HB 2745
In CommitteeHouse
Insurance premium taxes
Increasing temporarily insurance premium taxes on insurers to fund health insurance premium assistance.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill temporarily raises insurance and health plan premium taxes in 2026 to generate revenue for state-run health insurance subsidies. It increases the tax rate to 2.75% for most insurers and health plans for that year only, with the extra 0.75% dedicated to helping low- and middle-income residents afford coverage. It also locks in annual funding for auto theft prevention and bars companies from passing the extra tax onto consumers without approval.
- Increases the insurance premium tax rate to 2.75% in 2026 for most insurers (e.g., health, life, property/casualty), then reverts to 2.0% in 2027 and later.
- Requires that the portion of the premium tax above 2.0% (i.e., 0.75%) be deposited into the state health care affordability account, to fund premium assistance and cost-sharing reductions for Washington Healthplanfinder enrollees.
- Increases the health plan premium tax (for HMOs and health service contractors) to 2.75% in 2026, with the excess over 2.0% also going to the health care affordability account.
- Bars insurers and health plans from passing the extra tax cost onto consumers through higher premiums or plan design changes, unless the insurance commissioner approves it to avoid insolvency or consumer harm.
- Maintains a $7 million annual deposit (adjusted for inflation) from general premium tax revenue into the Washington auto theft prevention authority account.
- Requires health plans to make quarterly prepayments of their 2026 taxes, starting June 15, based on projected liability.
Who is affected
- Insurance companies — Insurers (e.g., health, life, property/casualty companies) must pay higher premium taxes in 2026 (2.75% instead of 2.0%) and in 2027 revert to 2.0%, with the extra 0.75% going to a special health care affordability fund. They cannot pass this extra tax onto consumers unless the insurance commissioner approves it due to solvency or consumer risk concerns.
- Health maintenance organizations (HMOs) and health care service contractors — Health plans (like HMOs and health service contractors) must also pay a higher tax (2.75% instead of 2.0%) on health-related premiums and prepayments in 2026, with the excess going to the same health care affordability fund. They are barred from passing the extra cost to enrollees without commissioner approval.
- Individuals and families purchasing subsidized or individual health insurance — Residents who buy health insurance through Washington’s health benefit exchange (like Washington Healthplanfinder) may benefit from lower premiums or cost-sharing help, since the extra tax revenue funds premium assistance and cost-sharing reduction programs for low- and middle-income enrollees.
- Auto theft prevention programs — The Washington auto theft prevention authority receives a fixed annual deposit ($7 million in 2026, adjusted for inflation) from general premium tax revenue to support auto theft prevention efforts.
Pro/Con Analysis
Potential Benefits (5)
The bill creates dedicated, temporary funding ($120–$150M in 2026) to reduce premiums and out-of-pocket costs for low- and middle-income Washingtonians enrolled in Washington Healthplanfinder, directly improving affordability and access to care for vulnerable populations. This is especially impactful given Washington’s high health insurance costs and high uninsured rates among low-income residents.
HealthcarePeopleRef: Sec. 1(7) and Sec. 2(3)(c)By prohibiting insurers and health plans from passing the 0.75% tax increase onto consumers without commissioner approval, the bill protects enrollees from sudden premium spikes in 2026—especially important in a market where premiums have risen 10–15% annually in recent years. This stability helps households budget and avoid coverage lapses.
consumer protectionPeopleRef: Sec. 1(8) and Sec. 2(11)The bill ensures $7 million annually (inflated) for auto theft prevention, supporting local law enforcement efforts and potentially reducing vehicle thefts and related crimes. While modest, this funding helps sustain a proven program that benefits communities with high auto theft rates, such as parts of King and Pierce counties.
Public SafetyPeopleRef: Sec. 1(2)(b)The bill’s temporary 2.75% tax rate in 2026—reverting to 2.0% in 2027—creates a predictable, time-limited funding mechanism for health affordability programs, avoiding permanent tax increases while addressing near-term affordability crises. This structure allows the state to respond to inflation and rising health costs without long-term fiscal commitment.
