Health Plans Come Out Against Tax Bills

California’s largest health plan group this week declared its opposition to both of the healthcare special session bills that would impose new taxes on managed-care organizations, the latest sign that a replacement for a soon-to-expire health plan tax is unlikely to emerge before lawmakers adjourn next week.

Health plan taxation is the focus of the special session called by Gov. Jerry Brown. He wants the Legislature to approve an expansion of the existing tax on managed-care organizations to generate about $1.3 billion for Medi-Cal and home-care services. The current tax expires in mid-2016.

But any tax would likely increase costs for millions of consumers. Also, some plans could be hit disproportionately.

With this week’s opposition to ABx2 4 and ABx2 17 by the California Association of Health Plans, neither measure seems to have a chance to attract Republican votes. The first bill requires at least some GOP support to meet the two-thirds threshold to pass the Legislature before the regular session ends Sept. 11.

That measure, by Assemblyman Marc Levine, D-San Rafael, would impose a $7.88 flat tax per enrollee, per month on California health plans. The money would raise almost $2 billion annually for Medi-Cal, as well as in-home supportive services and people with developmental disabilities.

“We believe that ABx2 4 increases taxes on the private sector by about $1.2 billion,” the health plan group said in its oppose letter. “Our member health plans believe that the proceeds of any MCO tax should go back to Medi-Cal managed care to bolster the program. In contrast, AB x2 4 funds other programs with revenue from the tax.”

The other bill, by Assemblyman Kevin McCarty, D-Sacramento, would shift some health plans from the jurisdiction of the Department of Managed Care to the Department of Insurance. McCarty’s office said the move would generate $300 million in additional tax revenue, which could go to Medi-Cal. It requires a majority vote.

Health plans, though, said the bill would make a “fundamental change” in the state’s health plan structure and “arbitrarily shift most of this market from one regulator to another without a valid reason, causing major disruption in the market place for consumers and providers.”

Brown administration officials have testified about the governor’s January proposal to create a tiered tax on health plans. But it has yet to show up as legislation in the special session.

Most of the other 30-odd bills introduced in the health special session deal with regulation of tobacco products, taxes on tobacco and alcoholic beverages, and assisted death.