NJBIA Testifies Against State Plan to Tax Health Insurance

Chrissy Buteas, NJBIA Chief Government Affairs Officer

The New Jersey Business & Industry Association is urging two legislative committees today to vote against a proposed $300 million health insurance tax that would increase costs for businesses, nonprofits and ultimately all employees who pay a portion of their healthcare premiums.

The bills, S-2676/A-4389, would impose a new 2.75% state excise tax on fully-insured health insurance premiums for health benefits plans, MEWAs and dental and vision coverage. The bills are before the Senate Commerce Committee and the Assembly Financial Institutions Committee this afternoon.

“This bill would increase costs on businesses and nonprofits, large and small, which have continued to offer health benefit plans during the current COVID-19 pandemic while struggling themselves to remain afloat,” NJBIA Chief Government Affairs Officer Chrissy Buteas said in her prepared testimony.

“At the state level, the tax would increase premium costs by an estimated $300 million,” Buteas said. “This legislation will undoubtedly lead to higher health insurance premium costs for both our employers and their employees.”

Proponents assert that taxing health insurance will help make it more affordable. Instead, Buteas said the new tax could force some employers to stop offering health benefits and lead to painful choices for those who buy coverage.

Noting that the state’s unemployment rate is currently 16.6%, Buteas said policymakers should focus on helping businesses safely bring back workers who were laid off during the pandemic, not drive up businesses’ costs.

“Increasing the cost of doing business, especially for New Jersey’s small businesses, should be avoided during the current health and economic crisis,” Buteas said. “Yet this legislation would saddle businesses with still another new tax at the same time they are struggling to keep their doors open,” Buteas said.

Buteas noted that small group single health insurance premiums paid by businesses with fewer than 50 employees had already increased by nearly $2,500 between 2008 and 2018. “For those remaining, further cost increases would be devastating and accelerate their exit from the market,” she said.

In 2019, Congress permanently repealed the health insurance tax that had been contained in Affordable Care Act after twice suspending it because it would have led to a 2.2% increase in health insurance costs for individuals, employers, workers and Medicare Advantage members, Buteas pointed out.  New Jersey’s policymakers should reject any new health insurance tax on the state level as well, she said.

The tax is also opposed by dozens of other business groups and medical organizations, which wrote a joint letter to Gov. Phil Murphy and members of the Legislature on July 20 saying the legislation would compound the financial hardships facing New Jersey businesses.