As Lawmakers Return to Sacramento, Debate Over Healthcare Taxes Kicks Off

The debate over new taxes and fees — a dominant theme in the final weeks of the legislative session — kicked off Monday, with some Democratic lawmakers calling for a new tax on health insurance plans to pay for Medi-Cal and other social services.

Assemblyman Marc Levine (D-San Rafael) touted his proposal to impose a flat tax on managed care organizations at a news conference, arguing that it would avert a plunge in funding from Washington for state-subsidized healthcare.

California currently imposes a tax on plans that accept Medi-Cal patients, and the revenue goes into the state’s general fund to help pay for Medi-Cal and other services. But the Obama administration has said California’s tax needs to be changed, or the state could lose as much as $1 billion in federal matching funds.

To comply with federal standards, the tax would have to be levied on all health plans, even those with no Medi-Cal enrollees. Insurers say those costs probably would be passed onto consumers.

Levine’s proposal would levy $7.88 per person per month on managed care organizations, generating a total of $1.8 billion each year. The money, Levine said, would help fund Medi-Cal, pay for more hours of in-home care and increase money for services for the developmentally disabled, which advocates say still have not recovered from recession-era cuts.

“There are many providers that would go out of business if this kind of legislation … doesn’t move forward,” said Margaret Farman, head of United Cerebral Palsy of the North Bay.

Nicole Kasabian Evans, spokeswoman for the California Assn. of Health Plans, said the group does not yet have a position on the proposal but added, “We’re trying to work on an option that could be successful in the Legislature.”

Other options could include taxing different health plans at different rates, as Gov. Jerry Brown proposed this year. That proposal was opposed by commercial health plans and business groups.

Republican lawmakers, whose support will be necessary to clear the two-thirds vote requirement needed for a new tax, sounded unenthused about coming up with such a tax by the time the Legislature adjourns in mid-September, noting that the current tax does not expire until the middle of next year.

“We have a year to solve this problem,” Assemblyman Travis Allen (R-Huntington Beach) said.

The leader of the Senate’s Republicans, Bob Huff of San Dimas, said funding for Medi-Cal and transportation, also a major agenda item for the Legislature’s final weeks, should have been addressed in the budget, rather than as a subject for new taxes and fees.

Huff did not say where he would reduce spending to make more money available.

“That’s not my job,” he said. “Let me deal with the whole budget. I will make it balanced … I wouldn’t have done what they did.”

GOP state Sens. Jim Nielsen of Gerber and Jeff Stone of Temecula have proposed measures to require that any extra state revenue go toward increasing money for Medi-Cal providers and developmental services.

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