Nonprofit health-care providers, especially Intermountain Health Care, will not be taxed — but companies that own hospitals may have to stop also providing insurance.

After a second day of nearly two hours of public hearing before a packed room, members of the Senate Revenue and Taxation Committee on Monday approved a substitute form of SB61. The original bill would have levied a 3 percent gross receipts tax on nonprofit health-care providers.

In the bill's current form, companies like IHC will have to divest themselves of either their health-care business or their insurance business to protect against what some senators feared had started to become a monopoly for Utah's health-care giant.

The substituted SB61, approved by the committee on a 5-1 vote, sets a deadline of Jan. 1, 2007, for any company that owns hospitals to get rid of its insurance business. While the bill's stated purpose is to "prevent unfair competition," Sen. Darin Peterson, R-Nephi, said the substitute "cuts to the heart of the issue" by forcing state leaders and health-care companies to look closely at whether the practices of those companies, especially nonprofits like IHC, are fair to consumers.

"I don't think that this whole discussion was done with the intent of taxing IHC," Peterson said.

Sen. Michael Waddoups, R-Taylorsville, said IHC is approaching "monopolistic" in Utah and he is primarily concerned about whether the company is really behaving as a charitable nonprofit.

By splitting up the company, the reasons for massive jumps in profits for IHC — he said the company reported $276 million in reserves last year — would be much easier to pinpoint.

"We can study this, we can review it, but the only way we'll know if it's a for-profit company is to divide them up," he said. "Then we'll see if they're profiting from health care."

IHC president and chief executive officer Bill Nelson said after the meeting he was "surprised" the committee approved SB61, especially after the hours of testimony in which the company presented plenty of evidence to support IHC's nonprofit status and very little to support taxing it or splitting it.

As for selling the insurance portion, he said that would result in as much as a 15 percent increase in premiums because the company that buys the insurance coverages would be for-profit, and would therefore want to see a good bottom line. IHC, on the other hand, only looks to break even, he said.

"Potentially, this will increase premiums for patients, decrease payments to doctors and facilities, and cause a loss of jobs" because it would probably be an out-of-state company that would relocate the bulk of the currently Utah-based administrative employment, Nelson said. "It doesn't make any sense."

While some senators were concerned about the dominance of IHC facilities, those who represent rural areas (like Peterson and Senate Minority Leader Mike Dmitrich, D-Price,) were concerned about the lack of health-care options in their areas.

"I would hope that something comes out of this session which addresses health-care equity, both along the Wasatch Front and in the rural areas," Dmitrich said.

---

E-mail: jloftin@desnews.com