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Indiana Gov. Daniels Signs Law To Increase Cigarette Tax To Fund Health Care Program

September 21, 2017

Indiana Gov. Mitch Daniels (R) on Thursday signed into law a bill that will increase the state's cigarette tax by 44 cents per pack to fund a health insurance program for low-income residents, the AP/Louisville Courier-Journal reports. The tax, which will take effect on July 1, is expected to generate $206 million annually. If the health plan receives federal approval, the tax could leverage additional federal funding for a total of $750 million to $800 million annually (Smith, AP/Louisville Courier-Journal, 5/11).

The money would fund the Healthy Indiana Plan for low-income, uninsured state residents. Under the plan, beneficiaries would contribute up to $1,100 or 5% of their annual gross family income to a type of health savings account. After beneficiaries spend that money on medical services, the new health plan will cover 100% of their medical bills up to a lifetime cap of $1 million. Indiana Family and Social Services Administration Secretary Mitch Roob said that the savings accounts will encourage beneficiaries to act as intelligent consumers (Evans, Indianapolis Star, 5/14).

According to FSSA, about 367,000 state residents would be eligible for the plan; the cigarette tax would generate funding to cover about 140,000 people (AP/Louisville Courier-Journal, 5/11). Roob said that his goal is to enroll 50,000 people in the program by the end of 2008, but he added, "It's going to take a couple of years to get the word out." The Indianapolis Star reports that one of the biggest challenges facing the program will be convincing low-income residents to enroll in a health plan that requires them to share in the cost of premiums. Roob said FSSA is planning "a full-court press" throughout the state to promote the new health plan, and outreach efforts will include health care providers, social service organizations, businesses and religious leaders. Patti O'Callaghan, president of the Indiana Coalition for Human Services, said, "Education and outreach will be critical to the success of this program" (Indianapolis Star, 5/14).

"Reprinted with permission from kaisernetwork. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at kaisernetwork/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork, a free service of The Henry J. Kaiser Family Foundation . © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.