February 24, 2004
Senate Majority proposes health-insurance tax credit for some small businesses
The state Senate majority has proposed creating a health insurance tax credit that would help many businesses with 50 or fewer employees provide health insurance for their employees.
The tax credit is the centerpiece of what the Republican majority called "a comprehensive plan to make health insurance more affordable and to provide coverage for hundreds of thousands of New Yorkers who are now uninsured." Senate Majority Leader Joseph Bruno and Senator James L. Seward (R-Oneonta), chair of the Senate Insurance Committee, unveiled the plan at a Feb. 24 press conference.
The plan would create a 43 percent tax credit that, when combined with the existing health insurance tax deduction, would result in an effective tax credit of 50 percent for health insurance costs. The new credit would be available only to businesses with 50 or fewer employees and with earned net income of $290,000 or less.
The credit would be phased in over ten years and, when fully implemented, would result in an investment of almost $1.6 billion to provide health insurance coverage for hundreds of thousands of uninsured New Yorkers, the Senate said in a release.
Six states - Kansas, Kentucky, Maine, Massachusetts, Oklahoma and Oregon - currently provide a similar tax credit.
"This is the most far-reaching measure we've ever put forward to reduce the number of uninsured people in this state, which is currently about three million people," Senate Majority Leader Joseph L. Bruno said. "This is a very effective plan that will ensure people get the health care they need, that businesses and individuals will be able to afford health insurance coverage and that state and local governments will save money.
Business Council President Daniel B. Walsh called the Senate plan "a significant new idea in the ongoing effort to make employment-based health insurance more affordable." He added: "A policy that helps more employers offer insurance is certainly preferable to one that would punish employers that cannot offer insurance."
Also participating in the Senate news conference was Scott Stevens, president of Dimension Fabricators of Schenectady, a Business Council member. He discussed the continuing and increasing difficulty of offering affordable health-insurance benefits.
The Senate plan would also:
insurers and HMOs to offer "Freedom Policies," which would
have higher deductibles and which would be coupled with
new health savings accounts (HSAs). HSAs are accounts to
which individuals can contribute pre-tax income to cover
health-care expenses. The Senate said these policies would
cost about 40 percent less than existing policies, but would
be subject to all state health insurance mandates.
- Expand participation in the Healthy New York program by increasing the program's eligibility threshold from 208 percent of the federal poverty level to 250 percent of that level, and by permitting individuals above that level to buy into the program at the full unsubsidized premium. Healthy New York is a state program that allows small businesses that offer no health insurance to offer more affordable insurance, with costs shared by the employer and its employees.
"Many employers are dropping coverage after five straight years of double-digit premium increases and a full 100 percent increase in costs since 1999," Senator Seward, Chairman of the Senate Insurance Committee, said. "It is estimated that for every 1 percent increase in insurance premiums nationally, 400,000 more people may become uninsured. That figure translates to about 30,000 more uninsured New Yorkers.
"With our plan, the Senate is taking a comprehensive, multifaceted, approach to ensure that New Yorkers can afford health insurance, that they have choices and access to the care they need for themselves and their families."
About 60 percent of small businesses in New York State offer their employees health care coverage, and those who don't typically blame the high costs, the Senate release said.
The Senate said the credit would save businesses $50 million in the first year, and that the fully phased in credit would eventually save small businesses $1.56 billion a year.
New York is expected to spend almost $15 billion in the 2003-2004 fiscal year to pay for the cost of health care for the uninsured and for programs to provide health care coverage, and local governments will spend more than $6 billion on top of that, the Senate release said. In addition, the state spends billions of dollars to support other aspects of the health care delivery system, and individuals and businesses spend billions of additional dollars for medical care and health insurance.