Businesses in New Jersey could face higher health insurance premiums under legislation introduced July 6 that would impose a new state tax on fully insured health insurance premiums. NJBIA opposes the bill.

S-2676 (Vitale, D-19)/A-4389 (McKeon, D-27), 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 bill is similar to a health insurance tax Gov. Phil Murphy proposed in his original FY 2021 budget proposal, which he put forth before the pandemic began in the U.S.

NJBIA opposes the bill because it can only increase healthcare costs for employers who have been struggling for years to continue to provide healthcare coverage to their employees despite costs rising much faster than the rate of general inflation.

“This bill will take a situation that was already difficult and make it worse,” said NJBIA Chief Government Affairs Officer Chrissy Buteas. “Businesses were struggling to afford health insurance for their workers before the pandemic hit. With an economic lockdown and slow reopening, businesses are struggling to survive. Hitting them with a tax on something as vital as health insurance is a terrible idea.”

Additionally, both Senate Budget Committee Chairman Paul Sarlo and Assembly Budget Committee Chairwoman Eliana Pintor Marin have indicated in recent public remarks that they are opposed to new taxes on the very businesses that have been decimated by the pandemic and the government lockdown. Hopefully they stay true to that commitment.

The 2.75% tax mirrors what was originally in the federal Affordable Care Act (ACA) to help pay for health insurance subsidies for qualified individuals shopping on one of the health insurance exchanges. The federal government thought better of the tax though; Congress delayed its onset twice before repealing it in 2019 on a bipartisan basis.

The state’s version of the tax would dedicate revenue to “increasing affordability in the individual and small group markets,” but it doesn’t specify how.

“Taxing a product to make it more affordable just doesn’t make any sense,” said Buteas.

That’s not to say the cost of health insurance isn’t a problem for business. In NJBIA’s 2018 Health Benefits Survey, member companies reported spending an average of $8,292 annually for employee-only plans. That’s compared to $7,044 in 2016, an increase of nearly 18%. The average cost of a family plan was reported to be $19,764, compared to $17,580 in 2016, a 12.4% increase. Small businesses with fewer than 50 employees generally saw larger increases.

But rather than helping affordability, S-2676 would make the problem worse.

“Putting a sales tax on health insurance would effectively increase costs on those employers who are trying to maintain coverage for their employees,” Buteas said. “Employers forgo profits, freeze wage increases, and delay investments in their businesses just to be able to afford the increases. At some point, the cost just becomes more than they can bear and they have no choice but to drop coverage.

“This bill, if enacted, would be a significant step backward in ensuring New Jerseyans have access to affordable healthcare,” she said.


6 responses to “Tax on Health Insurance Plans Proposed”

  1. Patrick says:

    Only in NJ as if it’s not bad enough to afford living in this state
    I was born and raised here
    All my family here
    Have a small business here
    I’ve been wanting to move out of state but considering the above makes it very difficult
    The governor has tried to put me out of business with the essential jobs order now this

  2. Leslie says:

    The taxpayers of our state can not afford any additional taxes particularly businesses as they attempt to reopen.
    To borrow to stopgap deficits is not only irresponsible but should be a ballot question this fall. Please work diligently to halt the governor moving forward with either of these actions. Thank you.

  3. Thomas W says:

    NJ’s government will always be innovative in finding sources to tax. They should put that imagination to work in spending what they have more effectively and efficiently, so that its residents can spend less time working for the government and more time for their families.

    Next they’ll be taxing toilet paper.

  4. I believe that in this state there is a need to control spending. Our governor thinks
    that all businesses are money pits and they can pay whatever is required of them.

    That is not a truth and he must realize that or the voters must make him realize
    that. Controlling costs is difficult but must be achieved.

  5. Betty Maul says:

    Micro business has been hit hard withe the shutdown. This tax will make it that much harder on small shops to survive.

  6. Doug Hahner says: