Bill 2 estimates that HMO
premiums will increase by 12.4% annually. In a time when providing health care to all

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