SENATE BILL REPORT

SSB 6391

BYSenate Committee on Ways & Means (originally sponsored by Senator McDonald)

Revising the taxation of medical and dental coverage.

Senate Committee on Ways & Means

Senate Hearing Date(s):January 25, 1988; January 28, 1988

Majority Report:  That Substitute Senate Bill No. 6391 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bauer, Bluechel, Cantu, Deccio, Fleming, Gaspard, Hayner, Johnson, Lee, Moore, Newhouse, Saling, Smith, Talmadge, Vognild, Williams, Wojahn, Zimmerman.

Senate Staff:Gary Benson (786-7715); Charles Langen (786-7715)

                  February 11, 1988

AS PASSED SENATE, FEBRUARY 10, 1988

BACKGROUND:

A 2.0 percent tax is imposed on all insurance premiums received by an authorized insurer in the State of Washington.  Nonprofit health care contractors (e.g., Blue Cross) and HMOs are not considered to be authorized insurers and are exempt from the tax.

Insurance premiums that are not subject to the insurance premiums tax are subject to the B&O tax at 1.5 percent.  Medical service corporations (e.g. Blue Cross) are not subjected to the B&O tax on their income that is passed through to the providers of health services (e.g. physicians, hospitals, etc.).

SUMMARY:

The insurance premium tax does not apply to premiums paid by the state prior to July 1, 1990 when purchasing medical and dental coverage through the State Employees Insurance Board (SEIB).

The B&O tax does not apply to amounts paid out prior to July 1, 1990 by insurance companies under contract to the SEIB.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: Basil Badley, Health Ins. Association of America