Governor’s New Health-Insurance Tax Proposal is Contradictory to the Goal of Lowering Costs

We have heard a lot from Governor Andrew Cuomo’s office about the success of New York’s health-insurance exchange, [the NY State of Health]. The exchange was set up pursuant to Obamacare, which mandates that all Americans obtain health insurance. The exchanges, which are either set up by individual states or by the federal government (when a state decides not to opt into the program) are, in theory, supposed to provide a market for people to purchase health insurance. 

New York, pursuant to an executive order of Governor Cuomo, set up its own exchange. Compared to other states and to the federal government’s system, New York’s exchange has had fewer reported problems.

 The governor recently announced that more than 2 million New Yorkers have now purchased insurance on New York’s exchange. Less reported is the fact that about 1.5 million of these New Yorkers are Medicaid-eligible and therefore will have government-paid health insurance. The governor’s office is predicting that by 2016, New York will have more than 6 million people enrolled in Medicaid. This is about 30 percent of New York’s total population.

Although not mentioned in his State of the State address, Cuomo, in his 2015-16 budget proposal, is seeking to raise $69 million to cover the cost of New York’s health-insurance exchange. He is proposing to raise this revenue by taxing health-insurance policies.

Initially, the federal government paid the cost of setting up the exchange, but that money has run dry. Interestingly, those states that opted not to set up their own exchanges and instead rely on the federal government’s health-insurance exchange will not have to provide revenue for the operation of the exchange. 

The idea that Governor Cuomo is proposing to tax health-insurance policies to cover the cost of New York’s health exchange is counterintuitive in light of the idea that the exchange was supposed to lower the costs of health insurance. Only government could come up with a system that is supposed to lower the cost of health insurance, but then tax health-insurance policies to pay for that system, thereby increasing the cost of health insurance. While New York deserves credit for setting up an exchange that has had less problems than the federal exchange, it’s unfortunate that we now have to pay for the cost of administering this exchange.       

William (Will) A. Barclay is the Republican representative of the 120th New York Assembly District, which encompasses most of Oswego County, including the cities of Oswego and Fulton, as well as the town of Lysander in Onondaga County and town of Ellisburg in Jefferson County. Contact him at barclaw@assembly.state.ny.us, or (315) 598-5185.