Effective September 28, 2009, a new bill passed by the 2009 Oregon legislature imposes a new tax on what a legislative staff summary refers to as a “specified group of health insurers.” In particular, the new law assesses a 1% tax upon the gross amount of premiums earned by health insurance providers. The stated purpose of the new tax is to provide health insurance to low income children – a commendable objective.
As the popularity of insurance companies is probably not high, most people might not have a great deal of sympathy for the plight of the newly taxed. However, the tax has already begun to “trickle down” to the rest of us. I’ve recently read a copy of a letter from a CEO of a major Oregon health insurance provider to a customer. Noting the new tax’s impending effective date, the letter pleasantly informs the small business insurance customer that “your premium rates will be adjusted to reflect the new 1 percent tax.”
However, the “trickle” does not stop with the small business. The owner of that business will now need to make a difficult decision as to whether to raise prices, absorb the cost, cut costs of other employee benefits, or pass the additional costs on to employees. You get the idea – the tax lands upon small businesses and their employees at a time when many such businesses are stretched to the breaking point (assuming they’ve made it this far in the recession).
Is this really the intended consequence of the new policy? I welcome your comments and questions.