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July 16, 2003

State budget, HCRA extension increase employers' already high health-care taxes

New York State employers will pay almost $1.4 billion in health-insurance taxes as a result of a two-year extension of the controversial Health Care Reform Act (HCRA), an analysis by a health insurance trade group shows.

Empire State employers were already paying nearly $1.3 billion in taxes imposed by the Health Care Reform Act (HCRA). Lawmakers extended the law for two years in June as part of the state budget agreement—and, in the process, increased those taxes by $89 million annually, according to the analysis by the New York State Conference of Blue Cross and Blue Shield Plans.

In addition, the state budget increased the surcharges that insurers pay to fund the State Insurance Department and increased the premium tax paid by insurers.

"At a time when rising health-care costs are already driving double-digit premium increases, these measures taken individually and together will contribute to higher health care premiums next year in New York," said Mark Amodeo, director of public policy and communications for the Conference of Plans.

The original Health Care Reform Act of 1996 imposed three-year "temporary" annual surcharges onto insurance premiums. The original intent of the law was to help New York join 48 other states in deregulating health care.

Since then, however, lawmakers have routinely extended HCRA taxes, making this the second highest tax on businesses in New York. This year, lawmakers agreed to:

Research by The Public Policy Institute, The Council's research affiliate, has shown that HCRA taxes actually support the training of doctors that New York State doesn't need.

The Institute estimated that New York spends more than a third of all Medicaid dollars spent on physician training to train 15 percent of the nation's doctors—even though New York has only about 7 percent of the nation's population.

The Institute has also criticized New York for keeping HCRA spending "off the books." An estimated $1.2 billion or more of health-care spending is controlled and accounted for entirely outside the state's financial plan, a 2003 report from The Public Policy Institute showed.