Lawmakers Unveil California Health Plan Tax Proposal

The California Legislature on Monday unveiled a bill imposing a new tax on health insurance plans that would prevent a massive $1.1 billion hole in the state budget.

The tax is designed to allow California to continue receiving matching funds from the federal government to pay for health insurance for the poor. It would replace a tax that applied only to Medi-Cal managed care organizations, which the federal government said it would not renew.

Democratic Gov. Jerry Brown called a special session last year to deal with health care financing but failed to find a solution. His administration has worked for months to broker a compromise with insurance companies, which warned that higher costs could get passed on to consumers.

A spokesman for Brown, Evan Westrup, said the bill “reflects the administration’s proposal.”

Insurers would get a reduction in other taxes to offset the cost of the new assessment. The effects on each company would likely be different, depending on their mix of Medi-Cal clients, their corporate structure and other factors.

The California Association of Health plans did not immediately take a position on the bill, spokeswoman Nicole Kasabian Evans said.

The measure requires bipartisan support in the Assembly and Senate to achieve the supermajority required of tax increases. It could begin moving through legislative committees as soon as this week.

It was not immediately clear whether Brown had lined up the needed support from two-thirds of each chamber. In the past, some GOP lawmakers have supported similar taxes if the affected industry was on board.

Insurers supported past iterations of the health plan tax because it was crafted to apply only to Medi-Cal managed care organizations. The money is matched by the federal government and pumped back into the Medi-Cal program.

But the Obama administration said the tax must apply more broadly, warning California that the state must find a new model to continue receiving the federal matching funds after June 30.

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