Federal Compensation:

Premium Taxes Paid by the Health Benefits Program

GGD-89-102: Published: Aug 8, 1989. Publicly Released: Aug 8, 1989.

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Bernard L. Ungar
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Pursuant to a congressional request, GAO provided information on the amount of premium taxes that underwriters participating in the Federal Employees Health Benefits Program paid to states and other government entities.

GAO found that: (1) states, county and municipal governments, U.S. territories, and Panama imposed premium taxes on the portion of premium income that participating plans paid to insurance underwriters to process and pay claims; (2) federal regulations allowed participating plans to charge premium taxes as a program expense; (3) in 1987, 22 of 25 participating fee-for-service plans charged the health benefits program about $44.1 million for premium taxes, and included those taxes in the premiums they charged to enrollees and the federal government; (4) in 1980, Congress exempted Federal Employees Group Life Insurance Program premiums from similar premium-based taxes, since it considered the program to be self-insured; and (5) although the Federal Employees Health Benefits Program operated similarly to the life insurance program, Congress has not exempted it from premium-based taxes.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: In P.L. 101-508, Congress exempted premiums from states' taxation.

    Matter: If Congress wants to make the treatment of premium taxes uniform in the health and life insurance programs, it may wish to consider amending the Federal Employees' Health Benefits Act to expressly prohibit states, the District of Columbia, the Commonwealth of Puerto Rico, or other political subdivisions from imposing or collecting taxes, fees, or other monetary payments based on the premiums paid under the Federal Employees Health Benefits Program.


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