The New York Health Plan Association has joined the New York Insurance Association Inc. in suing New York state over what it says are illegal assessments on insurance companies to fund agencies unrelated to insurance.

The suit, which NYIA filed in state Supreme Court in Albany Jan. 13, challenges the levy on insurers known as the 332 assessment and how the funds are used. By state law, the assessments are to be used only for the operating expenses of the New York State Department of Insurance, but are increasingly being used for other purposes.

"These assessments, paid only by New York-based insurers, drive up the cost of health care in our state," said Paul Macielak, president and CEO of the Health Plan Association. "That is bad news for small businesses and families who are finding it increasingly difficult to afford health insurance coverage in New York."

The 2009-10 state budget includes nearly $455 million in assessments on insurers, with $317 million in suballocations to other state agencies and other programs.

"These programs should be paid for from the state's General Fund, paid for by all taxpayers," Macielak said. "This is a classic case of robbing - or taxing - Peter to pay Paul."

Ellen Melchionni, president of the NYIA, said the organization filed the lawsuit "because the state is treating the 332 assessment as a bottomless ATM for programs that may be worthy but cannot legally be funded by this assessment. Ultimately consumers pay the price, and the state is brazenly ignoring their interests."