New York has a well-documented problem with its byzantine healthcare taxes, which are frequently overpaid by health plans and employers. It’s only gotten worse over the past two years.

Unlike other states that charge fixed fees, such as a percentage of insurer premiums or provider revenue, New York’s HCRA (Healthcare Reform Act) has an extremely complex series of surcharges and fees that only apply in certain circumstances. One of those circumstances is elective procedures, which were largely postponed by patients during 2020.

In addition, as a result of the economic impact of the pandemic, many patients dropped their private insurance and enrolled in Medicaid during 2020. Services to patients on Medicaid are subject to reduced HCRA taxes.

One would think that these two factors — the most dramatic drop-off in elective procedures and increase in Medicaid enrollments in recent memory — would cause the amount of surcharges the state collects under HCRA to decrease in 2020. Instead, we saw a 7 percent increase in HCRA surcharge revenue between 2019 and 2020, totaling almost $3.9 billion.

This makes no sense. Even the state’s own 2021 budget acknowledged there should have been “a material and adverse impact on HCRA revenues.” What went wrong?

Too complicated to get right

The rules around when HCRA applies, and when it doesn’t, are so complicated that insurers, self-insured employers and even large hospital systems basically throw up their hands and pay the taxes when they shouldn’t.

For example, many providers require a patient to get a Covid test prior to an elective procedure. This type of Covid test is taxed. The much more common reason for getting a Covid test — because you think you might be sick — is not.

Tracking why different people are getting the same exact test is quite difficult. As a result, many insurers just pay the tax on every test. Given the massive amount of Covid testing that took place in 2020, payments for tests that shouldn’t have been taxed are likely a major part of the increase in HCRA revenues.

Covid testing is one of many examples of HCRA exceptions that are exceedingly difficult for even sophisticated health plans and hospital systems to track. The web of exemptions extends to all sorts of tests and procedures and varies based on the type of facility.

Individual consumers don’t stand a chance. Look for a HCRA charge on your next medical bill. If you find one, there’s a chance it shouldn’t be there. In fact, that’s how I learned that these taxes were being inappropriately assessed in the first place.

Time to do something about this

Even before Covid testing became part of our lives, the collected HCRA surcharges exceeded the state’s own estimates by an average of 10 percent each year leading up to the pandemic. The Empire Center for Public Policy estimates these insurance taxes add approximately $440 per person annually to the cost of private health insurance.

At a time when healthcare costs are rising sharply and every penny counts for so many households in this state, it’s unconscionable for our lawmakers to take no action to fix local healthcare taxes that are unfair and overpaid. When it’s impossible for even the most sophisticated insurers and providers in the state to adhere to the tax code, it’s time to change it.

Until that happens, it’s up to healthcare organizations in New York to no longer be at the mercy of state auditors, but hire their own auditors to track HCRA surcharges and exemptions and pay only what is right. Healthcare consumers are depending on them to take up this fight and not pass on the costs of these taxes.

Jeff Snyder is an accredited healthcare fraud investigator and VP of Operations at Penstock, a payment integrity company based in Buffalo.