HealthcarePeopleRef: Sec. 1(1) and Sec. 2(2)(b)The bill requires quarterly prepayments of health plan taxes in 2026, improving state cash flow and reducing budget uncertainty—benefiting state fiscal management and enabling more reliable funding of health programs. This also reduces the risk of last-minute budget adjustments that could disrupt services.
FinancialPeopleRef: Sec. 2(3)
Potential Concerns (5)
The bill’s 0.75% premium tax increase in 2026 is dedicated to funding premium assistance and cost-sharing reductions for Washington Healthplanfinder enrollees, but the tax is levied on insurers and health plans—not directly on consumers—so the benefit flows to low- and middle-income enrollees through reduced out-of-pocket costs. However, the tax increase may lead to reduced insurer participation or narrower provider networks over time, especially if compliance costs or regulatory uncertainty increase, potentially limiting access for some enrollees.
HealthcarePeopleRef: Sec. 1(7) and Sec. 2(3)(c)The bill bars insurers and health plans from passing the 0.75% tax increase onto consumers through higher premiums or plan design changes unless the commissioner determines it is necessary to avoid insolvency or consumer harm. This protects consumers from immediate premium spikes, but the restriction may reduce insurer flexibility in competitive markets, potentially discouraging new entrants or leading to reduced benefits or service areas in future years.
HealthcarePeopleRef: Sec. 1(8) and Sec. 2(11)The bill imposes a temporary 2.75% premium tax on insurers and health plans in 2026, increasing compliance and administrative burdens for these entities. While the tax is not passed directly to consumers, it may reduce profitability for smaller insurers and health plans, potentially leading to consolidation or reduced investment in innovation, especially among regional or niche carriers.
Business & EmploymentLean peopleRef: Sec. 1(2)(a) and Sec. 2(2)(b)The bill maintains a $7 million annual deposit (adjusted for inflation) to the Washington auto theft prevention authority from general premium tax revenue. While this supports public safety infrastructure, it does not directly benefit or burden any specific group beyond general taxpayers and auto theft victims, and the amount is modest relative to overall state spending.
Local GovernmentRef: Sec. 1(2)(b) and Sec. 2(5)(b)The bill’s revenue increase of $120–$150 million in 2026 is dedicated to health care affordability programs, but the tax is structured regressed in effect: while the *revenue* funds programs that help low- and middle-income households, the *tax burden* falls on insurers and health plans—entities that may pass some cost indirectly through reduced provider payments, lower wages, or reduced investment. However, the statutory bar on passing the tax to consumers and the targeted use of funds make the net effect beneficial overall for low- and middle-income Washingtonians.
FinancialPeopleRef: Sec. 1(7) and Sec. 2(3)(c)
Who Is Most Affected
Low- and middle-income Washingtonians enrolled in Washington Healthplanfinder will benefit significantly from reduced premiums and cost-sharing, especially those earning 100–250% of the federal poverty level. The bill’s funding directly supports subsidies they rely on.
Insurers and health plans face a temporary 0.75% tax increase in 2026, which may reduce profitability and increase compliance costs. However, the bar on passing the tax to consumers and the short duration (reverting in 2027) limit long-term harm, especially for large, well-capitalized carriers.
Auto theft victims and communities with high vehicle crime rates benefit from sustained funding to the auto theft prevention authority. While the $7 million is modest, it supports proven prevention strategies like vehicle tracking and community outreach.
Small employers and sole proprietors who purchase individual or small-group health plans may benefit indirectly from stabilized premiums and reduced insurer churn, though they are not direct subsidy recipients. The bill’s consumer protection provisions help prevent surprise premium hikes.
State and local governments benefit from improved fiscal predictability and increased revenue for health and public safety programs. The bill’s dedicated funding stream supports budget stability without raising general taxes.