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Testimony to
New York State Senate Health & New York State Senate Insurance Committees

Affordable Care Act Impact

Presented by
Lev Ginsburg, Esq.
Director of Government Affairs

January 13, 2014

Senator Hannon, Senator Seward and Members of the Health Committee and Insurance Committee;

Thank you for holding this hearing and for the opportunity to share my thoughts on the impact of the Affordable Care Act on businesses throughout New York. On behalf of the Business Council’s more than 2,500 members – businesses large and small all across the state – I wish to submit these comments into the record of today’s hearing.

As the state’s leading business organization we begin our testimony by pointing out that New York State employers responding to Business Council surveys have overwhelmingly identified employee health care as their top cost-of-doing business concern. The ACA has upped the ante, so to speak, on the unease of employers about their health care costs and has raised serious questions, especially among small businesses, about their ability to meet current and looming government mandates while staying competitive.

We congratulate the Department of Health and the staff at the New York State of Health for their good work in developing and rolling out New York’s Exchange. New York’s Exchange infrastructure and user interface is perhaps the very best in the nation and has been described by some media outlets as, “one of few Obamacare success stories.” While, it remains unclear how many small businesses in New York have utilized the Exchange, it is clear that New York did a fine job in its creation.

New York’s employers have spent the last several years hard at work strategizing the best ways to navigate the ACA. There have been numerous changes and moving targets. These sudden changes in such an overarching law have caused confusion, disruption and significant cost. Premium prices continue to rise for employers, and individuals, excited by press stories of lower premiums, are getting sticker shock when they go to purchase coverage on the Exchange. New Yorkers are more than ever being forced to purchase types of coverage that they do not necessarily want and do not necessarily need, thanks in part to the ACA but also, and quite significantly, to the state’s standard plan design requirements.

With the above in mind we ask that during this Legislative Session, the Legislature, regulatory agencies and businesses alike be mindful of the vast amount of change that has already occurred in the health care market and ensure that there are no further disruptions in the near-term. To that end, the Business Council wishes to bring your attention to the following;

Taxes

The ACA has imposed several new taxes on businesses. These include among others, the comparative effectiveness research fee, reinsurance tax, medical device manufacturers tax, brand name drug tax and the health insurers tax, which will collectively cost over $800 billion by 2022.

One of these taxes alone, the health insurers tax (HIT) is price tagged at $8 billion in 2014 and rises to $14.3 billion in 2018. For the average family, the tax will add $270 in premium in 2014, $400 in 2016 and $5,080 over the next decade. The HIT disproportionately affects the small business community because it falls solely on the fully insured marketplace, where 87% of small businesses, their employees and the self-employed purchase their insurance.
In addition to federal taxes, New York imposes several state taxes on employers and individuals who purchase health insurance. The taxes include a covered lives assessment, health services surcharge, health insurer assessment and a premium tax for an annual total of almost $5 billion.

The health services surcharge, which applies to members of a self-insured or fully insured health plan, is a 9.63% sales tax, collected from health plans, on many hospital-based health services. This tax was imposed to cover losses incurred by hospitals for bad debt and charity care. It is our hope that based on the promises of the ACA and the projected enrollment of 1.1 million New Yorkers in health plans through New York’s Exchange over the next three years that the need to reimburse hospitals for bad debt and charity care and the need for the corresponding tax will be greatly diminished.

In a world in which resources are limited always and everywhere, it is imperative that we make the best use of those we have. This is as true for New York State’s government as it is for any business. To sustain economic growth and guarantee that New York’s employers can continue to provide quality health coverage to their employees, there must not be any new health insurance related taxes levied for any purpose.

Mandates

Depending on how you count what a mandate is; New York has over four dozen. The incremental and steady growth of mandates over the years has had a significant impact on the increased costs of health insurance in New York State. Going forward, new mandates will have an even greater effect in light of the federal ACA’s requirement that the State pay for any mandates beyond the Essential Health Benefits of the federal act.

Employers and employees want and need choice in the health insurance market. A healthy market with a variety of coverage options is the only way to ensure that New Yorkers can purchase insurance that fits both their health care needs and their budgets. Mandates add both cost and inflexibility to plans, raising prices and limiting variety of plans at the same time. A good model is New York’s large group market. In this market, employers have flexibility in plan design and aren’t stymied by over-standardization. Controlling costs fostering choice for employers and employees throughout the state should be the highest priority. To that end, we must not alter models that work well. New York’s large group market works and we mustn’t make any attempt to force it into a small group plan construct.

Respectfully, legislation that would mandate all health insurers to offer coverage for all health care provided by out-of-network providers would result in increased premiums overall and the serious weakening of existing provider networks. Such legislation would essentially remove any leverage health plans have to negotiate with health care providers to participate as part of networks.

An out-of-network mandate, like many other mandates, would significantly increase the cost of health care. Unlike in the past however, these costs would not be borne by premium payers alone. Under the ACA New York State would have to pay a corresponding amount of any federal health subsidy for any mandates beyond the Essential Health Benefits. It is of increased importance that the Legislature show great fiscal discipline and not impose costly coverage mandates for which there are no revenue sources to pay for them.

To stymie the growth of health insurance mandates, The Legislature created the Health Care Quality and Cost Containment Commission, charged with analyzing the impact on health-insurance costs of proposed legislation that mandates health benefits be offered or made available in individual and group health-insurance policies, contracts and comprehensive health service plans. Unfortunately, since its creation in 2007, this Commission has never been appointed or met. We ask that the Commission be appointed and seated as soon as possible.

Thank you for the opportunity to offer my insight on these important issues. I welcome any questions or comments you have.

Thank you.
Lev Ginsburg
Director of Government Affairs