California is getting ready to increase a health insurance tax. Will it affect your premium? - California Political Review
Keeping up with your California representatives felt impossible before. Now you can watch them like a hawk: Sign up for My Legislator, your weekly, personalized report that tracks what your state representatives say and do. Legislators this week approved a health tax bill meant to continue critical federal funding for the state’s Medicaid program, also known […]
Legislators this week approved a health tax bill meant to continue critical federal funding for the state’s Medicaid program, also known as Medi-Cal. Their approval comes despite warnings from health industry leaders that the tax, as designed, will raise premiums for privately insured Californians. Click Here to Subscribe to the California Political ReviewNew federal rules are forcing the state to restructure its managed care organization tax, or MCO tax, which the state collects from health insurance plans that coordinate care for their members. California has been charging Medi-Cal insurance plans at a higher rate than private plans. The state’s newly-designed solution,Senate Bill 125, will lower the tax on Medi-Cal plans and raise the tax on private plans to the same level. If finalized by the governor, and accepted by the federal government, the new plan would shift more of the cost burden onto people who buy private insurance but bring in less revenue overall. Senate President Pro TemMonique Limón, a Santa Barbara Democrat, told reporters earlier this week that there was no perfect plan for redesigning the tax and that the Senate still has concerns, but the proposal they voted through is one that would bring in money quickly. “We have as a Senate been very clear that we needed revenue … it was a matter of making a decision which we could troubleshoot given what is happening at the federal level,” Limón said. As part of the tax and spending law Congress passed last summer, the federal government imposed new restrictions on provider taxes, including the one imposed on health plans. Under existing rules, California receivedalmost $8 billion annuallyfrom this tax; the new limits mean the state will receive billions less. The Legislature’s plan tries to fill at least some of that gap. The plan does not directly raise health insurance premiums. Instead it imposes a higher tax on private plans, which have said they’d pass the cost down to consumers. The proposal would require all health plans, both public and private, to pay a monthly rate of $8. 85 per enrollee – a total cost of about $1. 5 billion a year for private plans. If health plans pass the entire tax to their members, Californians could seeabout a 1. 5% increasein their monthly premiums, according to the independent Legislative Analyst’s Office. That’s on top of theyearly premium rate increasesthat people see year to year. The California Association of Health Plans, the health insurance lobby, estimates this would translate to consumers paying about $100 more in premiums each year. That means a family of four could be looking at $400 more a year in health premiums. Charles Bacchi, president of the association, said health plans roll taxes and fees into the administrative portion of premiums. “That is just actuarial science,” he said. “So when you increase taxes on health plans and insurers, that is built into premium rates and the customer pays it. ”Affordability is key concernThe Legislature’s plan largely mirrors what Gov. Gavin Newsom and his Department of Finance proposed last month. Bacchi argues the state could have imposed a smaller tax to lessen the impact on plans and consumers. Click here to read the full article in CalMatters