BILL ANALYSIS Ó
SENATE COMMITTEE ON PUBLIC HEALTH AND DEVELOPMENTAL SERVICES
Senator Ed Hernandez, O.D., Chair
BILL NO: SBX2 15
---------------------------------------------------------------
|AUTHOR: |Hernandez |
|---------------+-----------------------------------------------|
|VERSION: |February 8, 2016 |
---------------------------------------------------------------
---------------------------------------------------------------
|HEARING DATE: |February 22, | | |
| |2016 | | |
---------------------------------------------------------------
---------------------------------------------------------------
|CONSULTANT: |Teri Boughton |
---------------------------------------------------------------
SUBJECT : Medi-Cal: managed care organization tax
SUMMARY : Imposes a three-year managed care organization
provider tax (MCO tax) on health plans, with taxing tiers and
based on enrollment assessed during a base year period of
October 1, 2014 through September 30, 2015. Continuously
appropriates funds from the MCO tax for purposes of funding the
nonfederal share of Medi-Cal managed care rates. Reduces the
amount of the Corporate or Gross Premium taxes that specified
health plans and insurers are required to pay for the three
years of the MCO tax assessment. Sunsets these provisions June
30, 2020.
Existing law:
1)Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), under which health
care services are provided to qualified, low-income persons.
Under existing law, one of the methods by which Medi-Cal
services are provided is through contracts with various types
of managed care organizations (MCOs).
2)Imposes a 3.9 % tax on the total revenue of Medi-Cal MCOs
until July 1, 2016.
3)Establishes the Department of Managed Health Care (DMHC) which
licenses and regulates health care service plans (health
plans) and the California Department of Insurance (CDI), which
regulates insurers, including health insurers.
SBX2 15 (Hernandez) Page 2 of ?
4)Enacts the Corporation Tax Law, which applies a tax rate of
8.84% on the apportioned net income of a corporation with a
taxable nexus to California, or a minimum franchise tax of
$800, whichever is more. The Franchise Tax Board (FTB)
administers the tax, which flows to the State's General Fund.
Requires unitary taxpayers to be included on a single,
combined report, and also includes various income exclusions,
deductions, and credits against the tax.
5)Requires most corporation taxpayers to apportion income
according to its sales factor, which is equal to its sales in
California compared to its total sales. State law generally
excludes economic activity that did not give rise to taxable
business income from the apportionment process, as well as
tax-exempt entities such as Gross Premiums Taxpayer (GPT)
taxpayers, from the combined reporting group. FTB Legal
Ruling 2006-01 applies these exclusions when advising
taxpayers who produce both taxable and tax-exempt income to
divide both its income and the factors produced by the income
into distinct taxable and tax-exempt categories according to
existing regulations.
6)Imposes a GPT upon foreign and domestic insurance companies at
a rate of 2.35% of gross premium income, in lieu of all other
taxes, except for real estate taxes, motor vehicle license
fees, and retaliatory exactions. The California Constitution
sets the rate, but allows the Legislature to change the rate
or rates imposed. The Commissioner of CDI (Commissioner)
administers the tax, which is collected by the Board of
Equalization, and flows to the State's General Fund.
7)Allows for retaliatory exactions, which the Commissioner can
impose whenever a non-California based insurer's state of
incorporation imposes higher taxes on California insurers
doing business in that state than California would otherwise
impose on that state's insurers doing business here.
This bill:
1)Establishes a new MCO tax, to be administered by DHCS, for
three fiscal years (FYs) 2016-17, 2017-18, and 2018-19.
SBX2 15 (Hernandez) Page 3 of ?
2)Assesses the MCO tax on health plans and entities contracted
with DHCS to provide Medi-Cal services (county organized
health services are contracted to provide Medi-Cal services
but are not all licensed as health plans). Excludes from the
MCO tax a health plan that provides only specialized or
discount services, international plans, as specified, and a
plan owned and operated by a nonprofit hospital or health
system or multiple hospitals or health systems, headquartered
in Sacramento or San Diego County, as specified.
3)Defines as the base year for purposes of assessing the MCO tax
the 12-month period of October 1, 2014 through September 30,
2015.
4)Defines for purposes of assessing the MCO tax, countable
enrollee as an individual enrolled in a health plan, as
defined, during a month of the base year according to the base
data source. Countable enrollee does not include an
individual enrolled in a Medicare plan, a plan-to-plan
enrollee, as defined, or an individual enrolled in a Federal
Employee Health Plan (FEHP), to the extent the imposition of
the tax under this bill is preempted, as specified.
