New York's $6.5 Billion Stealthcare Tax
The Health Care Reform Act (HCRA) was meant to fund public health goods. Instead, it’s become an unfair, regressive tax that penalizes responsible employers and raises healthcare costs for everyone.
$1,000
Average annual cost for an average family of four.
4.3%
Estimated increase in cost of coverage due to HCRA taxes.
14
times these hidden taxes have been increased since 1997
The Problem with HCRA's Funding
New York’s Health Care Reform Act (HCRA) funding system is anything but transparent. It relies on a complex and outdated structure that unfairly penalizes employers who offer health benefits — while others who do not contribute little or nothing. This creates a competitive imbalance and drives up costs for responsible businesses and their employees.
A “sales tax” on healthcare services. Payers (like union benefit funds and insurers) must choose an option:
Option A: Election
Pay a 9.63% surcharge on hospital and clinic claims directly to the state. This is the "most desirable" option to avoid massive penalties.
Option B: Non-Election (Default)
Face a minimum penalty surcharge of 37.90%, which can rise to over 65% for inpatient care. This punitive rate forces payers to "elect".
An annual flat tax levied on payers for each person they cover who lives in New York. This tax varies significantly by region, placing a heavier burden on residents of certain areas.
New York City
$566.52
per family, per year
Long Island
$203.14
per family, per year
Utica Region
$30.35
per family, per year
Originally the two public goods were indigent care and graduate medical education. HCRA now funds a broader range of “public goods”, including:
- Doctors Across New York (DANY)
- Nurses Across New York (NANY)
- Diversity in Medicine Program
- Elderly Pharmacy Program
- Support for Home Care Workers in NYC
- School Based Health Clinics
- Subsidies for Medical Malpractice Insurance
- A significant portion, projected at $5 billion annually, goes towards a Medicaid subsidy. This shift towards subsidizing Medicaid was not part of HCRA’s original intention.
The Solution: A fair path forward
The proposed “NYS Health Care Tax Reform Act” offers a comprehensive solution. It repeals the unfair taxes and replaces them with a broad-based, equitable system that incentivizes good employer behavior while ensuring public health programs remain fully funded.
Repeal Current System
❌ 9.63% Surcharge on Health Services
❌ Regional Covered Lives Assessments
❌ Penalties on Benefit-Providing Employers
REPLACE with Fair Taxes
✅ Broad-based tax on business corporations
✅ Tax on insurance corporations
✅ Tax on pass-through entities
✅ Exemptions for small businesses (<50 employees)
A growing coalition for reform
The HCRA Revenue Reform Coalition is a diverse group of labor unions and trade associations united in the fight for a fair and equitable tax system. These organizations represent hundreds of thousands of New York workers and responsible employers who are currently burdened by the flawed HCRA system.
Actors Equity Association
Bricklayers Local 1
BAC Local 7
Teamsters Local 237
CWA Local 1180
Directors Guild of America
IATSE
IATSE Local 52
IATSE Local 600
IATSE Local 700
Local 372, DC 37
NY Electrical Contractors Assoc.
NYS Public Employee Conf.
SAG-AFTRA
Subcontractors Trade Assoc.
Theatrical Teamsters 817
United Scenic Artists 829
Writers Guild of America, East
Frequently Asked Questions (FAQs)
What is The Health Care Reform Act (HCRA)?
The Health Care Reform Act (HCRA) is a New York State law from 1997, originally created to fund specific public health goods like indigent care. It now generates $6.5 billion annually through taxes on healthcare services and insurance.
Why is the current HCRA system unfair?
It disproportionately taxes employers and unions who provide health benefits, while employers who offer no benefits pay nothing. This creates a competitive disadvantage and penalizes responsible behavior.
How much does HCRA cost me?
It adds an estimated $440 per person (4.3%) to annual health coverage costs, which is about $1,000 for a family of four.
Will reform cut funding for public health programs?
No. The reform proposals are designed to be revenue-neutral. The goal is to change *how* the money is collected to make it fair, not to reduce funding for essential programs like Indigent Care, GME, or Medicaid.
How does the proposed new tax system work?
It replaces the current surcharges with broad-based taxes on business and insurance corporations. Crucially, it creates a ‘fair share’ incentive with a lower tax rate (5.4%) for employers who provide qualifying health benefits and a higher rate (10.2%) for those who do not.
Would small business be affected by the reform?
No. The proposed ‘Public Goods Tax on Business Corporations’ includes an exemption for small businesses with fewer than 50 employees.
