BILL NUMBER: ABX2 4 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 31, 2015
INTRODUCED BY Assembly Member Levine
(Coauthors: Assembly Members Bloom, Brown, Chau, Chu, Cristina
Garcia, Roger Hernández, Jones-Sawyer, McCarty, Nazarian, Quirk,
Rendon, Mark Stone, and Williams)
JULY 16, 2015
An act to amend Section 6172 of, and to amend and repeal Section
17131.9 of, the Revenue and Taxation Code, and to amend
Section 12302.2 of, to amend and repeal Section
Sections 12302.2 and 12306.6 of, and to add Article
6.3 (commencing with Section 14197.50) Article 6.4
(commencing with Section 14197.100) to Chapter 7 of Part 3 of
Division 9 of, the Welfare and Institutions Code, relating to public
social services.
LEGISLATIVE COUNSEL'S DIGEST
AB 4, as amended, Levine. Managed care organization provider tax.
Existing law establishes the Medi-Cal program, administered by the
State Department of Health Care Services, under which health care
services are provided to qualified, low-income persons. The Medi-Cal
program is, in part, governed and funded by federal Medicaid Program
provisions. Under existing law, one of the methods by which Medi-Cal
services are provided is pursuant to contracts with various types of
managed care plans.
Existing law provides for the county-administered In-Home
Supportive Services (IHSS) program, under which qualified aged,
blind, and disabled persons are provided with services to permit them
to remain in their own homes and avoid institutionalization.
Existing law provides, as part of the Coordinated Care Initiative,
that IHSS is a Medi-Cal benefit available through managed care health
plans in specified counties. Existing law provides for a 7%
reduction in hours of service to each IHSS recipient of services.
Existing law imposes a sales tax on providers of support services
for the privilege of selling support services at retail, measured by
the gross receipts from the sale of those services in this state at a
specified rate of those gross receipts. Existing law specifies that
a seller is the State Department of Social Services, a county, or
other person or entity, as provided. Existing law also imposes a
sales tax on sellers of Medi-Cal managed care plans.
This bill would repeal the support services sales tax and would
establish a new managed care organization provider tax, to be
administered by the department in consultation with the Department of
Managed Health Care. The tax would be assessed by the department on
licensed health care service plans and managed care plans contracted
with the department to provide Medi-Cal services, except as excluded
by the bill. The bill would require the health plans to report to the
department specified enrollment information, on a quarterly basis,
beginning with the 2016-17 state fiscal year. On December 1, 2016, or
the date upon which the department receives approval for federal
financial participation, whichever is later, the department would
commence notification to the health plans of the assessed tax amount
and due date for the first taxable quarter. The amount of the tax
would be $7.88 per plan enrollee, as defined.
The bill would require the department to request approval from the
federal Centers for Medicare and Medicaid Services as necessary to
implement the bill. The bill would authorize the department to
implement its provisions by means of provider bulletins, all-plan
letters, or similar instructions, and to notify the Legislature of
this action.
This bill would establish the Health and Human Services Special
Fund in the State Treasury, into which all revenues, less refunds,
derived from taxes imposed by the bill would be deposited. Moneys in
the fund would be used for designated health care purposes, subject
to appropriation in the annual Budget Act. The remaining moneys in
the fund would be available to the department for the purpose of
funding the nonfederal share of Medi-Cal managed care rates, as
prescribed, upon appropriation in the annual Budget Act.
This bill would also make conforming and technical changes.
This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
Vote: 2/3. Appropriation: yes no .
Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6172 of the Revenue and Taxation Code is
amended to read:
6172. This article shall remain in effect only until July 1,
2016, and as of January 1, 2017, is repealed.
SEC. 2. Section 17131.9 of the Revenue and Taxation Code is
amended to read:
17131.9. (a) Gross income does not include any supplementary
payment received by an individual pursuant to Section 12306.6 of the
Welfare and Institutions Code.
(b) This section shall remain in effect only until July 1, 2016,
and as of January 1, 2017, is repealed.
SEC. 3. Section 12302.2 of the Welfare and Institutions Code is
amended to read:
12302.2. (a) (1) If the state or a county makes or provides for
direct payment to a provider chosen by a recipient or to the
recipient for the purchase of in-home supportive services, the
department shall perform or assure the performance of all rights,
duties and obligations of the recipient relating to those services as
required for purposes of unemployment compensation, unemployment
compensation disability benefits, workers' compensation, federal and
state income tax, and federal old-age survivors and disability
insurance benefits. Those rights, duties, and obligations include,
but are not limited to, registration and obtaining employer account
numbers, providing information, notices, and reports, making
applications and returns, and withholding in trust from the payments
made to or on behalf of a recipient amounts to be withheld from the
wages of the provider by the recipient as an employer, and
transmitting those amounts along with amounts required for all
contributions, premiums, and taxes payable by the recipient as the
employer to the appropriate person or state or federal agency. The
department may assure the performance of any or all of these rights,
duties, and obligations by contract with any person, or any public or
private agency.