5)Establishes applicable taxing tiers and per enrollee tax
amounts for FYs 2016-17, 2017-18, and 2018-19 for health plans
and an alternate health care service plan (AHCSP), defined as,
a non-profit health plan with at least four million enrollees
statewide, that owns or operates pharmacies, and provides
professional medical services to enrollees in specific
geographic regions through an exclusive contract with a single
medical group in each specific geographic regions in which it
is licensed.
6)Prohibits DHCS from collecting the MCO tax until DHCS receives
approval from federal Centers for Medicare and Medicaid
Services (CMS) that this is a permissible health care-related
tax, as specified in federal regulations. Requires, on
October 1, 2016, or the date DHCS receives such federal
approval from CMS, whichever is later, certain activities to
occur, such as certification by DHCS that approval was
SBX2 15 (Hernandez) Page 4 of ?
obtained and notification to the affected plans of the
approval, payment schedule and other details related to the
payment of the tax.
7)Requires DHCS to determine for each health plan, other than
excluded plans, using the base data source all of the
following:
a) Total cumulative enrollment for the base year;
b) Total Medicare cumulative enrollment for the
base year;
c) Total Medi-Cal cumulative enrollment for the
base year;
d) Total plan-to-plan cumulative enrollment for
the base year;
e) Total cumulative enrollment through the FEHP
for the base year; and,
f) Total other cumulative enrollment for the base
year that is not otherwise counted in b) through e),
inclusive.
8)Requires, in the event of a merger, acquisition,
establishment, or any other similar transaction that results
in the transfer of health plan responsibility for all
countable enrollees from a health plan to another health plan
or similar entity, and that occurs at any time during which
this MCO tax is operative, the resultant health plan or
similar entity to be responsible for paying the full tax
amount provided in this bill that would have been the
responsibility of the health plan to which that full tax
amount was assessed, upon the effective date of any
transaction. Specifies that if a transaction transfers
responsibility for some of a health plan's countable enrollees
but not all countable enrollees, the full tax amount as
provided in this bill remains the responsibility of that
health plan to which that full tax amount was assessed.
9)Permits DHCS to modify or make adjustments to any methodology,
SBX2 15 (Hernandez) Page 5 of ?
tax amount, taxing tier, or other similar provision to the
extent necessary to meet the requirements of federal law or
regulation, obtain federal approval, or to ensure federal
financial participation is available provided the modification
or adjustment does not otherwise conflict with the purposes of
this bill.
10)Requires any modification or adjustment that would result in
more than the following aggregate tax amounts for the other
enrollees and AHCSP enrollees combined, to be considered in
conflict with the purposes of this bill:
a) $266 million in the 2016-17 FY.
b) $287 million in the 2017-18 FY.
c) $309 million in the 2018-19 FY.
11)Authorizes DHCS in implementing any modification or
adjustment, to only make an adjustment that would result in
lowering the amounts in 10). States that this does not limit
DHCS' authority to make an adjustment that does not impact the
amount in 10).
12)Establishes the Health and Human Services Fund (fund) in the
State Treasury, and requires all revenues, less refunds,
derived from the MCO tax to be deposited to the credit of the
fund. Requires interest and dividends to be retained in the
fund. Requires a continuous appropriation, without regard to
fiscal year, for purposes of funding the nonfederal share of
Medi-Cal managed care rates for health care services furnished
to children, adults, seniors and persons with disabilities,
and persons dually eligible for Medi-Cal and Medicare.
13)Requires DHCS to provide an annual report to all health plans
accounting for the funds deposited in and expended from the
fund in a time and manner as deemed appropriate by the
director. Requires the report to identify the MCO tax imposed
on each health plan, and to provide an itemized accounting of
expenditures.
14)Permits DHCS to implement this bill by means of provider
bulletins, all-plan letters, or other similar instructions,
without taking regulatory action. Requires DHCS to notify the
Joint Legislative Budget Committee and 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 approval from CMS has been
SBX2 15 (Hernandez) Page 6 of ?
obtained, and also in the event of a modification or
adjustment.
15)Makes the MCO tax provisions operative on July 1, 2016 and
inoperative on July 1, 2019. Repeals the MCO provisions on
June 30, 2020. Requires, notwithstanding this provision, the
MCO tax and any applicable interest and penalties imposed
under this bill to continue to be due and payable until the
tax and any applicable interest and penalties are fully paid.
