ISSUE IN BRIEF: Health Insurance Mandates and “Pay or Play Taxes”
Legislators like to pass new health insurance mandates. They don't require any money from the state treasury and they appeal to groups - often providers of the service - who call for the new coverages. The Business Council is not opposed to most of the services that are being requested; rather we oppose forcing all health insurance policies to be overly-expansive. The incremental build-up of the mandates over the past two decades are one of the reasons that health insurance in New York State is about 25% higher than the national average.
There are a range of other punishing tax proposals that would be counterproductive to helping small business buy health insurance for their workers, including:
- Play or pay, where a small business who could not afford to buy health insurance for their workers would be taxed on a per-head basis. The money generated under some schemes would not even go towards purchasing health insurance.
- An obesity tax.
- A tax on health insurance plan surplus.
Mandated benefits -- proposed Timothy's Law - The Business Council opposes the Assembly's expansive mental health mandate because it is expensive and, if passed, would further drive up health-insurance costs and increase the total number of uninsured New Yorkers.
This bill would require that every insurance policy in the state provide full coverage for the diagnosis and treatment of mental disorders, including nervous disorders, emotional disorders, and dependency on alcohol or other drugs. The bill would also mandate that policies impose no limits on the coverage of mental disorders that are not imposed on physical disorders.
If passed, the mandate would add at least $200 million to skyrocketing insurance costs. That $200 million is in addition to $130 million in new taxes, fees, and “assessments” on health care that are part of the state budget.
The bill is cost-prohibitive for most businesses. Companies that believe they would like to- and can afford to- offer a higher level of mental health benefits already can buy an insurance rider. Many insurance plans offer mental health and substance-abuse benefits.
Already the state has over 30 mandated benefits that significantly increase the cost of health insurance. The average family in New York pays more than $1,000 per year to cover the cost of mandated services, according to a recent study by the Employer Alliance for Affordable Health Care.
Passing this new mandate would increase premiums by another 3 percent, according to the study. Moreover, there is not a consensus that mandating full mental-health coverage would be the most effective health-policy option.
“This [mandate] could lead individuals to receive services that are not shown to be effective or have been shown to be ineffective leading to wasted health care dollars and false hope,” said Donna Novak, author of the Employer Alliance study.
Employers in the state will face the real possibility of dropping coverage or passing the cost along to employees as rates continue to rise. These added costs will also contribute to an increase of uninsured New Yorkers - a figure that already stands at more than three million. As health insurance becomes more expensive, New Yorkers drop out of insurance plans because the cost, even when shared with their employer, is too high.
In 2000, the legislature recognized what rising health-care costs mean to small businesses by enacting Healthy New York. Passing this new burdensome mandate flies in the face of that initiative and further burdens small businesses that already buy health insurance, and by definition are not eligible to buy into Healthy New York.
The Business Council is supporting efforts to create a health-benefit cost commission. This commission would study the cost and effectiveness of all proposed health care mandates. Twenty-two other states have mandate review boards that serve the same function. The absence of a commission in New York is problematic. Advocates who support this new mental-health mandate maintain that the new burden would affect premium costs only minimally. But a variety of expert groups have estimated that it could drive up premiums as much as 3-5 percent. Enacting a health-benefit commission would help legislators accurately estimate the true costs of mandates before enacting them.