SENATE BILL REPORT

SB 6391

BYSenator McDonald

Exempting state employees' health insurance from the insurance premiums tax.

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)

                  January 29, 1988

AS REPORTED BY COMMITTEE ON WAYS & MEANS, JANUARY 28, 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 original bill was not considered.

EFFECT OF PROPOSED SUBSTITUTE:

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