(2) Contributions, premiums, and taxes shall be paid or
transmitted on the recipient's behalf as the employer for any period
commencing on or after January 1, 1978, except that contributions,
premiums, and taxes for federal and state income taxes and federal
old-age, survivors survivors, and
disability insurance contributions shall be paid or transmitted
pursuant to this section commencing with the first full month that
begins 90 days after the effective date of this section.
(3) Contributions, premiums, and taxes paid or transmitted on the
recipient's behalf for unemployment compensation, workers'
compensation, and the employer's share of federal old-age
survivors old-age, survivors, and disability
insurance benefits shall be payable in addition to the maximum
monthly amount established pursuant to Section 12303.5 or subdivision
(a) of Section 12304 or other amount payable to or on behalf of a
recipient. Contributions, premiums, or taxes resulting from liability
incurred by the recipient as employer for unemployment compensation,
workers' compensation, and federal old-age, survivors
survivors, and disability insurance benefits
with respect to any period commencing on or after January 1, 1978,
and ending on or before the effective date of this section shall also
be payable in addition to the maximum monthly amount established
pursuant to Section 12303.5 or subdivision (a) of Section 12304 or
other amount payable to or on behalf of the recipient. Nothing in
this section shall be construed to permit any interference with the
recipient's right to select the provider of services or to authorize
a charge for administrative costs against any amount payable to or on
behalf of a recipient.
(b) If the state makes or provides for direct payment to a
provider chosen by a recipient, the Controller shall make any
deductions from the wages of in-home supportive services personnel
that are authorized by Sections 1152 and 1153 of the Government Code,
as limited by Section 3515.6 of the Government Code.
(c) Funding for the costs of administering this section and for
contributions, premiums, and taxes paid or transmitted on the
recipient's behalf as an employer pursuant to this section shall
qualify, where possible, for the maximum federal reimbursement. To
the extent that federal funds are inadequate, notwithstanding Section
12306, the state shall provide funding for the purposes of this
section.
SEC. 4. Section 12306.6 of the Welfare and Institutions Code is
amended to read:
12306.6. (a) (1) Notwithstanding any other provision of law,
beginning on the date for which the federal Centers for Medicare and
Medicaid Services authorizes commencement of the implementation of
this section, but no earlier than January 1, 2012, and concurrent
with the collection of the sales tax extended to support services
pursuant to Article 4 (commencing with Section 6150) of Chapter 2 of
Part 1 of Division 2 of the Revenue and Taxation Code, a provider of
in-home supportive services shall receive a supplementary payment
under this article equal to a percentage, as set forth in paragraph
(2), of the gross receipts, as defined in subdivision (b) of Section
6150 of the Revenue and Taxation Code, of the provider for the sale
of in-home supportive services, plus an amount described in paragraph
(3) if applicable. If the underlying payment for in-home supportive
services that is being supplemented is a Medi-Cal payment, then the
supplementary payment shall also be a Medi-Cal payment. Supplementary
payments shall be made only to those providers from whom the tax
imposed pursuant to Section 6151 of the Revenue and Taxation Code has
been collected.
(2) The percentage applicable to the supplementary payment
required by paragraph (1) shall equal the rate described in
subdivision (b) of Section 6151 of the Revenue and Taxation Code and
shall only be applied to services provided under this article,
including personal care option services reimbursable under the
Medi-Cal program.
(3) The supplementary payment of an individual provider whose
payroll withholding required for federal income tax purposes and for
purposes of taxation for the Social Security and Medicare programs is
increased due to the supplementary payment, in comparison to the
amounts for those purposes that would be withheld without the
supplementary payment, shall be increased by an additional amount
that is equal to the amount of this additional federal withholding.
(b) (1) All revenues deposited in the Personal Care IHSS Quality
Assurance Revenue Fund established pursuant to Section 6168 of the
Revenue and Taxation Code shall be used solely for purposes of the
In-Home Supportive Services program, including, but not limited to,
those services provided under the Medi-Cal program. All supplementary
payments required by this section shall be paid from the Personal
Care IHSS Quality Assurance Revenue Fund.
