Briefing PaperBusiness Council Opposes More than $850 million in New Heath Insurance Taxes
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In 2008 the NUMBER ONE issue with our members was the rising cost of health care coverage. Yet when we look at the Governor’s 2009-10 Budget we see that he has included nearly a billion dollars in taxes that will lead to increased health insurance costs. Our members tell us neither they nor their employees can afford any more increases. For businesses, it could mean asking their employees to pay more for coverage or dropping it altogether.
The budget proposes $855.3 million (FY2009-10) and $827.0 million (FY2010-11) in new or increased insurance and/or health-related assessments and surcharges (we call them TAXES). These taxes will ultimately be passed through to businesses and consumers in the form of higher health and other insurance premiums.
Because employers pay for most New Yorkers’ health benefits, the various private insurance surcharges and industry assessments are a business tax.
On February 3rd the State Legislature approved increasing health insurance taxes by an estimated $350 million as part of the 2008-2009 Deficit Reduction Plan, or DRP, to help close the current year’s $1.6 billion budget deficit.
Now as state lawmakers look to tackle the $13 billion deficit for the upcoming fiscal year, the potential for an estimated $420 million in additional new and increased health taxes that were proposed in the Executive Budget appears to remain on the table.
What lawmakers agreed to in the DRP:
- $240 million increase in the Covered Lives Assessment. One of two Health Care Reform Act (HCRA) taxes, the Covered Lives Assessment is a regional tax collected from health plans on the basis of individual and family policies issued and used in part to fund Graduate Medical Education (GME). The Covered Lives Assessment would increase by $240 million, from $920 million to an estimated $1.19 billion.
- $108 million increase in assessments on the health insurance industry to finance the cost of the HMO Direct Pay “stop-loss” program and the cost of financing the Healthy NY program. (The overall industry assessments will total $180 million – 60 percent of which is paid by health insurers.)
In the final DRP that passed, lawmakers did not move to shift the financing for selected public health programs and the cost of assisting small businesses to implement the Timothy’s Law mental health insurance mandate from HCRA and the state’s General Fund to assessments on the insurance industry. However, it is unclear what actions the state will take on the cost-shifts or the one-year extension of Timothy’s Law as part of 2009-10 Budget negotiations.
Also, the final DRP did not include a tax on hospital patient discharges that was originally proposed. This tax - the second of two HCRA taxes that privately insured pay through their premiums - would have increased from 8.95 percent to 9.63 percent.
The Business Council opposes these taxes. At a time when health care costs continue to skyrocket, employers, especially small business, will be hit hard by increased taxes on health insurance and health care services. These taxes hit the people who pay the premiums, in most cases employers and their employees. Health care and health insurance costs in New York are already sky-high. Loading on new taxes will make it unaffordable for many businesses and force them to drop coverage.
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Is the Governor listening to business?
At a time when the nation is looking to lower the cost of health care, this sector has the largest tax increase in the Executive Budget proposal.
The 2009-2010 Executive Budget Proposal would place an unprecedented increase in tax burden on health plans in New York State. Currently, health plans pay more than $2.5 Billion in various taxes on health insurance coverage.
The budget proposal could increase that amount by 25%- raising their tax levy in one fiscal year to a new total of $3.1 Billion. Such an increase is not only catastrophic for the plans, but could result in innumerable New Yorkers losing coverage as these tremendous costs increases force higher costs for employers and employees alike.
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The chart to the right shows the increase in the approved Covered Lives Assessment. The increase raises the funds for the 2008-2009 fiscal year on a retroactive basis through a supplemental assessment imposed for the period of October 2008 through March 2009.
Having the opposite effect
Enrollment in HMO products has been decreasing for each of the last seven years, resulting in a 36.5% drop in enrollment for the period. This drop is not surprising given the relatively higher cost of comprehensive HMO coverage versus other lower cost insurance products (such as high deductible health plans) that are more attractive to employers and employees struggling with the cost of health care. Increasing the tax burden on HMOs will cause further deterioration of this form of comprehensive health coverage - the exact opposite of the state's goal for increasing access to affordable, comprehensive coverage for all New Yorkers.
For more information on The Business Council’s view on Health Care legislation Contact:
Mark Amodeo,
Director of Government Affairs
T 518.465.7511 X 218
F 518.465.4389