What's happening
This bill phases out several taxes on health care and health insurance in New York over several years, aiming to lower costs for consumers.
Why it matters
Directly addresses health care affordability. by targeting taxes that are currently built into hospital and insurance costs, which the legislature acknowledges are regressive and not tied to a person’s ability to pay. Reducing and ultimately eliminating these taxes could make health insurance and care more affordable, especially for lower- and middle-income New Yorkers.
Gradually phases out multiple health care-related taxes. over several years, including the covered lives assessment, the 9.63% hospital tax surcharge, the 1.75% insurance tax, and the section 206 assessment on insurers. This incremental approach is designed to give the state time to adjust its budget and funding streams, while offering predictability to health care providers, insurers, and consumers.
Shifts focus on health care funding mechanisms. by reducing reliance on taxes that are “hidden” in insurance premiums and hospital bills. This could increase transparency in how health care is funded and potentially force public debate on alternative revenue sources for health programs currently funded by these taxes.
May have significant budget implications for state health programs. since these taxes currently raise over $5 billion annually for New York. The bill’s approach assumes that reducing these taxes will lower costs for consumers, but it also creates pressure to find replacement funding for critical health initiatives unless offsetting spending cuts or new revenues are identified.
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Cut Health Care Taxes
Plain English, a few words. Used as the page title.
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History
- Referred to insurance
- Referred to insurance
Full text
8 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
219
2025-2026 Regular Sessions
IN SENATE (Prefiled)
January 8, 2025
Introduced by Sens. GALLIVAN, BORRELLO -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the financial services law, the tax law and the public health law, in relation to enacting the health care tax reform act
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Short title. This act shall be known and may be cited as the "health care tax reform act".
§ 2. Legislative findings. The Legislature hereby finds that:
(a) The affordability of health care and health insurance is extremely important in ensuring that the maximum number of New York State residents can obtain high quality affordable health care;
(b) Health care and health insurance are currently subject to several taxes that directly and indirectly increase the cost of health insurance coverage, including an annual flat tax on all privately insured people in New York State called the covered lives assessment that raises the costs to health plans by $1.1 Billion, a 9.63% sales tax surcharge on certain hospital based health services that costs consumers $3.6 Billion, a 1.75% flat tax on all commercial health insurance policies that costs consumers $350 Million, and a gross receipts tax on insurance companies called a section 206 assessment that costs health plans $149 Million a year;
(c) Collectively, the taxes on health care and health insurance cost consumers a total of over $5 Billion in 2018, which exceeds the total amount of taxes paid by corporations through the franchise taxes and exceeds all other types of taxes except for personal income taxes and general sales taxes; and
(d) The taxes on health care and health insurance are fundamentally regressive taxes because the taxes are unrelated to a consumer's wealth or ability to pay, directly impact hospitalization costs at a time when
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00796-01-5
consumers are facing some of their greatest health care challenges, directly increase the cost of health insurance, and are counterproductive to the public policy objective of making health insurance as affordable as possible.
§ 3. Section 206 of the financial services law is amended by adding a new subsection (g) to read as follows:
(g) For the fiscal year commencing on April first, two thousand twenty-five, the commissioner shall only collect eighty per centum of any assessments collected pursuant to this section in the fiscal year commencing on April first, two thousand twenty-six, and provided further, however, that for the fiscal year commencing on April first, two thousand twenty-eight, the commissioner shall only collect sixty per centum of any assessments collected pursuant to this section in the fiscal year commencing on April first, two thousand twenty-six, and provided further, however, that for the fiscal year commencing on April first, two thousand twenty-nine, the commissioner shall only collect forty per centum of any assessments collected pursuant to this section in the fiscal year commencing on April first, two thousand twenty-six, and provided further, however, that for the fiscal year commencing on April first, two thousand thirty, the commissioner shall only collect twenty per centum of any assessments collected pursuant to this section in the fiscal year commencing on April first, two thousand twenty-six, and provided further, however, that for the fiscal year commencing on April first, two thousand thirty-one, no such assessment under this section shall be collected.
§ 4. Section 1502-a of the tax law, as amended by section 2 of part B-1 of chapter 57 of the laws of 2009 and as further amended by section 104 of part A of chapter 62 of the laws of 2011, is amended to read as follows:
§ 1502-a. Tax on non-life insurance corporations. (a) In lieu of the tax imposed by section fifteen hundred one of this article, every domestic insurance corporation, every foreign insurance corporation and every [alien] noncitizen insurance corporation, other than such corporations transacting the business of life insurance, (1) authorized to transact business in this state under a certificate of authority from the superintendent of financial services[,] or (2) that is a risk retention group as defined in subsection (n) of section five thousand nine hundred two of the insurance law, [or (3) that is a health maintenance organization required to obtain a certificate of authority under article forty-four of the public health law,] shall, for the privilege of exercising corporate franchises or for carrying on business in a corporate or organized capacity within this state, and in addition to any other taxes imposed for such privilege, pay a tax on all gross direct premiums, less return premiums thereon, written on risks located or resident in this state. The tax imposed by this section shall be computed in the manner set forth in subdivision (a) of section fifteen hundred ten of this article as such subdivision applied to taxable years beginning before January first, two thousand three, except that the rate of tax imposed by this section shall be [one and seventy-five hundredths percent on all gross direct premiums, less return premiums thereon, for accident and health insurance contracts, including contracts with health maintenance organizations for health services, and] two percent on all [other] such premiums except accident and health insurance contracts, including contracts with health maintenance organizations for health services.