(2) The Director of Finance shall determine the sum required to be
deposited in the Personal Care IHSS Quality Assurance Revenue Fund
to fund the initial supplementary payments from the fund. As soon
thereafter as reasonably possible, this sum shall be transferred, in
the form of a loan, from the General Fund to the Personal Care IHSS
Quality Assurance Revenue Fund. At the time sufficient revenues have
been deposited in the Personal Care IHSS Quality Assurance Revenue
Fund pursuant to Section 6168 of the Revenue and Taxation Code to
sustain the continued operation of the fund for that portion of the
supplementary payment described in paragraph (2) of subdivision (a)
plus an additional amount equal to the General Fund loan made
pursuant to this paragraph, plus interest, the sum transferred from
the General Fund, including interest, shall be repaid to the General
Fund. Subsequent supplementary payments pursuant to this section
shall be made from revenue deposited in the Personal Care IHSS
Quality Assurance Revenue Fund pursuant to Section 6168 of the
Revenue and Taxation Code.
(3) The Department of Finance, on an ongoing basis, shall
determine the amount necessary to implement paragraph (3) of
subdivision (a), and subdivision (c) of Section 12302.2, and
immediately transfer this amount from the General Fund to the
Personal Care IHSS Quality Assurance Revenue Fund.
(c) (1) The Director of Health Care Services shall seek all
federal Medicaid approvals necessary to implement this section,
including using the revenues obtained pursuant to Article 4
(commencing with Section 6150) of Chapter 2 of Part 1 of Division 2
of the Revenue and Taxation Code as the nonfederal share for
supplementary payments. As part of that request for approval, the
director shall seek to make the supplementary payments effective as
of January 1, 2012.
(2) This section shall become operative only if the federal
Centers for Medicare and Medicaid Services grants Medicaid approvals
sought pursuant to paragraph (1).
(3) If Medicaid approval is granted pursuant to paragraph (2),
within 10 days of that approval the Director of Health Care Services
shall notify the State Board of Equalization and the appropriate
fiscal and policy committees of the Legislature of the approval.
(d) If Article 4 (commencing with Section 6150) of Chapter 2 of
Part 1 of Division 2 of the Revenue and Taxation Code becomes
inoperative pursuant to subdivision (b) of Section 6170 of the
Revenue and Taxation Code, supplementary payments shall cease to be
made pursuant to subdivision (a) when all moneys in the fund have
been expended.
(e) (1) Notwithstanding the rulemaking provisions of the
Administrative Procedure Act, Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code, the
department and the State Department of Health Care Services may
implement and administer this section through all-county letters or
similar instruction from the department and the State Department of
Health Care Services until regulations are adopted. The department
and the State Department of Health Care Services shall adopt
emergency regulations implementing this section no later than 12
months following the initial effective date of the supplementary
payments. The department and the State Department of Health Care
Services may readopt any emergency regulation authorized by this
section that is the same as or substantially equivalent to an
emergency regulation previously adopted under this section.
(2) The initial adoption of emergency regulations implementing
this section and the one readoption of emergency regulations
authorized by this subdivision shall be deemed an emergency and
necessary for the immediate preservation of the public peace, health,
safety, or general welfare. Initial emergency regulations and the
one readoption of emergency regulations authorized by this section
shall be exempt from review and approval by the Office of
Administrative Law. The initial emergency regulations and the one
readoption of emergency regulations authorized by this section shall
be submitted to the Office of Administrative Law for filing with the
Secretary of State and each shall remain in effect for no more than
180 days, by which time final regulations may be adopted.
(f) This section shall remain in effect only until July 1, 2016,
and as of January 1, 2017, is repealed.
SEC. 5. Article 6.3 6.4 (commencing
with Section 14197.50) 14197.100) is
added to Chapter 7 of Part 3 of Division 9 of the Welfare and
Institutions Code, to read:
Article 6.3. 6.4. Managed Care
Organization Provider Tax
14197.50. 14197.100. (a) The
Legislature finds and declares the following:
(1) California's expansion of health care coverage has resulted in
more than four million additional Californians receiving coverage
through Medi-Cal.
(2) California is in need of at least one billion one hundred
million dollars ($1,100,000,000) annually to stabilize the cost of
Medi-Cal.
(3) The In-Home Supportive Services Program provides vital
services to elderly and disabled populations across our state to
ensure that they are able to remain in their homes and continue to
receive the care and attention they need.
(4) Thousands of dedicated care providers have suffered years of
rate cuts to In-Home Supportive Services and are in desperate need of
a stable funding source.
(5) The State Department of Developmental Services oversees the
care of our state's most vulnerable population, and these services
have continuously been underfunded.
(6) As the state transitions away from the use of developmental
centers, a population of medically fragile and behaviorally
challenged individuals will need to identify adequate care in the
community.
