MEMORANDUM IN OPPOSITION

Date: May 2, 2006

Bill: S.7002 (Morahan) - An act to amend the public health law in relation to establishing a healthcare reinvestment fund suburban demonstration project.

This legislation would mandate more than a quarter-billion dollar tax solely on small business premium payers who purchase their insurance from for-profit health plans in a nine-county region. The Employer Alliance for Affordable Health Care is a coalition of nearly 2,500 small and medium size employers dedicated to keeping health insurance affordable by reducing government mandates. While the focus of the Alliance has been on traditional provider and service insurance mandates that disproportionately impact small employers, this is a significant tax on small businesses and accordingly we oppose this legislation.

New York’s businesses pay a substantial amount of taxes to help underwrite health care in New York State. In fact, no other state taxes premium payers as aggressively as New York in the area of health care. Currently, employers pay more than $1.5 billion annually to finance bad debt and charity care as well as Graduate Medical Education. Additionally, premium payers contribute taxes to help fund nearly $200 million in operational aid for the State Insurance Department and other state programs. Today, health Insurance taxes represent the second highest tax on employers in New York State – only second to corporation franchise taxes. These taxes directly contribute to New York’s high health insurance costs and rate of uninsured. Instead of finding ways to alleviate high costs of health insurance, this bill seeks to exacerbate this by further taxing those least able to pay.

While this proposal to extract additional taxes is bad enough, we have equal concerns as to where this money is being directed. Under the terms of the bill, revenues raised from this tax will once again go to subsidize hospital operations. What the sponsor of this bill fails to realize is that there is already a substantial investment for information technology being made by the state and federal government targeted to regional hospitals. In addition to the HEAL grants authorized as part of the Hospital Rightsizing Commission, hospitals will soon also be able to take advantage of federal programs (“Fsharp”) created to address this same need. Why these nine counties need to tax employers to raise capital for the same needs is unfathomable and can only be called an excessive demand.

It is time that lawmakers stopped catering solely to their local hospitals and begin to take note of the toll these taxes are taking on community businesses that are generously contributing to hospital operations through very high premiums and taxes. Without special attention to the burden that is being placed on small businesses, New York will continue to have a chronically high-uninsured rate and premiums well above the national average.

The targeting of small businesses in nine counties to produce more than one-quarter billion dollars is bad policy and will be counterproductive. Once again, small employers seek “parity” with large employers who can self-insure and as a result have maximum flexibility in putting their benefit package together while skirting certain state taxes and mandates. Legislation like this only highlights this disparity - where those least able are asked to contribute the most.

This legislation is unconscionable.

For all these reasons, the Employer Alliance for Affordable Health Care opposes the passage of S.7002.

Employer Alliance For Affordable Health Care

PO Box 1412

Albany, New York 12201-1412

315-363-9657

employeralliance@yahoo.com

www.employeralliance.com

Scott Miller, Chairman

5/2006