BILL NUMBER: S219
SPONSOR: GALLIVAN
 
TITLE OF BILL:
An act to amend the financial services law, the tax law and the public
health law, in relation to enacting the health care tax reform act
 
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this legislation is to reduce the amount of taxes imposed
on health care and health insurance consumers. These taxes collectively
are over $5 Billion annually, which exceeds the amount of annual fran-
chise taxes paid by corporations. In fact, health care and health insur-
ance taxes account for the third highest tax burden on New York resi-
dents, exceeded only by the income tax and the general sales tax.
These health care and health insurance taxes are regressive because
these taxes are unrelated to a person's income, wealth, or ability to
pay. In addition, these taxes directly impact hospitalization costs at a
time when consumers are facing some their greatest health care chal-
lenges, directly increase the cost of health insurance, and are coun-
ter-productive to the public policy objective of making health insurance
as affordable as possible. A reduction in health care and health insur-
ance costs will result in more people being able to afford health care
and health insurance.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 names the bill the "Health Care Tax Reform Act."
Section 2 sets forth legislative findings that lowering the cost of
health care and health insurance is extremely important in maximizing
the number of New York State residents who can afford high quality
health care insurance; that New York State taxes on health care and
health insurance amount to over $5 Billion a year and have a substantial
negative impact on the affordability of health care; and that reducing
these tax burdens would help make health care and health insurance more
affordable.
Section 3 amends section 206 of the financial services law to phase out
over a five year period the tax assessment on health insurance compa-
nies.
Section 4 amends section 1502-a of the tax law to phase out over a five
year period the commercial 1.75% health insurance premium tax.
Section 5 amends section 2807-j(2) of the public health law to phase out
the sales tax surcharge on certain hospital based health services
created by the Health Care Reform Act (HCRA Surcharge), and
Section 6 amends section 2807-s(2) of the public health law to phase out
the covered lives assessment that imposes a flat tax on health insurance
policies based on the residence of the insured.
Section 7 provides that the act shall take effect immediately, but would
not affect the existing expiration date of section 2807-j or 2807-s of
the public health law.
 
JUSTIFICATION:
The State of New York imposes over $5 Billion in taxes on health care
and health insurance, which significantly increases costs to patients
and consumers. Collectively, these taxes exceed the taxes imposed on
corporation through the annual franchise tax. Only income taxes and the
sales taxes exceed the tax burden placed on the health care and health
insurance.
In addition to directly affecting the affordability of health care and
health insurance, these taxes are extremely regressive. These taxes are
completely unrelated to the taxpayers' wealth, income, or ability to
pay, but instead impose additional costs on residents based on flat
taxes on premiums, sales taxes on hospital care when people are at their
most vulnerable condition, and gross receipt taxes on health insurance
companies.
These health care taxes are counterproductive to the public policy
objective of making health insurance as affordable as possible and maxi-
mizing the number of people covered by quality health insurance. The
size of these taxes is astounding. The HCRA surcharge, a 9.63% sales tax
on certain hospital services, increased the cost of these hospital
services by $3.3 Billion in 2019.
The covered lives assessment, a flat annual surcharge (tax) on all
privately insured people, increases the cost of health insurance in New
York City by $173.55 per year for single coverage and $572.70 per year
for family coverage. For insurance companies that do not "elect" to
participate in the flat annual covered lives assessment, there is an
additional tax for all in-hospital charges that ranges from a high of
27.28% for a New York City hospital, 13.89% in Long Island, and a low of
2.25% in the Utica area. The covered lives assessment cost consumers
approximately $1.1 Billion in 2018.
The commercial health insurance premium tax is a 1.75% tax applied to
all premiums paid by those with commercial health insurance policies and
raises the cost of these policies by about $350 Million a year. The
section 206 assessment applies to all life, property, casualty and
health insurers and is based on the premium amount. This tax costs
consumers $149 Million annually.
 
PRIOR LEGISLATIVE HISTORY:
2023-24: S.87/A.6012 Referred to Insurance/Referred to Ways and Means
2021-22: S.9522/A.4911 Referred to Rules/Held in Ways and Means
2020: A.9029 Held for consideration in Ways and Means
 
FISCAL IMPLICATIONS:
This bill would cut health care and health insurance taxes by about $1
Billion per year. Some of that loss in tax revenue would be off-set by
reductions in the cost of health insurance paid by New York State for
its employees, lower Medicaid costs, and lower uninsured losses.
 
EFFECTIVE DATE:
This Act would take effect immediately, but would not affect the exist-
ing expiration date of section 2807-j or 2807-s of the public health law
relating to the HCRA surcharge.

Statutes affected:
S219: 206 financial services law