16)Excludes the income of a health plan subject to the MCO tax,
as defined, for Corporation Tax purposes. Specifically, this
bill excludes the health plan's income properly accrued with
respect to enrollment or services occurring between July 1,
2016 and June 30, 2019. To be eligible for the exclusion, the
revenue must be associated with the plan's operation, and
subject to current requirements for the plan to report to
DMHC, as specified, including:
a) Premiums (commercial);
b) Co-payments, COB, Subrogation;
c) Medicaid;
d) Point-of-Service premiums;
e) Risk pool revenue;
f) Capitation payments;
g) Medicare;
h) Fee-for-service;
i) Interest, and,
j) Aggregate write-ins for other revenues,
including capital gains and other investment income.
17)Excludes health plans whose entire income is excluded by the
bill from the $800 minimum franchise tax.
18)Requires DMHC to provide specified information to FTB
regarding each plan subject to the MCO tax by December 1,
2016, and annually thereafter. Allows FTB to prescribe rules,
guidelines, or procedures to implement the bill, which are
exempt from the Administrative Procedures Act.
19)States the intent of the Legislature that FTB Legal Ruling
2006-01 apply to apportionment factors attributable to income
excluded by the bill.
SBX2 15 (Hernandez) Page 7 of ?
20)Sets a GPT rate of zero on premiums received for the
provision of health insurance, as defined. Limits the zero
rate only to insurers that provide health insurance that has a
corporate affiliate that is a health plan, meaning the insurer
is directly or indirectly, controlled by, under common control
with, or controls a health plan, and, that is:
a) Licensed by DMHC, or who contracts with DHCS
to provide Medi-Cal services,
b) Had at least one enrollee enrolled in the
health plan in the base year, not including Medicare
plan enrollees, individuals who receive health care
services under subcontract with another plan, or
enrollees under the Federal Employees Health Benefits
Act, and,
c) Subject to the MCO tax.
21)Directs the Commissioner not to consider the zero GPT rate as
part of any determination to impose or enforce a retaliatory
insurance tax.
22)Requires the provisions of this bill to cease to be operative
for each taxable year beginning on or after the date the DHCS
director, in consultation with the Director of Finance,
determines the taxes have not met the intent for purposes of
providing funding for health care and prevention or the state
does not have federal approval necessary for receipt of
federal financial participation; or on or after the effective
date of a final judicial determination made by any court of
appellate jurisdiction that the provisions of this bill cannot
be implemented. Requires the director to post notification to
this effect.
23)Provides that this bill's changes to the GPT and Corporation
Tax become effective and operative on the latter of July 1,
2016, or the effective date certified in writing by the DHCS
director of federal approval of the MCO tax. The director
must post certification of federal approval on DHCS's website,
and send notice to the Secretary of State, Secretary of the
Senate, the Chief Clerk of the Assembly, Legislative Counsel,
the State Board of Equalization, CDI, and FTB's Executive
Officer.
24)Renders the tax provisions in effect until December 1, 2019,
and repeals them on June 30, 2020.
SBX2 15 (Hernandez) Page 8 of ?
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)Author's statement. According to the author, this bill would
enact the Governor's most recent proposed tax on MCOs in
response to federal requirements to revise California's
existing MCO tax structure and allocates the funding directly
to Med-Cal managed care. The revenue generated by enacting
this bill will help provide care for the most underserved and
neediest communities in California, encourage California's
continued successful implementation of the Affordable Care
Act, and minimize the need for reductions to the program. The
author includes the following statement from DHCS.
"The Administration is seeking to continue an assessment on
managed care organizations in California to support critical
services in the Medi-Cal program. There have been several of
these financing structures dating back to the early 2000's -
and they have allowed California to support care for
low-income Californians and providers by maximizing our state
general fund. With the recent federal requirements,
California has worked to ensure this new financing structure
is accompanied with changes in California's tax structure in
recognition of the impact to the commercial market and
affordability of coverage more broadly. This set of tax
changes will ensure that Medi-Cal continues to support care
for 13 million Californians and draw down necessary federal
dollars, especially given California's economic history with
recessions and volatile general fund. Lastly, the
Administration recognizes the complexity of this tax reform
package and has specifically limited it to 3 years so the
Legislature can evaluate within a specific timeframe as to
whether it should be continued or not."
2)MCO tax. California's existing MCO tax imposes a 3.9% tax on
the total revenue received by Medi-Cal health plans. This
existing tax does not apply to non-Medi-Cal health plans or a
health plan's commercial enrollment, and it holds the MCOs
harmless and generates funding to offset other GF costs.
