Gov. Jerry Brown’s plan to make more managed care organizations pay a state tax – one likely to be passed on to consumers – is meeting resistance at the Capitol.
A major part of Brown’s proposed healthcare budget, the expanded tax on managed-care organizations would raise an estimated $1.7 billion to help pay for healthcare for the poor and pay for a court settlement ending a years-long legal fight over reduced hours for home-care workers.
Health plans could choose to absorb the higher cost or, what seems more likely, it could show up in the bills of the nearly 14 million Californians who the California Healthcare Foundation said receive health insurance though commercial plans such as Aetna and others with few or no Medi-Cal patients.
“It is a common practice that taxes get passed on through increased premiums and so it would not be surprising,” Mari Cantwell of the state’s healthcare services department told an Assembly budget panel this month.
California has had several versions of a health plan tax since 2005, and the current one imposes a 3.94 percent levy on the earnings of health plans that serve people receiving Medi-Cal, the state’s health insurance program for the poor. Today, the money attracts federal matching dollars that flow back to 27 Medi-Cal managed-care plans that currently pay the tax.
That tax expires next year, but renewing it in its current form is a non-starter. That’s because the Obama administration has told California and other states that such taxes need to be broad-based and apply to all health plans – including the dozen in California that do not have any Medi-Cal patients and thus would not receive any federal matching dollars for serving them.
Charles Bacchi, the CEO of the California Association of Health Plans, said the the group supports the existing tax on health plans. The organization, though, said the governor’s proposal could raise premiums for millions of consumers.
“We’re working constructively with the administration,” Bacchi said Friday. “But the federal rules make it really difficult.”
Health plans’ support is critical. Any new tax would require a two-thirds vote of the Legislature, meaning some Republican votes would be necessary.
When it presented its proposed budget in January, the Brown administration wanted lawmakers to adopt the expanded health plan tax in March or April. Now it seeks to have the expanded tax in the budget for the fiscal year that begins July 1, which must be approved by June 15. That would create Medi-Cal funding certainty for the following budget year, officials said.
More immediately, though, the administration faces paying up on a $215.6 million settlement to restore a recession-era 7 percent across-the-board cut in hours in the In-Home Supportive Services program in the next budget. The restoration was part of a spring 2013 agreement between the Brown administration, disability-rights advocates, and unions that represent in-home care workers.
“While the (managed-care) tax doesn’t have to pass this year, the IHSS (payment) does need to happen,” Bacchi said.
SEIU, which represents thousands of home-care workers, backs the managed care tax proposal and has lobbied lawmakers, said Stacey Leyton, an attorney for the union. “The plaintiffs are watching this and watching what the administration is doing,” she said.
Given the resistance to the administration’s tax proposal, SEIU officials say lawmakers need to come up with the money regardless. Budget panels in both houses have tentatively approved restoring the money, without mentioning a higher managed-care tax as a source.