(b) In lieu of the tax imposed by section fifteen hundred one of this article, every domestic insurance corporation, every foreign insurance corporation and every noncitizen insurance corporation, other than such corporations transacting the business of life insurance that is a health maintenance organization required to obtain a certificate of authority under article forty-four of the public health law, shall, for the privilege of exercising corporate franchises or for carrying on business in a corporate or organized capacity within this state, and in addition to any other taxes imposed for such privilege, pay a tax on all gross direct premiums, less return premiums thereon, written on risks located or resident in this state. The tax imposed by this section shall be computed in the manner set forth in subdivision (a) of section fifteen hundred ten of this article as such subdivision applied to taxable years beginning before January first, two thousand three, except that the rate of tax imposed by this section shall be one and seventy-five hundredths percent on all gross direct premiums, less return premiums thereon, for accident and health insurance contracts, including contracts with health maintenance organizations for health services, provided, however, that for the taxable year beginning January first, two thousand twenty-seven, the percentage shall be one and four tenths percent, and provided further, however, that for the taxable year beginning January first, two thousand twenty-eight, the percentage shall be one and five hundredths percent, and provided further, however, that for the taxable year beginning January first, two thousand twenty-nine, the percentage shall be seven tenths of one percent, and provided further, however, that for the taxable year beginning January first, two thousand thirty, the percentage shall be thirty-seven hundredths of one percent, and provided further, however, that for the taxable years beginning on and after January first, two thousand thirty-one, no such tax shall be imposed.
(c) All the other provisions in section fifteen hundred ten of this article as amended from time to time, other than subdivision (b) of such section, shall apply to the tax imposed by this section. In no event shall the tax imposed under this section be less than two hundred fifty dollars.
§ 5. Subdivision 2 of section 2807-j of the public health law, as amended by section 41 of part B of chapter 58 of the laws of 2005 and paragraphs (b), (c), (d), and (e) as amended by section 50 of part B of chapter 58 of the laws of 2009, is amended to read as follows:
2. (a) The total percentage allowance for any period during the period January first, nineteen hundred ninety-seven through December thirtyfirst, nineteen hundred ninety-nine and on and after January first, two thousand, for a designated provider of services applicable to a payor shall be determined in accordance with this subdivision and applied to net patient service revenues.
(b) The total percentage allowance for each payor, other than governmental agencies, or health maintenance organizations for services provided to subscribers eligible for medical assistance pursuant to title eleven of article five of the social services law, or approved organizations for services provided to subscribers eligible for the family health plus program pursuant to title eleven-D of article five of the social services law, and other than payments for a patient that has no third-party coverage in whole or in part for services provided by a designated provider of services, shall be:
(i) the sum of (A) eight and eighteen-hundredths percent, provided, however, that for services provided on and after July first, two thousand three, the percentage shall be eight and eighty-five hundredths percent, and further provided that for services provided on and after January first, two thousand six, the percentage shall be eight and ninety-five hundredths percent, and further provided that for services provided on and after April first, two thousand nine, the percentage shall be nine and sixty-three hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-six, the percentage shall be twenty-two and sixty-one hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-seven, the percentage shall be sixteen and ninety-six hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-eight, the percentage shall be eleven and thirty-one hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-nine, the percentage shall be five and sixty-five hundredths percent, and further provided that for services provided on and after April first, two thousand thirty, the percentage shall be zero percent, plus (B) twenty-four percent, provided, however, that for services provided on and after July first, two thousand three, the percentage shall be twenty-five and ninety-seven hundredths percent, and further provided that for services provided on and after January first, two thousand six, the percentage shall be twenty-six and twenty-six hundredths percent, and further provided that for services provided on and after April first, two thousand nine, the percentage shall be twenty-eight and twenty-seven hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-six, the percentage shall be twenty-two and sixty-one hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-seven, the percentage shall be sixteen and ninetysix hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-eight, the percentage shall be eleven and thirty-one hundredths percent, and further provided that for services provided on and after April first, two thousand twenty-nine, the percentage shall be five and sixty-five hundredths percent, and further provided that for services provided on and after April first, two thousand thirty, the percentage shall be zero percent, and plus (C) for a specified third-party payor as defined in subdivision one-a of section twenty-eight hundred seven-s of this article the percentage allowance applicable for a general hospital for inpatient hospital services pursuant to subdivision two of section twenty-eight hundred seven-s of this article;
(ii) unless (A) an election in accordance with paragraph (a) of subdivision five of this section to pay the allowance directly to the commissioner or the commissioner's designee is in effect for a third-party payor, and in addition (B) for a specified third-party payor an election to pay the assessment in accordance with section twenty-eight hundred seven-t of this article is in effect.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the financial services law, the tax law and the public health law, in relation to enacting the health care tax reform act
Purpose or general idea of bill
The purpose of this legislation is to reduce the amount of taxes imposed on health care and health insurance consumers. These taxes collectively are over $5 Billion annually, which exceeds the amount of annual fran- chise taxes paid by corporations. In fact, health care and health insur- ance taxes account for the third highest tax burden on New York resi- dents, exceeded only by the income tax and the general sales tax.