(7) It is essential that these programs be funded through a
reliable funding mechanism that allows services to be provided on an
ongoing basis.
(b) Accordingly, it is the intent of the Legislature that the
State Department of Health Care Services implement a managed care
organization provider tax, effective July 1, 2016, to provide
reliable ongoing funding for the Medi-Cal program, minimize to the
extent possible any need for new reductions to the program, and meet
all of the following goals:
(1) Generate an amount of nonfederal funds for the Medi-Cal
program equivalent to the funds generated by the tax imposed pursuant
to Article 5 (commencing with Section 6174) of Chapter 2 of Part 1
of Division 2 of the Revenue and Taxation Code.
(2) In addition to the amount in paragraph (1), and in a manner
consistent with Section 12301.03, generate an amount of nonfederal
funds sufficient to offset the 7 percent reduction to the In-Home
Supportive Services Program imposed pursuant to Section 12301.02.
(3) Comply with federal Medicaid requirements applicable to
permissible health care-related taxes.
(4) Provide sufficient funding for community-
based developmental services at rates that
services, to allow for appropriate
levels of service. no less than a 10-
percent increase in levels of services and supports.
14197.51. 14197.101. The following
definitions shall apply for purposes of this article:
(a) "Countable enrollee" means an individual enrolled in a health
plan, as defined in subdivision (e), each month of a taxable quarter.
"Countable enrollee" does not include an individual enrolled in a
Medicare plan, or a plan-to-plan enrollee, as defined in subdivision
(g).
(b) "Department" means the State Department of Health Care
Services.
(c) "Director" means the Director of Health Care Services.
(d) "Excluded plan" means a health plan licensed pursuant to
Section 1351.2 of the Health and Safety Code.
(e) "Health care service plan" or "health plan" means a full
service health care service plan licensed by the Department of
Managed Health Care under the Knox-Keene Health Care Service Plan Act
of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of
the Health and Safety Code) or a managed care plan contracted with
the State Department of Health Care Services to provide Medi-Cal
services.
(f) "Per enrollee tax amount" means the amount of tax assessed per
countable enrollee within a taxing tier.
(g) "Plan-to-plan enrollee" means an individual who receives his
or her health care services through a full service health plan
pursuant to a subcontract from another full service health plan.
(h) "Taxable quarter" means a calendar quarter of the state fiscal
year.
14197.52. 14197.102. (a) The Health
and Human Services Special Fund is hereby created in the State
Treasury.
(b) All revenues, less refunds, derived from the taxes provided
for in this article shall be deposited in the State Treasury to the
credit of the fund.
(c) Notwithstanding Section 16305.7 of the Government Code, any
interest and dividends earned on moneys in the fund shall be retained
in the fund for the purposes specified in subdivisions (d) and (e).
(d) Subject to an appropriation in the annual Budget Act, moneys
in the fund shall be available for health services including, but not
limited to, all of the following:
(1) To the State Department of Social Services, to offset the
reductions to the In-Home Supportive Services Program imposed
pursuant to Section 12301.02, not to exceed an amount beyond a 7
percent reduction in hours of service, in a manner consistent with
Section 12301.03.
(2) To the State Department of Health Care Services, for purposes
of reinstating rates to offset previous freezes and
reductions to Medi-Cal reimbursement rates pursuant to Sections
14105.192 14105.07, 14105.192, and
14105.194.
(3) To the State Department of Developmental Services, for
purposes of increasing providing no less than
a 10- percent increase in provider rates for vendor
services, establishing services and funds to
community-based service providers, and to establish adequate
care for those individuals transitioning out of the developmental
centers, and providing funds to community-based resources.
centers.
(e) Subject to an appropriation in the annual Budget Act, after
meeting the funding obligations pursuant to subdivision (d), the
remaining funds deposited in the Health and Human Services Special
Fund pursuant to this article shall be available to the State
Department of Health Care Services for purposes of funding the
nonfederal share of Medi-Cal managed care rates for children, adults,
seniors and seniors, persons with
disabilities, aging and disability resource centers, and
persons dually eligible for Medi-Cal and Medicare.
14197.53. 14197.103. (a) Beginning
with the 2016-17 state fiscal year, each health plan, within 45 days
after the end of each state fiscal quarter, shall submit a report to
the department for the state fiscal quarter that includes all of the
following information:
(1) Total cumulative enrollment for the quarter.
(2) Total Medicare cumulative enrollment for the quarter.
(3) Total Medi-Cal cumulative enrollment for the quarter.
(4) Total plan-to-plan cumulative enrollment for the quarter.
(5) Total other cumulative enrollment for the quarter that is not
otherwise counted in paragraphs (2) through (4), inclusive.
