Published: August 28, 2008 01:34 pm            

GUEST EDITORIAL: Hidden insurance tax hurts

Drivers can thank New York’s Insurance Department for asking auto insurers to justify a proposed rate hike.

And doctors, along with their patients, can thank Governor Paterson for freezing malpractice rates for a year while the state tries to find a solution to sky-high physician policies.

So it would seem that when it comes to insurance rates, New York has the consumers’ interest at heart, right?

Well, not exactly.

When state leaders needed to come up with money for this year’s budget, one of the tools they used was the so-called covered lives assessment, a fee health insurance companies pay based on how many people they cover. The money was needed to help foot the bill for more than $160 million in extra costs or nursing homes, home care and hospital inpatient services. The higher fees will mean an estimated $70 million for the state, bringing the total assessment to $920 million annually.

It could have been worse. Then-Gov. Eliot Spitzer had proposed a $190 million hike, which the Assembly appeared willing to go along with. To its credit, the Senate negotiated the increase down to $70 million.

Nonetheless, the increases, effective in October, will add $4.11 to a person’s health insurance bill in the Capital Region, bringing an individual’s total assessment to $32.11 a year. A family will pay $13.56 more, for a total of $105.95 a year.

While a business sometimes absorbs an added cost like a state fee, that won’t happen here: The legislation specifically called for the policy holders to pay it.

These hikes will show up in insurance bills at a time when the state has cast a skeptical eye on auto insurers, who are asking for rate hike approvals even as motorists are driving less, thanks to the high price of gasoline. The industry says the cost of claims is rising faster than accidents are falling. The state has demanded details, and already one company, GEICO, has scaled back its rate request.

The increases also come as Mr. Paterson last week froze medical malpractice rates to further study ways to deal with the high cost of physician insurance. This followed the failure of a task force appointed by Mr. Spitzer to find a solution. Members of that panel accused each other of using the task force to further their own interests.

There’s a certain irony in the notion of the state acting on one hand as the champion of consumers and keeping insurance companies from taking more of our money, while on the other hand using insurance companies to dip into consumers’ wallets. Yet such hidden taxes are a favored tool for politicians, even those who will, in the next breath, vow never to raise taxes.

Still, it is a tax hike, one that hits all New Yorkers, rich, poor and middle class. Better, apparently, to hit everyone than, say, to focus on the highest income groups. Especially if you think no one will notice.

— The Times-Union of Albany

        

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