New York Insurers Object to $140M in ‘Back-Door Taxes’

December 10, 2008

A trade group for insurers in New York State says its members strongly oppose $140 million in new assessments on insurance companies proposed by Gov. David Paterson.

Those increases, according to the New York Insurance Association (NYIA), are part of a deficit reduction package recently proposed by Paterson. The group said the increases are unrelated to the operations of the state insurance department and called the new assessments a “back-door tax” on insurers and their policyholders.

“Everyone is talking about the importance of transparency and accountability in government and yet New York State wants to implement this back-door tax on insurers at a time when insurers, like all businesses in the state, are struggling with the economic downturn,” said Ellen Melchionni, president of NYIA, in a release.

Domestic insurers contribute more than $340 million in assessments to fund the expenses of the insurance department. That total includes $111 million in so-called sub-allocations, and the proposal would increase the amount to fund non-insurance department programs by $140 million — a total of $251 million in sub-allocations.

More than one-half of the proposed insurance department’s budget will be used to fund programs that are not directly related to insurance. The $140 million would be raised by having the Insurance Department increase substantially its assessment of New York-based insurers to collect money that is currently funded through New York State’s general fund/Health Care Reform Act (HCRA) budget line.

The NYIA said it does not dispute the merit of the programs funded under the HCRA, but believes the funding should come from general revenues following open debate and approval by the state legislature.

The group said burying the assessments in the insurance department’s budget masks it from public view and debate.

“The funding of programs which are supposed to benefit all New Yorkers should be funded by all New Yorkers and not be hidden away in the budget of a state agency which has no direct responsibility for managing them, nor funded entirely by a single industry which does not wholly benefit from them,” Melchionni said.

Source: New York Insurance Association

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