Legislative Memo

T 518.465.7511


S.6808/A.9808 (Budget, Part B) S.6810/A.9810 (Budget, Part K)



Covered Lives Assessment and HMO Premium Tax



March 7, 2008


The Business Council opposes these provisions of the 2008-09 Executive Budget, which would increase the Covered Lives Assessment and impose a premium tax on HMOs. Together they would add $350 million in new taxes on health coverage. With employee healthcare identified as the most significant cost-of-doing-business issue faced by Business Council members, these taxes will mean higher health insurance premiums for businesses and individuals at a time when many employers and their workers are already struggling to afford health coverage.

The taxes will drive up the cost of health coverage for all our members that purchase health insurance – from sole proprietors and small businesses to the largest self-insured employers – yet will provide no additional covered benefits or do anything to address the rising cost of healthcare.

These taxes would create obstacles to private sector growth by adding to the cost of doing business in New York. They will increase premiums and could force many business owners – particularly small business owners - to reduce or eliminate coverage for their workers, driving up the ranks of the state's uninsured.

The proposed $190 million increase in the Covered Lives Assessment – a coverage tax on individual and family health insurance policies issued in New York – would result in a 22 percent increase over last year's total collection of $850 million, to $1.04 billion proposed in the budget. This is a 56 percent increase since the Covered Lives Assessment was first implemented in 1997 with the passage of the Health Care Reform Act.

Imposing the Article 33 premium tax on HMO policies – policies which are traditionally purchased by small to mid-sized businesses – has been estimated to amount to a $160 million tax.

New Yorkers - both individuals and businesses - who purchase health insurance currently pay more than $2 billion in “hidden” taxes which are included in their health insurance premiums. These taxes may add as much as 3 percent to 7 percent to the cost of coverage. If approved, the two proposals would increase these taxes by another $350 million, increasing the cost of coverage by an estimated additional 2 percent.

By making coverage less affordable, these proposals undermine the Spitzer Administration's efforts to expand health coverage to more New Yorkers. The Business Council respectfully urges the rejection of these proposals.