A provision in New York Governor David Paterson's Deficit Reduction Plan to increase assessments by $180 million on all insurers, and additional amounts for health insurers, has drawn criticism from a state insurance association.
Ellen Melchionni, president of the New York Insurance Association, called assessment increases a "back-door tax."
In December, Ms. Melchionni criticized a separate proposed $140 million assessment, which she said may still be in play and assessed on top of the recently announced $180 million tab.
This latest assessment, announced as part of the governor's Deficit Reduction Plan that was passed by the legislature Feb. 3 and signed by the governor the next day, increases the New York State Insurance Department's (NYSID) budget, which is funded by assessments on insurance companies, Ms. Melchionni said.
But she added the department is not able to spend the increase as it sees fit. Instead, she said the money is earmarked for funding three programs that were previously funded through the Health Care Reform Act (HCRA) budget line.
The three programs–Healthy NY, the HMO Direct Pay program and an entertainment industry employee pilot program–will now be brought under the NYSID, and will receive $137 million, $40 million and $2 million, respectively, according to Ms. Melchionni.
Matt Anderson, spokesman for the state's Division of the Budget, said he did not know of the $2 million for the entertainment industry employee pilot program but verified the other figures.
He also noted an increase in the state's "covered lives" assessment of $120 million, but Ms. Melchionni said this will affect health insurers only.
Mr. Anderson said the Deficit Reduction Plan closed the current-year deficit in the state. He added there is a $13 billion deficit for next year that also needs to be closed.
Ms. Melchionni said the insurance industry seems to be an easy target for assessments, and she wondered whether the industry had failed to raise its voice loud enough to protest such increases.
She noted there were no hearings held on the Deficit Reduction Plan, and the language was kept quiet up until its passage.
She said it will be difficult for insurers to make up the assessments through rate increases because getting a price change in highly regulated New York takes time and must receive department approval.
Citing examples of how the assessments will hurt individual companies, Ms. Melchionni said one NYIA member company which had paid $87,000 per quarter in these "332 assessments" said it will now have to pay $211,000 per quarter. A second company's assessment bill jumped to $109,000 per quarter from $30,000.
She added Gov. Paterson has said insurance companies have reserves to cover the assessment increases, and she stated, "You can't just go take money out of reserves that are supposed to be for claims…and use that to pay a new expense."
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