According to the Senate Budget Subcommittee on Health and
Human Services, for 2015-16, the current MCO tax is projected
to generate $1.13 billion in non-federal funding for the
Medi-Cal program. The revenues are deposited into the
SBX2 15 (Hernandez) Page 9 of ?
Children's Health and Human Services Special Fund. Half of the
MCO tax revenues are used to draw down federal Medi-Cal funds
and then used to pay back Medi-Cal managed care plans in order
to "make them whole." The other half of these funds is used to
offset GF expenditures for Medi-Cal managed care rates for
children, seniors and persons with disabilities, and dual
eligibles. California's current MCO tax sunsets on July 1,
2016.
In a July 2014 letter to State Medicaid Directors, the federal
Centers for Medicare and Medicaid Services (CMS) indicates
that taxes structured like California's current MCO tax will
likely be considered health care-related taxes that would have
to meet Medicaid requirements. This means the tax must:
a) Be applied to all providers in a class
(meaning the tax must be applied to all MCOs and not
just MCOs providing services to Medi-Cal
beneficiaries, unless a waiver is obtained);
b) Applied at the same rate for all payers of the
tax (unless a federal waiver is obtained); and,
c) Cannot directly or indirectly guarantee that
providers receive their tax back.
The federal deadline for states to reform tax structures that
are out of compliance is the end of the states' legislative
session, which is August 31, 2016 for California.
The Administration's latest proposal was released on
Wednesday, January 13, 2016. The Administration refers to it
as a "tax reform" as the proposal does not count as taxable
income, income that is considered "qualified health care
service plan" income for purposes of calculating the amount of
corporation taxes. For insurers who are affiliated with
health plans subject to the MCO, the GPT rate is reduced to
zero. Instead those health plans will pay a new MCO tax on
that business.
The new MCO tax is based on the number of enrollees during a
base year period of October 1, 2014 through September 30,
2015. The taxing tiers are based on Medi-Cal enrollment,
non-Medi-Cal enrollment and a special tier for Kaiser (see the
chart below).
SBX2 15 (Hernandez) Page 10 of ?
----------------------------------------------------------------
|Medi-Cal |Cumulative |2016-17 |2017-18 |2018-19 |
| |Enrollment | | | |
|------------+------------+------------+------------+------------|
|Tier 1 |0-2 million |$40 |$42.50 |$45 |
|------------+------------+------------+------------+------------|
|Tier 2 |2-4 million |$19 |$20.25 |$21 |
|------------+------------+------------+------------+------------|
|Tier 3 |4 million + |$1 |$1 |$1 |
| | | | | |
----------------------------------------------------------------
-----------------------------------------------------------------
|Other | |2016-17 |2017-18 |2018-19 |
|------------+-------------+------------+------------+------------|
|Tier 1 |0-4 million |$7.50 |$8 |$8.50 |
|------------+-------------+------------+------------+------------|
|Tier 2 |4-8 million |$2.50 |$3 |$3.50 |
|------------+-------------+------------+------------+------------|
|Tier 3 |8 million + |$1 |$1 |$1 |
| | | | | |
-----------------------------------------------------------------
-----------------------------------------------------------------
|AHCSP | |2016-17 |2017-18 |2018-19 |
|(Kaiser) | | | | |
|------------+-------------+------------+------------+------------|
|Tier 1 |0-8 million |$2 |$2.25 |$2.50 |
| | | | | |
-----------------------------------------------------------------
Sutter, Sharp, and Western Health Advantage are excluded from
the tax because of the potential harm that would come to these
small regional nonprofit plans. Two border health plans
(Sistemas Medicos Nacionale and Medi Excel) are also exempt.
The bill permits DHCS to seek, as it deems necessary, a
request for waiver of the broad-based requirement, waiver of
the uniformity requirement, or both, or a request for waiver
of any other provision of federal law or regulation necessary
to implement this bill.
SBX2 15 (Hernandez) Page 11 of ?
The new MCO tax will generate, on net, approximately $1.3
billion in 2016-17. This is after the new tax levy is imposed
and accounting for the reduction/elimination of the GPT and
corporate and income taxes of plans and insurers. This $1.3
billion amount would grow approximately 5% a year based on the
assumption that this is how much GPT and corporate tax amounts
would have grown.
