Capitol Alert

Senate legislation would impose new taxes on health plans, tobacco

State Sen. Ed Hernandez, D-Azusa, listens during session in 2013. Hernandez has introduced a health special session bill to increase the tobacco tax and overhaul an existing tax on managed-care organizations.
State Sen. Ed Hernandez, D-Azusa, listens during session in 2013. Hernandez has introduced a health special session bill to increase the tobacco tax and overhaul an existing tax on managed-care organizations. hamezcua@sacbee.com

The leader of the Senate’s healthcare special session committee proposed legislation Tuesday that would raise tobacco taxes by $2 per pack and revamp an existing tax on managed-care organizations to help pay for various health and welfare programs.

“The revenue generated by enacting this bill will help provide care for the most under-served and neediest communities in California,” state Sen. Ed Hernandez, D-Azusa, the measure’s author, said in a statement.

The measure needs a two-thirds vote, requiring at least some Republican support, and there was no sign of that Tuesday. Republican leaders have ruled out supporting any tax proposal in both the health special session and the transportation special session.

The health plan tax would replace an existing tax that expires next year. It would raise an estimated $1.1 billion for Medi-Cal and $231 million services for programs serving the developmentally disabled. Health plans would face a net tax hit of an estimated $300 million, less than one-half of what plans faced under a tax proposal put forward in January by the Brown administration, which helped craft the latest proposal.

In addition, the new $2 tobacco tax would raise an estimated $1.2 billion. An equivalent tax on electronic cigarettes would generate another $100 million. That money would go to anti-tobacco programs and increase Medi-Cal physician reimbursement rates, among other uses, according to Hernandez’ office.

“At the end of the day, I am confident that my colleagues, including those on the Republican side of the aisle, will put the needs of California’s most vulnerable residents ahead of the addictive tobacco products” that burden the state’s health system, Hernandez said.

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