New tax on health insurance is bad idea when businesses are struggling to stay open

By Tom Bracken, N.J. Chamber of Commerce
Trenton | Jul 28, 2020 at 10:46 am
Op-Ed

This week, the New Jersey Legislature is considering legislation that would require certain entities authorized to issue health benefit plans to pay an annual assessment.

Of course, “assessment” is just another way of saying “tax” — which is what this is, a tax on health insurance. Worse, if this bill becomes law, it will actually create a second tax on health insurance in New Jersey.

Last December, the New Jersey Chamber of Commerce opposed the federal health insurance tax because of the significant financial burden it would put on many small businesses and the families they support.

We were relieved when Congress acknowledged the financial realities of the HIT and repealed it in a bipartisan vote. While that federal tax goes away Dec. 31, this new state tax would take effect on Jan. 1, 2021.

We appreciate the sponsors of the New Jersey legislation working with the health insurance carriers and the business community to amend the bill this week. We are relieved small employers have been removed from the financial burden, but remain concerned about middle-market and larger employers who will have to bear the cost.

However, we still have some concerns about why this bill is being considered in the first place, and why Gov. Phil Murphy publicly supported it when he usually doesn’t comment on pending legislation.

Proponents of the new legislation being considered say this state assessment will replace the federal one, and will be used to make health insurance more affordable. In reality, over a year ago, the state received the waiver from the federal government to create a Reinsurance Program, and that was supposed to help with affordability.

Proponents argue that one of the purposes for this tax will be to replenish the Reinsurance Fund. In reality, that money has already been allocated in the recently approved three-month budget.

Stakeholders also justify this tax as a means for outreach and enrollment in the soon-to-be created state-based health exchange. In reality, the state-based health exchange law that Gov. Murphy signed last year already includes an “assessment” on health insurance premiums that will be used for that purpose.

So the bill the Legislature is currently weighing is an additional tax, and it could not come at a worse time.

For years, businesses across this state have rated the cost of health insurance as one of their top concerns. Now, after having been shuttered since March, and struggling to find revenue to keep their doors open and their employees paid, these businesses will be hit with these increased costs at a time when they can least afford to pay them.

Earlier this month, the Legislature authorized Gov. Murphy to borrow almost $10 billion to cover gaps in the state budget as required. The business community was told by legislative leadership that this measure would ensure there would be no taxes on the table this fiscal year.

Well, there is a tax on the table now — one that is being rushed through the legislative process so it can be on Gov. Murphy’s desk for signature in a few days. The New Jersey Chamber asks why this tax cannot be shelved and the revenue projected from it be covered by the $10 billion.

The New Jersey Chamber of Commerce opposes this legislation and said so in testimony last Thursday and this Monday before both state Assembly and state Senate committees contemplating this bill.

Despite the many economic reasons to oppose it, all indications are that the Legislature will pass the bill during this coming week.

We can hope that a wave of fiscal sanity will wash over the New Jersey Legislature and it will follow the example of fiscal responsibility set by Congress when it repealed the health insurance tax.

It makes no sense during this time of continuing uncertainty and economic strain for our state Legislature to be considering additional cost burdens on New Jersey’s businesses and employees.​

Tom Bracken is CEO and president of the New Jersey Chamber of Commerce, based in Trenton.

ROI-NJ Staff | editorial@roi-nj.com | @roinjnews