Prior versions of the Administration's MCO tax proposal had
the health plan industry paying an increased tax overall. For
example, earlier versions of the Administration's proposals
would have had a net impact on the industry of $669 million,
then another version was a $317 million impact. The version
released in September 2015 had a net industry tax increase of
over $100 million. Based on the Administration's modeling, the
net impact to the health insurance industry under the proposal
in this bill is an estimated savings of approximately $100
million. However, plans and insurers are affected differently
by the proposal.
1)MCO Tax History. In 2005, with the passage of AB 1762
(Committee on Budget), Chapter 230, Statutes of 2003,
California enacted a quality improvement fee (QIF) on Medi-Cal
managed care organizations, assessed on all premiums paid to
legal entities providing health coverage to Medi-Cal
enrollees. When the fee was established, 75% of the revenue
generated was matched with federal funds and used for payments
to MCOs and the remaining 25% was deposited into the GF. In
October of 2007, as part of the implementation of a new
managed care rate methodology, this arrangement changed and
50% of the revenue generated by the QIF was matched with
federal funds and used for payments to MCOs and the remaining
50% was retained for the GF. Changes in federal law resulted
in this fee expiring on October 1, 2009, because it no longer
complied with federal requirements.
A GPT was imposed with the passage of AB 1422 (Bass) Chapter
157, Statutes of 2009, on the total operating revenue of
Medi-Cal MCOs until July 1, 2011. The proceeds from the tax
were continuously appropriated to DHCS for purposes of the
Medi-Cal program in an amount equal to 38.41% of the proceeds
from the tax and to the Managed Risk Medical Insurance Board
(MRMIB) for purposes of the Healthy Families Program in an
amount equal to 61.59% of the proceeds from the tax. The GPT
SBX2 15 (Hernandez) Page 12 of ?
tax was extended by ABX1 21 (Blumenfield) Chapter 11, Statutes
of 2011, until July 1, 2012 and the sharing percentages for
DHCS and MRMIB were updated.
SB78 (Committee on Budget and Fiscal Review) Chapter 33,
Statutes of 2013, extended the sunset date on the GPT to June
30, 2013. After the Healthy Families transition to Medi-Cal
in 2013, the MRMIB portion was used to offset GF cost for
Medi-Cal program. Under SB 78, an MCO was levied at the rate
of 3.9375% on the gross receipts of any seller from the sale
of Medi-Cal health services. The tax was imposed from July 1,
2013 through July 1, 2016. The revenue derived from this tax
was continuously appropriated to DHCS to be used solely for
the purpose of funding managed care rates for health care
services for children, seniors, persons with disabilities and
dual eligibles in the Medi-Cal program that reflect the cost
of services and acuity of the population served.
MCO Tax Revenue by Year on a Cash Basis (in Millions)*
---------------------------------------------
|FY |Tax Type |Tax |Net |
| | |Revenue |GF** |
|----------+---------------+----------+-------|
|2010-11 |GPT/MCO |$156.4 |($57.2)|
| | | | |
|----------+---------------+----------+-------|
|2011-12 |GPT/MCO |$265.2 |($163.9|
| | | |) |
|----------+---------------+----------+-------|
|2012-13 |GPT/MCO |$11.5 |($5.1) |
|----------+---------------+----------+-------|
|2013-14 |GPT/MCO |$371.3 |($185.7|
| | | |) |
|----------+---------------+----------+-------|
|2013-14 |Current MCO |$856.3 |($305.7|
| | | |) |
|----------+---------------+----------+-------|
|2014-15 |GPT/MCO lag |$0 |($9.3) |
|----------+---------------+----------+-------|
|2014-15 |Current MCO |$1,407.4 |($807.4|
| | | |) |
|----------+---------------+----------+-------|
SBX2 15 (Hernandez) Page 13 of ?
|2015-16 |Current MCO |$1,744.8 |($1,005|
| | | |.2) |
|----------+---------------+----------+-------|
|2016-17 |Current MCO |$0 |($160.1|
| |lag | |) |
| | | | |
---------------------------------------------
*Includes the rate increase as result of the QIF during
2005-2009/10 and the increment attributable to QIF is
currently unknown.
**Net GF pre-2013 was used to fund MRMIB. Following the
transition of Healthy Families in 2013, the Net GF reverted to
DHCS GF. Any difference between Net GF and Tax Revenue is
used to fund the Medi-Cal share of the tax. Amounts above
displayed on a cash basis.
