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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
premium tax credit; medicare claims
Purpose
Establishes the Medicare Supplemental Insurance Claims Costs Premium Tax Credit (Tax Credit).
Background
The Department of Insurance (DOI) regulates minimum standards for Medicare supplement insurance, also referred to as Medigap, in compliance with applicable federal laws (A.R.S. § 20-1133 and A.A.C. R20-6-1101). Federal law requires Medicare supplement insurance policies to conform to application and enforcement standards similar to or more stringent than the National Association of Insurance model standards (42 U.S.C. § 1395ss). Beginning July 1, 2020, DOI will be referred to as the Department of Insurance and Financial Institutions (DIFI) (Laws 2019, Chapter 252).
Medicare supplement insurance is private health insurance that helps cover some health care costs that Medicare does not cover, such as coinsurance, copayments or deductibles. Eligibility requirements, costs and coverage area vary depending on the company and plan selected. Currently, there are no insurance companies that offer Medicare supplement insurance policies to persons under 65 years of age in Arizona (DOI).
Insurance premium taxes apply to premiums paid for insurance covering liabilities that exist in Arizona. The tax is levied on the net premium income, which is the total amount received from premiums after deducting cancellations, returned premiums, policy dividends, refund reductions, savings coupons and similar amounts paid or credited to Arizona policyholders and not reapplied as premiums for new, additional or extended insurance (A.R.S. § 20-224). Insurance premium tax also includes retaliatory taxes, which are taxes owed by foreign insurers to the extent that the sum of taxes an insurer pays in Arizona is less than what the sum of taxes would be if the same insurance business were transacted in the insurer’s home state (A.R.S. § 20-230).
Since no insurance companies currently offer Medicare supplement insurance policies to persons under 65 years of age in Arizona, it is uncertain to what extent S.B. 1375 will affect insurance premium tax revenues if insurance companies begin offering the Tax Credit.
Provisions
1. Establishes the Tax Credit for insurers who provide Medicare supplemental insurance to individuals who are:
a) under 65 years of age; and
b) determined to have a disability by the Social Security Administration.
2. Specifies that the Tax Credit is allowed against the premium tax liability incurred by an insurer for the amount of claims costs incurred during each tax year.
3. Stipulates that an insurer who claims the Tax Credit is not required to pay any additional retaliatory tax as a result of claiming the Tax Credit.
4. Directs DIFI, with the cooperation of the Arizona Department of Revenue, to adopt rules and prescribe forms and procedures necessary for the administration of the Tax Credit.
5. Becomes effective on the general effective date.
Prepared by Senate Research
February 17, 2020
MG/AB/gs