Senate Bill 498 creates a new tax on health insurance coverage, administered by a politically appointed board, to pay for services provided through a government-created behavioral health program to children with private health insurance coverage.

While often framed as taking a stand against Big Insurance, it’s not insurance companies that will suffer the costs of the SB 498 tax – it’s the people who actually pay the bills.

SB 498 passed the New Hampshire Senate earlier this year, but the bill’s complicated tax structure and uncertain cost raised many questions in the New Hampshire House Commerce Committee this month.

On an overwhelming bipartisan basis, the committee voted to reject the tax and study the issue further to find better solutions.

NFIB New Hampshire has consistently opposed the health insurance tax and proposed alternative ways to resolve the issue without increasing premiums for everyone with private health insurance.

Small Business Healthcare Challenges. Health insurance costs are front of mind for small business owners and many others right now. Those who get their coverage through a small employer or who buy it on their own are struggling with double digit premium increases this year.

The high cost of employee health coverage is a financial strain on small businesses, and the vast majority cannot afford to offer it in New Hampshire. This negatively impacts their ability to recruit and retain workers, especially compared to larger businesses who benefit from more favorable federal healthcare regulations and lower costs.

New health insurance taxes that drive up the cost of premiums make the problem worse.

TAKE ACTION: NFIB | Surprise Bill: A New Tax on Your Health Insurance

Learn more about the proposed new tax below.

Background. Several years ago, when youth mental health issues were spiking during the pandemic, the New Hampshire Executive Council and Department of Health and Human Services (DHHS) expanded a government program for children and teenagers with severe behavioral health issues.

Our state already has longstanding mandates requiring commercial health insurance to cover mental and emotional disorders, biologically based mental illnesses, and other behavioral issues.

The expansion went beyond these mandates by opening the government program to people with private health insurance. The government program, which started as a Medicaid pilot project, is run by two management entities who contract with DHHS.

However, the management entities did not want to bill private insurers for their services.

Now, what started as an administrative issue has spilled over to the State House.

The normal course of business would be for the management entities to negotiate for inclusion in the health insurers’ provider networks. This competitive process is supposed to protect premium payers by ensuring high quality services are provided at reasonable prices.

If insurers fail to meet their legal obligation to provide in-network access for required services and treatments, a network adequacy complaint can be filed with the New Hampshire Insurance Department.

If the management entities are unable to reach an agreement on in-network status, they could bill the insurers on an out-of-network basis, which is also common practice.

Instead, DHHS and the management entities are now demanding a new tax on your health insurance coverage to pay for the services even though the cost of this type of treatment is already baked into your health insurance premium due to the existing coverage mandates.

Three major problems with this new tax should concern everyone.

Mystery Tax. First, nobody actually knows how much the tax will cost each year. It could be a few million dollars or it could be more than $20 million. And there’s no limit on how high it could go in the future.

This puts upward pressure on health insurance prices at a time when many workers, families, and small business owners are already dealing with double digit premium increases.

And you’ll pay the tax many times over: in your own insurance premiums, in the products you buy at businesses that offer employee coverage, and in property taxes to cover the cost for local government and school employees.

The uncertainty about the cost is driven by a lack of clarity on how many children with private insurance use the government program, the cost of the services provided, and the text of the bill not aligning with the stated purpose.

Advocates say the tax is necessary to recoup the cost of the services provided to children with private coverage, even though the management entities have never attempted to bill private insurance for those costs.

However, the text of the bill says the first-year tax is the state’s share of the program cost. Based on state budget documents, that cost could exceed $20 million per year at current spending levels. In addition to the state cost, administrative expenses, reserves, and interim levies throughout the year can be tacked on.

In subsequent years, unexpended funds – whatever is left over after paying for the services provided to children with private coverage – should be subtracted from the levy amount.

But a lack of control over the program’s scope, escalation in the price of services, and unknown number of children with private coverage using the program make it impossible to determine how much the tax will be in future years.

Anticompetitive Intervention. Second, SB 498 proposes an extraordinary level of government intervention in private health insurance coverage by giving one private entity the power to dictate the terms of a contract to the other private entity.

Such anticompetitive interventions almost always result in higher costs and fewer choices for consumers.

The management entities get a guaranteed funding stream regardless of the cost of their services. It does not matter if your insurer covers similar treatment options on a competitive basis, as already required by law.

This upends networking, which is one of the few tools available to control healthcare costs for small businesses, families, and individual consumers. It also stifles future innovation in care by fencing out medical providers who improve on the services offered through the management entities.

The New Hampshire Insurance Department already has a grievance process where medical providers can file complaints about specific patient claims or general issues with insurance company conduct. This includes situations where insurers are not meeting their required network obligations.

Rather than utilize the existing grievance process for medical providers, SB 498 proposes special treatment for the two care management entities not available to any medical provider.

Politically Appointed Board. SB 498 puts a politically appointed board in charge of the tax and services available through your private health insurance coverage.

Once taxing power is handed over to the board, those elected to represent us have little control over the cost or program scope. The mental healthcare providers in available your insurance plan’s provider network will be heavily influenced by the decisions made by DHHS and this board.

Further, limited oversight makes this arrangement ripe for the type of errors and fraud common in Medicaid programs.

Families vs. Families, Not Insurers vs. Families. The behavioral health issues that are the subject of this proposal are a serious matter. Children and teenagers who are struggling deserve care and coverage is already required under state law.

Advocates for the bill argue the new tax will somehow even the score with big health insurance companies.

But insurers don’t pay the tax. You do.

The reality is this bill pits families in need of care against families who are already struggling with double-digit health insurance premium increases.

There is a real cost to mandates and taxes that make health insurance more expensive. When the price goes up, fewer people buy coverage or can afford to keep it.

That means more people putting off preventative care, waiting for serious conditions to get worse before seeing a doctor, or never getting the treatment they need at all.

Reasonable Alternatives. There are many ways to resolve the issue that SB 498 seeks to address without the mystery health insurance tax.

For one, this government-created program could be funded within existing government and nonprofit resources instead of on the backs of a narrow pool of policyholders and employer plan sponsors. This makes sense since, in many ways, the program is an extension of public services (e.g., child protection, juvenile justice, special education).

Alternatively, lawmakers could further empower the state insurance department to ensure access to equivalent clinical services within the existing mental health coverage mandates.

Or they could utilize the state’s existing consumer claims and medical provider network adequacy dispute processes to resolve disputes between the management entities and insurers.

Whatever the right answer, trying to fix one group’s problem by making another problem worse is the wrong answer.