Executive Budget Health Bill (Parts B C D)
Excessive Health Care Taxes, Fees and Assessments
S. 6608-A/A. 9708-A (Part B, Part C & Part D)
MEMORANDUM IN OPPOSITION
Unshackle Upstate, a bipartisan coalition of more than 70 business and trade organizations representing a growing group of 70,000 companies and employing upwards of 1.5 million people, opposes the Article VII budget language found in S. 6608-A/A. 9708-A that would expand HCRA surcharge to physicians' services (Part B), increase assessments on hospitals, home care and nursing homes (Part C), and restore Insurance Department prior approval on insurance premiums (Part D).
This proposal would expand the Health Care Reform Act (HCRA) surcharge to include certain radiology and office-based surgery procedures. The HCRA surcharge is a tax on most hospital services that are paid by all persons who have health insurance coverage in the state. Currently, there is a HCRA surcharge of 9.63 percent for inpatient, outpatient, emergency and ambulatory services. The HCRA surcharge has increased from 8.18 percent in 1996 to its current rate. The tax is included in premiums, and every time it is adjusted upwards the net result is an increase in premium rate calculations year after year.
This proposal would increase assessments on hospitals, home care and nursing homes. In particular, the proposed budget would increase the hospital gross receipts tax from 0.35 percent to 0.75 percent, would increase the gross receipts tax on personal care, Certified Home Health Agencies (CHHAs), and Long-Term Home Health Care Programs (LTHHCP) from 0.35 percent to 0.7 percent, and would increase the nursing home gross receipts tax from 6 percent to 7 percent.
As a result of the Covered Lives Assessment, the Insurance Premium tax, 332 assessments, and the HCRA surcharge, the state collects more than $4 billion in insurance taxes, and the amount of premium attributable to these state taxes can be up to 10 percent. That is a great cost to taxpayers and, as a result, Unshackle Upstate opposes the enactment of the aforementioned parts of this bill.
This proposal would eliminate a health plan's ability to adjust rates through the "file and use" process, reinstituting a prior approval requirement, for any change in a community rate that would be effective on or after October 1, 2010. Prior approval artificially suppresses premium rates without addressing what really drives the cost of health care. This proposal was in place years ago and it failed miserably, as evidenced by the fact that the legislature unanimously voted to eliminate it.
Prior approval allowed the cost of health insurance to be based on political pressures. In election years, the department would keep premium increases minimal despite being presented data on the rising cost and increased usage of health care goods and services. In subsequent years, the department would be forced to deal with the consequences of its artificially suppressed rates by approving drastic increases to cover the insurer's needs for the coming year and shortfall from the current year.
The wild fluctuation in premiums from year to year made it impossible for business owners to budget for
their health care expenses. Department actuaries also could not keep up with the filings and oftentimes
would approve them retroactively, causing sticker shock for consumers. Moreover, with the threat of
small business premiums artificially suppressed, many insurers reduced the number of products for
consumers to choose from.