N.Y. state taxes on insurance to top $5.5B this year, report says

The annual report by the New York State Conference of Blue Cross and Blue Shield Plans released this week shows that state taxes on health insurance are estimated to cost privately insured New Yorkers more than $5.5 billion this year, increasing premiums by 6% to 9%.

New York imposes several taxes on employers and individuals who buy private health insurance coverage, and the levies are paid by consumers and included in their premiums, NYSCOP noted in releasing the report. The organization cited the state Departments of Financial Services and Health in detailing the dollar amount.

Of the almost $5.6 billion, about $3.9 billion is the result of a surcharge created by the Health Care Reform Act of 1996 that is collected from health plans in the form of a sales tax on certain hospital-based services. The current rate of the surcharge is 9.63%, up from 8.18% in 1997.

An additional roughly $1.1 billion comes from the covered lives assessment, which is an annual flat surcharge on all privately insured people in the state. Health plans are assessed according to the number of people they cover.

A 1.75% tax applied to premiums paid by those with commercial health insurance policies amounts to about $509 million this year, designated for the state treasury’s general fund, NYSCOP noted. And an assessment on all licensed insurers is estimated to be about $143 million, earmarked for the Department of Financial Services.

Taxes on private health insurance are the third highest in the state, after personal income taxes—which garners some $49 billion—and sales taxes—$12 billion—NYSCOP pointed out. And among business taxes levied by the state, those imposed on the privately insured are the single largest.

“As we continue the battle against Covid-19, access to affordable health coverage is more critical than ever,” Leanne Politi, executive director of communications for NYSCOP, said in a statement. “New Yorkers should not be burdened with increasing premiums as a result of higher state taxes.”

In a Siena College poll of registered voters released in September, nearly 80% of New Yorkers rejected the idea of increasing health insurance taxes to close the state budget gap, Crain’s previously reported.

The results showed that 77% of respondents opposed higher taxes on health insurance, and nearly a third of the 16% who supported them would prefer a different approach if it meant increasing what they pay for insurance. Seventy-nine percent of respondents said they felt consumers should not have to pay more for health insurance in order to close the state’s budget deficit.

The increase in premiums of between 6% and 9% noted by NYSCOP covers all health insurance markets, which include large-group and self-insured markets. 

In August the Department of Financial Services said it would allow insurers selling health plans to individuals to raise their rates by only 1.8% on average next year, marking the lowest increase for individuals in a decade. For small-group plans, the department approved a 4.2% rate increase.

NYSCOP is a partnership of New York Blue Cross Blue Shield Plans, including Excellus Blue Cross Blue Shield, Empire Blue Cross Blue Shield and Empire Blue Cross Blue Shield HealthPlus. Combined, the plans provide health insurance coverage to some 6 million enrollees.

“As New York state leaders consider options to close the growing deficit due to the pandemic, they should avoid measures that will impact the cost of care,” Politi said.