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Proposal would add 'coinsurance' to health‑care GRT deduction; LFC estimates ~$30M state cost
Summary
Sen. Figueroa presented a bill to expand the health‑care practitioner gross receipts tax deduction to include coinsurance and extend the sunset to 2031. Legislative Finance Committee staff estimate roughly $30 million in state revenue loss and about $20 million for municipalities; proponents and members debated evaluation metrics and local impacts.
Sen. Leo Figueroa (presenting) asked the Revenue Stabilization & Tax Policy Committee to consider adding “coinsurance” to an existing gross receipts tax (GRT) deduction for health‑care practitioner copayments and deductibles and to extend the current sunset from 2028 to 2031.
The proposal would let providers exclude from taxable receipts the portion of a service charge that is the patient’s coinsurance — the percentage a patient pays after meeting a deductible — in the same way the law already exempts fixed copayments and deductible payments. “It adds the word coinsurance to that legislation, and it extends the sunsets,” Figueroa said. He described the change as part of a suite of measures aimed at improving recruitment and retention of medical providers.
Jennifer Fabian, an economist with the Legislative Finance Committee (LFC), briefed the committee on implementation and fiscal effects. She told members that insurers set copay, deductible and coinsurance terms and that providers usually cannot tack tax onto patients’ bills, which is why providers currently absorb the GRT on coinsurance receipts. “The insurance companies dictate the copay, deductible and coinsurance rate and the providers don't have any leverage to tack on anything extra,” Fabian said. LFC’s fiscal impact number from last session estimated about $30 million in annual state revenue loss and roughly $20 million to counties and municipalities; staff said updated figures could change.
Committee members pressed for evaluation measures linking any tax change to provider recruitment and retention. Several members recommended including a sunset with reporting requirements. Representative Lundstrom and others urged measurable, regular reporting so the state can assess whether a change in tax policy produces the intended workforce outcomes. Figueroa confirmed the bill as presented would maintain a sunset (extended to 2031) to allow later evaluation.
Local governments were a recurring concern. Multiple members noted municipalities rely heavily on GRT and warned the municipal impact estimate should be double‑checked; LFC staff acknowledged the estimate is inherently uncertain because provider billing and insurance coverage vary across practices and payers. Committee counsel and members also pointed to legal limits on requiring self‑insured employer plans to reimburse providers.
The bill was presented for discussion; no motion or vote was taken. Sponsors and staff said they will refine fiscal estimates and consider evaluation language and options to address municipal losses before formally filing legislation.
Next steps: the committee recorded the proposal for further development and follow‑up in the upcoming legislative session.
