A.158/S.58 (Part C)A.160/S.60 (Part D)


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A.158/S.58 (Part C)A.160/S.60 (Part D)


Executive Budget - Health Insurance Taxes



With a $348 million increase in taxes on health insurance already approved by lawmakers as part of the 2008-09 Deficit Reduction Plan (DRP), The Business Council strongly opposes an additional $481 million in health care and health insurance taxes that are proposed as part of the 2009-10 Executive Budget.  All told, these more than $800 million in proposed taxes would be reflected in higher premiums and add hundreds of dollars to the cost of providing private health insurance for the average family, including employer-provided coverage.  Many employers will simply not be able to sustain this level of increase to the cost of health coverage, prompting many to drop their health insurance, reduce benefits or shift more of the cost to their workers.

The Business Council urges lawmakers to consider the devastating impact that these taxes would have on the ability of employers and businesses of all sizes in their districts to provide health coverage to their workers - from sole proprietors and small businesses to the largest companies and institutions that self-insure such as manufacturers, school districts, colleges and hospitals.

On February 3 the State Legislature approved increasing health insurance taxes by $348 million as part of the DRP to help close the current year's $1.6 billion budget deficit. 
An additional $481 million in new and increased health taxes that were proposed in the overall Executive Budget await lawmaker action, including:

  • $63 million from establishing a third party administrator claims processing fee, which is a $1 assessment on health (and presumably pharmacy) claims valued at more than $20 processed by entities that administer self-funded health insurance plans.  We expect that self-insured employers would ultimately be responsible for paying this claims fee.  
  • $180 million by increasing the state Insurance Department Section 332 assessment on all New York insurers; $108 million is estimated to be paid by health insurers.
  • $62 million by increasing the Article 32 premium tax on commercial insurers from 1.75 percent to 2 percent
  • $126 million by increasing the HCRA hospital services surcharge – essentially a sales tax on health care services performed in hospitals – from 8.95 percent to 9.63 percent, and  
  • $50 million from expanding the (proposed increased) 9.63 percent hospital services surcharge to other services provided in other health-care settings by establishing a physician procedure surcharge.

Business Council members have repeatedly identified the cost of employee health coverage as their most significant cost-of-doing-business issue.  New Yorkers - individuals and businesses - that purchase private health insurance currently pay more than $3.1 billion in health taxes through the Covered Lives Assessment; the HCRA hospital services surcharge; the Insurance Department Section 332 industry-wide assessments that fund Department operations and are also suballocated to other agencies and programs; and the 1.75 percent premium tax. 

It is estimated that the current health tax burden already adds between 3 and 7 percent to the cost of health coverage.  Because employers contribute to most privately insured New Yorkers' health benefits, we view these various insurance surcharges and industry assessments as taxes on business. They drive the cost of doing business in New York higher and create obstacles to private sector growth.

If approved, the health taxes in the Executive Budget will further drive up the cost of health insurance for all Business Council member employers that purchase health coverage yet will provide no additional covered benefits or have any effect on addressing the rising cost of health care.

Rather, by pushing premiums higher, these taxes will force more business owners – particularly small business owners – to reduce or eliminate coverage for their workers, driving up the ranks of the state's uninsured, or shift more of the cost to their employees.

For these reasons, The Business Council strongly urges you to reject these new and increased taxes.