Insurers Back Proposed California Health Plan Tax

Most of California’s health insurance companies said Wednesday they’re supporting Gov. Jerry Brown’s plan to restructure a tax on health plans.

As the administration worked to line up votes, state Assembly and Senate committees heard a generally supportive message from the industry that would pay the tax. Support from insurers, and their assurance that premiums won’t rise, is critical to winning support from the needed two-thirds of lawmakers.

The California Association of Health Plans said the bill would secure funding for Medi-Cal while protecting the affordability of health plans.

“It represents the best balance in achieving our shared goals,” Nick Louizos, the organization’s lobbyist, told the Assembly public health committee.

Brown’s tax proposal follows more than a year of negotiations with health insurers to prevent a $1.1 billion hole in the budget for Medi-Cal, the state’s health insurance plan for the poor.

The new tax would replace an existing levy that applies only to Medi-Cal managed care organizations. The revenue is matched by the federal government and pumped back into Medi-Cal.

To win support from insurers and avoid raising insurance premiums, Brown agreed to eliminate other taxes that insurance companies pay.

Still, one insurer, Cigna Life and Health Insurance Company, had reservations.

Lobbyist Fred Main said the proposal would affect companies differently, creating a competitive disadvantage for some. The National Federation of Independent Business, a lobbying group influential with conservatives, also said it needs stronger assurances that insurance premiums won’t rise.

The legislative committees did not vote on the bills, ABX2-20 and SBX2-15.

The federal government warned California in 2014 that its current arrangement would not be allowed to continue past this summer unless the state revised the tax to apply to all insurance plans — including lucrative private health plans.

Democratic Assemblyman Rob Bonta of Oakland, chairman of the public health committee, suggested higher funding for services for the developmentally disabled may be part of the final agreement. Lawmakers in both parties have supported funding increases.

“The Assembly remains committed to a substantial investment in the developmental disabilities system, as big and broad-based as possible,” Bonta said. “And work is being done right now to get there and achieve that outcome.”

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