(b) The department, in consultation with the Department of Managed
Health Care, shall develop the methodologies used to determine the
enrollments required to be reported by health plans and the format of
those submissions.
(c) A report submitted under this section shall be accompanied by
a certification by the health plan attesting to the accuracy of the
reports.
(d) For the efficient operation of this section, the director, in
consultation with the Director of the Department of Managed Health
Care, may delegate the development of the format of the reports or
the collection of the reports, or both, to the Department of Managed
Health Care.
14197.54. 14197.104. (a) A managed
care organization provider tax shall be imposed on every health plan
that is not an excluded plan.
(b) The department shall compute the quarterly tax for each health
plan subject to the tax during the fiscal year, pursuant to Section
14197.55. 14197.105.
(c) On December 1, 2016, or the date the department receives
federal approval necessary for receipt of federal financial
participation in conjunction with the tax created by this article,
whichever is later, the following activities shall commence:
(1) The director shall certify in writing that federal approval
has been received, and within 5 five
business days shall post the certification on its Internet Web site
and send a copy of the certification to the Secretary of State, the
Secretary of the Senate, the Chief Clerk of the Assembly, and the
Legislative Counsel.
(2) Within 10 business days following the receipt of the notice of
federal approval, the department shall send a notice to each health
plan subject to the tax, which shall contain the following
information:
(A) The quarterly tax due for the first taxable quarter, and any
subsequent taxable quarters for which data has been submitted and a
tax has been calculated.
(B) The date on which the tax payments are due.
(3) A health plan shall pay the quarterly tax, based on a schedule
developed by the department. The department shall establish the date
that each payment is due, provided that the first payment shall be
due no earlier than 20 days following the date the department sends
the notice pursuant to paragraph (2), and the payments shall be paid
at least one month apart, but no more than one quarter apart.
(4) A health plan shall pay the quarterly taxes that are due, if
any, in the amounts and at the times set forth in the notice, unless
superseded by a subsequent notice issued by the department.
(d) The managed care organization provider tax, as assessed
pursuant to this article, shall be paid to the department by each
health plan subject to the tax, and deposited by the department into
the Health and Human Services Special Fund created pursuant to
Section 14197.52. 14197.102.
(e) (1) Interest shall be assessed on managed care organization
provider taxes that are not paid on the date due at a rate of 10
percent per annum. Interest shall begin to accrue the day after the
date the payment was due, and shall be deposited in the Health and
Human Services Special Fund created pursuant to Section
14197.52. 14197.102.
(2) If a tax payment is more than 60 days overdue, a penalty equal
to the interest charge described in paragraph (1) shall be assessed
and due for each month for which the payment is not received after 60
days.
(f) (1) Subject to paragraph (2), the director may waive any or
all interest and penalties assessed under this article in the event
that the director determines, in his or her sole discretion, that the
health plan has demonstrated that imposition of the full amount of
the managed care organization provider tax pursuant to the timelines
applicable under this article has a high likelihood of creating an
undue financial hardship for the health plan, or creates a
significant financial difficulty in providing needed services to
Medi-Cal beneficiaries.
(2) Waiver of some or all of the interest or penalties imposed
pursuant to this subdivision shall be conditioned on the health plan'
s agreement to make tax payments on an alternative schedule developed
by the department that takes into account the financial situation of
the health plan and the potential impact on services.
(g) For the efficient operation of this section, the director, in
consultation with the Director of the Department of Managed Health
Care, may delegate the collection of the taxes under this article to
the Department of Managed Health Care.
14197.55. 14197.105. (a) Effective
July 1, 2016, in order to achieve the goals specified in Section
14197.50, 14197.100, the per enrollee
tax amount shall be seven dollars and eighty-eight cents ($7.88).
(b) The department shall request approval from the federal Centers
for Medicare and Medicaid Services as is necessary to implement this
article. In making the request, the department may seek, as it deems
necessary, a request for waiver of the broad based requirement,
waiver of the uniformity requirement, or both, pursuant to paragraphs
(1) and (2) of subsection (e) of Section 433.68 of Title 42 of the
Code of Federal Regulations, or a request for waiver of any other
provision of federal law or regulation necessary to implement this
article.
(c) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement this article by means of provider bulletins,
all plan letters, or other similar instruction, without taking legal
regulatory action. The department shall provide notification to the
Joint Legislative Budget Committee and to the Senate Committees on
Appropriations, Budget and Fiscal Review, and Health and the Assembly
Committees on Appropriations, Budget, and Health within 10 business
days after the above-described action is taken to inform the
Legislature that the action is being implemented.