From community businesses to local workers and their families, in Connecticut everyone felt the economic effects of the coronavirus pandemic. As we look ahead to what life may look like, it is commendable that Governor Ned Lamont and the Connecticut General Assembly are seeking to expand access to affordable health care for the most vulnerable. But the proposed health insurance coverage tax for those who purchase health care through the fully insured market is the wrong approach.
Proponents of this proposal in Connecticut promise that this tax will only be paid by insurance companies. Unfortunately, this claim has been dismissed and we can resort to this exact policy that is being overturned in Congress to understand why.
At the federal level, House Democrats, under the leadership of President Nancy Pelosi, repealed a similar health insurance tax in 2019 and subsequently saved workers and families an average of $ 500 in lower premiums. of health insurance. This legislative moment is fundamental to understanding the health insurance market. For Connecticut profit brokers, this means that not only can we estimate the cost this tax will have for consumers here, but we have historical data that describes the burdens this tax would generate on our local businesses.
As insurance policyholders, we have a “general” perspective on what local businesses, their employees, and their families need when it comes to health insurance. We work carefully with our clients to find the best possible coverage within our state’s health insurance market. Based on the data, we know that the proposed health insurance taxes included in both the governor’s budget and SB 842 would make health coverage more expensive at a time when our local businesses are struggling to recover from a devastating pandemic.
As part of the Affordable Care Act, federal law requires insurers to comply with so-called “federal loss ratio standards.” The law states that business health plans must spend a majority (80-85%) of premium dollars directly on enrollees and other improvement efforts. But the side effect of this policy is that administrative costs must pass to the consumer by law. And, as a result, the health insurance tax that would be levied on insurance plans would have to be included in the rates.
What does this mean for local businesses purchasing insurance in the fully insured Connecticut market? It basically means they are subject to a sales tax. Look no further than New Jersey residents for the effects of a health insurance tax. Last session, the state adopted a policy similar to the one Connecticut is studying, and in return, premiums increased by nearly $ 300 for New Jersey residents covered by the typical family health insurance plan. In Connecticut, the average-sized business could record losses of more than $ 6,000 a year as a result of a health insurance tax, while the state’s top employers will increase annual costs by more than $ 60,000 if the proposed HIT tax goes into the law.
Businesses are facing financial difficulties due to the devastation caused by our economy by the coronavirus pandemic. With funds already limited, companies can react to higher health prices in a number of ways. First, they can ask their employees to pay more for their insurance. Second, they may stop offering the benefit altogether. Both options run counter to our legislators ’goals of expanding affordable health coverage for all. Or, third, they can offset the added costs elsewhere by limiting or completely abandoning hiring or delaying much-needed investments in your business. All of these scenarios would further inhibit a company’s ability to revitalize and grow.
Every day, Connecticut profit brokers work to identify the most affordable, best-quality health care plans for our state’s businesses, while understanding the market and its complexities. We have already had this debate and we know that this proposed health insurance tax is bad for companies, for employers and for employees. We should not make more difficult decisions for our local employees when they should focus on rebuilding their businesses. While it is critical to expand health insurance coverage for those who need it, this tax is not the way to go. Connecticut lawmakers should not unnecessarily burden local businesses that already have problems with this when our state experiences a budget surplus, in addition to the billions of dollars we receive from the federal government. We urge Governor Lamont and the General Assembly to cancel the proposed health insurance fee.
John Calkins is the chairman of the Connecticut Benefit Brokers legislative committee, a chapter of the National Association of Health Underwriters.