Capitol Alert

Health plan tax bill introduced in California special session

California Gov. Jerry Brown holds up a prop during a 2014 news conference on the budget. A California lawmaker has introduced a special session bill that would create an expanded tax on managed-care organizations.
California Gov. Jerry Brown holds up a prop during a 2014 news conference on the budget. A California lawmaker has introduced a special session bill that would create an expanded tax on managed-care organizations. MCT

Every California health plan would pay a flat tax under legislation introduced this week that, for the first time in bill form, responds to federal warnings that the state risks about $1 billion in federal matching money if it fails to expand a tax on managed-care organizations.

Crafting an expanded health plan tax is the focus of a healthcare special session called by Gov. Jerry Brown last month. The governor’s order came after lawmakers, amid resistance by the health plan industry, failed to act on the administration’s January proposal for an expanded tax that would help pay for Medi-Cal and home-care services.

Managed-care organizations with Medi-Cal patients pay a tax of 3.9 percent of their total Medi-Cal revenue. Those plans ultimately break even because of higher Medi-Cal payments made possible by the matching federal funds. But the federal government says the state needs to replace that limited tax with a comprehensive one by next July, when the current tax expires. Such a tax would cover 45 health plans serving more than 21 million people.

Enter ABx2 4 by Assemblyman Marc Levine, D-San Rafael. The bill, introduced Thursday, would impose a flat tax of $7.88 for each plan enrollee, per month. Of the estimated $1.9 billion that would be raised by the tax, $1.1 billion would continue pulling in the federal match for Medi-Cal. The rest would help pay for home-care services, raise reimbursement rates for Medi-Cal providers, and increase funding for programs serving people with developmental disabilities.

“This funding fix is broad-based,stable, and solves the problem we were called here to address,” Levine said in a statement. “Almost half of all California's children receive health care through Medi-Cal, so we must come up with a real, sustainable solution now.”

Health plans backed the existing managed-care tax approved in 2013 but have raised concerns about the cost of Brown’s proposal. Republican lawmakers, meanwhile, have questioned the push to act on the issue nearly a year before the current tax expires.

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