These health care and health insurance taxes are regressive because these taxes are unrelated to a person's income, wealth, or ability to pay. In addition, these taxes directly impact hospitalization costs at a time when consumers are facing some their greatest health care chal- lenges, directly increase the cost of health insurance, and are coun- ter-productive to the public policy objective of making health insurance as affordable as possible. A reduction in health care and health insur- ance costs will result in more people being able to afford health care and health insurance.
Read the full memo (907 words)
Summary of specific provisions
Section 1 names the bill the "Health Care Tax Reform Act."
Section 2 sets forth legislative findings that lowering the cost of health care and health insurance is extremely important in maximizing the number of New York State residents who can afford high quality health care insurance; that New York State taxes on health care and health insurance amount to over $5 Billion a year and have a substantial negative impact on the affordability of health care; and that reducing these tax burdens would help make health care and health insurance more affordable.
Section 3 amends section 206 of the financial services law to phase out over a five year period the tax assessment on health insurance compa- nies.
Section 4 amends section 1502-a of the tax law to phase out over a five year period the commercial 1.75% health insurance premium tax.
Section 5 amends section 2807-j(2) of the public health law to phase out the sales tax surcharge on certain hospital based health services created by the Health Care Reform Act (HCRA Surcharge), and
Section 6 amends section 2807-s(2) of the public health law to phase out the covered lives assessment that imposes a flat tax on health insurance policies based on the residence of the insured.
Section 7 provides that the act shall take effect immediately, but would not affect the existing expiration date of section 2807-j or 2807-s of the public health law.
Justification
The State of New York imposes over $5 Billion in taxes on health care and health insurance, which significantly increases costs to patients and consumers. Collectively, these taxes exceed the taxes imposed on corporation through the annual franchise tax. Only income taxes and the sales taxes exceed the tax burden placed on the health care and health insurance.
In addition to directly affecting the affordability of health care and health insurance, these taxes are extremely regressive. These taxes are completely unrelated to the taxpayers' wealth, income, or ability to pay, but instead impose additional costs on residents based on flat taxes on premiums, sales taxes on hospital care when people are at their most vulnerable condition, and gross receipt taxes on health insurance companies.
These health care taxes are counterproductive to the public policy objective of making health insurance as affordable as possible and maxi- mizing the number of people covered by quality health insurance. The size of these taxes is astounding. The HCRA surcharge, a 9.63% sales tax on certain hospital services, increased the cost of these hospital services by $3.3 Billion in 2019.
The covered lives assessment, a flat annual surcharge (tax) on all privately insured people, increases the cost of health insurance in New York City by $173.55 per year for single coverage and $572.70 per year for family coverage. For insurance companies that do not "elect" to participate in the flat annual covered lives assessment, there is an additional tax for all in-hospital charges that ranges from a high of 27.28% for a New York City hospital, 13.89% in Long Island, and a low of 2.25% in the Utica area. The covered lives assessment cost consumers approximately $1.1 Billion in 2018.
The commercial health insurance premium tax is a 1.75% tax applied to all premiums paid by those with commercial health insurance policies and raises the cost of these policies by about $350 Million a year. The section 206 assessment applies to all life, property, casualty and health insurers and is based on the premium amount. This tax costs consumers $149 Million annually.
Prior legislative history
2023-24: S.87/A.6012 Referred to Insurance/Referred to Ways and Means
2021-22: S.9522/A.4911 Referred to Rules/Held in Ways and Means
2020: A.9029 Held for consideration in Ways and Means
Fiscal implications
This bill would cut health care and health insurance taxes by about $1 Billion per year. Some of that loss in tax revenue would be off-set by reductions in the cost of health insurance paid by New York State for its employees, lower Medicaid costs, and lower uninsured losses.
Effective date
This Act would take effect immediately, but would not affect the exist- ing expiration date of section 2807-j or 2807-s of the public health law relating to the HCRA surcharge.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.