Feds Begin Review of California’s Health Plan Tax

The Brown administration this week formally asked the U.S. government to sign off on a revamped tax on health plans that has the primary goal of continuing to pull in more than $1 billion in federal money.

The three-year tax was part of a bipartisan package that passed the Legislature Feb. 29 and was signed by Gov. Jerry Brown the next day. It would replace an existing tax on health plans with Medi-Cal managed care patients that expires July 1 with a tax that covers more health plans.

To prevent managed-care organizations from passing on any tax hit consumers, the package reduces plans’ state gross premium and corporate tax. The state still would net nearly $1.3 billion in the coming fiscal year because of the matching federal money, according to estimates.

If the Obama administration signs off, California’s approach could be a model for other states that also received word in 2014 that their existing taxes needed to change. In its filing Wednesday, the state asked the U.S. Centers for Medicaid and Medicare Services to act by May, when Brown will release his revised budget proposal.

“We believe the reformed MCO tax proposal solves the issues that CMS raised and won’t harm California’s people or health care system,” state Medicaid Director Mari Cantwell said in a statement.