CCSNJ Opposes Increases to the Insurance Premium Group Accident and Health Insurance Premiums Tax Proposed in FY2010 State Budget
Monday, June 15, 2009

MEMORANDUM

TO: Members of the Assembly Budget Committee

FROM: Christina M. Genovese, Manager, Government Relations

RE: A-4108 (Cryan) - Health Insurance Taxes Proposed in FY2010 State Budget

DATE: June 15, 2009

The Chamber of Commerce Southern New Jersey respectfully opposes S-2016 (Sweeney), which would increase the insurance premium group accident and health insurance premiums tax 1.25 percent, from 1.05 percent to 2.30 percent and increase the tax rate on dental service corporations. Although the Chamber is pleased the original tax increases proposed by the Administration, which included an increase in the insurance premium tax on all lines of insurance and a proposal to increase the HMO assessment from 2 percent to 3 percent, have been removed from consideration, the Chamber believes these new increases will fall squarely on the shoulders of New Jersey employers as insurers are forced to raise their premium rates to recoup costs.

Since 2004, the Legislature has passed six bills that have increased the tax burden on health insurers and/or their affiliates, including: the “interim” one percent HMO assessment that to became a permanent 2 percent tax in 2006, a surcharge on liability on the corporate business tax, and raising the minimum loss ratio for health carrier from 75 percent to 80 percent in individual and small employer markets. The proposed increases, so soon on the heels of these other taxes, will place a further tax burden on health carriers, make New Jersey less attractive to new carriers, and could very well result in some of the smaller-sized plans dropping out of the state’s market.

Increased taxes on health or dental plans will eventually trickle down to the consumer, many of which are employers who provide coverage for their employees and cannot afford to pay higher premium. Over the past two years, the small group market has dropped by 70,000 covered lives, 20,000 in the last recorded quarter alone. Our Chamber is concerned that higher taxes on health plans will increase the number of uninsured residents in New Jersey. In the American Legislative Exchange Council’s 2009 “State Legislators’ Guide to Health Insurance Solutions” report, it states that “Taxing health insurance naturally increases its cost, leading to even more uninsured citizens. It’s a predictable downward cycle. As health insurance costs increase, we know more people drop or decline coverage.”

Insurance carriers employ thousands of people in our state and create additional jobs in support industries. Maintaining the health of these companies, while keeping insurance rates reasonable for employers and their employees, are important public policy issues that will impact our state’s ability to recover from this economic recession.

We urge you to vote “no” on S-2016 (Sweeney) and instead seek additional cuts to state spending. Thank you for the opportunity to weigh in on this important issue. The Chamber looks forward to continuing this dialogue with you in the upcoming weeks.