News Item

Business community rallies against proposed health insurance tax

Originally published by the Hartford Business Journal (Link)

A coalition of industry and employer groups is calling on Gov. Ned Lamont and the General Assembly to abandon proposals for a $50 million tax on the state’s health insurers, arguing the plans could devastate businesses at a time when Connecticut’s coffers are already flush with cash from rebounding tax revenues and federal stimulus programs.

In a letter sent to the governor and lawmakers Monday, the alliance said the tax would drive up health insurance costs for companies, disincentivize employers from expanding benefits, hiring more people or expanding operations and likely push at least some entrepreneurs and job creators out of Connecticut and into New York, Massachusetts and Rhode Island.

“Simply put, this [health insurance tax] is not necessary in order to expand affordable health care coverage in our state,” the message read. “If passed, a new state [health insurance tax] will cause significant financial strain on middle class families, workers and local businesses who purchase their coverage on the fully insured marketplace.”

The letter was signed by 24 industry groups, including the Connecticut Business & Industry Association, Connecticut Retail Merchants Association, Connecticut Restaurant Association and Connecticut Farm Bureau.

The state business community has kept up opposition to the two bills — SB 842 and HB 6447 — for weeks, contending that assessments on health insurance companies inevitably lead to higher costs for customers, including small businesses.

The coalition offered as evidence the decline in premiums seen after Congress phased out the federal health insurance tax, which had cost Connecticut insurers $300 million annually. Reinstating $50 million of that assessment could cost the average Connecticut business around $6,100 per year, with larger employers facing expenses of over $60,000 per year, the industry groups said.

The letter also pointed out that Connecticut currently has a budget surplus of around $1.6 billion and is expected to receive $10 billion in federal stimulus money, $85 million of which will fund expanded health care subsidies on the health care exchange.

Democratic lawmakers announced Friday they were dropping plans to create a state-sponsored health insurance program for small businesses and nonprofit entities — referred to by some as the “public option” — for this legislative session but continue to support the $50 million assessment on health insurers to help fund an expansion of health care coverage for low-income residents.

State Democrats have argued that health insurers are still coming out ahead under their plan, since the federal health insurance tax — which extracted six times the amount that SB 842 and HB 6447 propose to collect — was allowed to expire.