According to DHCS, for FY 2016-17, total revenues to the state
would be $2.38 billion. Of that $740 million is used to fund
the required capitation adjustments to Medi-Cal managed care
plans for the Medi-Cal cost of the tax, $371 million replaces
the reduced funding from the corporation and gross premiums
tax reforms, and $1.27 billion goes to fund Medi-Cal managed
care. The MCO tax liability for health plans breaks down as
follows: $2.11 billion based on Medi-Cal business and $267
based on other lines of business. DHCS estimates a reduction
in tax liability to the health plan industry of $104 million.
4)Litigation. There are three pending court cases related to
the GPT. All of these were brought forward by the same
plaintiff, Michael D. Myers. In the first action, Myers v.
Board of Equalization et. al, Mr. Meyers, a taxpayer, brought
suit to compel state officials to collect a GPT from two
health plans licensed by DMHC (Blue Shield and Anthem Blue
Cross) on the basis that they were "insurers." The Superior
Court of Los Angeles County sustained state officials' and the
health plans' demurrers without leave to amend. This means
that in the trial court's original decision, it ruled that Mr.
Myers did not have standing based on the constitutional
provision that a taxpayer has to pay a tax to fight the tax.
The taxpayer appealed. The Court of Appeal held that on first
impression, the health plans were insurers subject to GPT if
indemnifying against future contingent claims represented a
significant proportion of their business. The Court of Appeal
said that the constitutional provision did not apply to a
taxpayer suit like the one Mr. Myers filed and under the
SBX2 15 (Hernandez) Page 14 of ?
public interest exception, Mr. Myers can bring a lawsuit to
enforce the government's duty to collect taxes owed to the
state. After the opinion was decided by the Court of Appeal,
Blue Cross and Blue Shield filed a petition for review with
the California Supreme Court, which was denied in December
2015, sending the case back to the trial court. In October of
2015, Mr. Meyers filed two additional similar cases; one
against Kaiser Foundation Health Plan and the other against
Health Net of California.
5)Related legislation. ABX2 20 (Bonta) is substantially similar
to this bill and is currently pending in the Assembly Public
Health and Developmental Services Committee.
6)Prior legislation.
a) SB78 establishes the 3.9% rate, extends the
sunset on the tax established in ABX1 21 to June 30,
2013 and after Healthy Families transitioned to
Medi-Cal in 2013, the MRMIB share was used to offset
GF cost for the Medi-Cal program.
b) ABX1 21 extends the sunset on the tax
established through AB 1422 until July 1, 2012 and
updated the sharing percentages for DHCS and MRMIB.
c) AB 1422 imposes a gross premium tax on the
total operating revenue of Medi-Cal Managed Care plans
until July 1, 2011.
6)Neutral. Kaiser Permanente writes that after thoroughly
analyzing the latest model and the accompanying legislative
language, Kaiser is confident the proposal is a balanced
approach that will not negatively affect their purchasers,
while generating important revenue to support the Medi-Cal
program. Kaiser believes this new MCO tax proposal is one that
will have a positive overall impact on the health care
marketplace. The National Federation of Independent Business
(NFIB) has moved to a neutral position indicating that
concerns raised previously have been alleviated. NFIB writes
that these proposals reduce other industry taxes by an equal
SBX2 15 (Hernandez) Page 15 of ?
or greater amount, leaving no valid rationale for health plans
to raise rates due to this legislation, and NFIB understands
that these tax changes are necessary to obtain critical
federal matching funds for state healthcare costs.
7)Support. Blue Shield of California writes that this bill
achieves both goals of maintaining overall health care
affordability with providing sustainable funding for the
Medi-Cal program. The California Association of Health Plans
writes that this bill includes two tax relief provisions that
eliminate current taxes on health plans and insurers, and
coupled with other safeguards; protect the affordability of
health care coverage. CAHP states that the bill also offers
needed tax relief for employers and individuals purchasing
health coverage. Health Net writes in support that beginning
last year when the federal government issued guidance setting
forth what elements an acceptable MCO tax must contain, they
have worked with the Administration, the Legislature and
others to develop a replacement tax. Health Net states that
they have worked diligently and in good faith to ensure that
any proposal would not negatively affect efforts to ensure
affordability for California consumers who purchase coverage -
and this bill achieves this goal. The Local Health Plans of
California (LHPC) writes that DHCS has devised a new MCO tax
model that is fair and meets federal requirements. Under the
new MCO model, local plans will continue to pay the tax on
their Medi-Cal enrollment. But, like their commercial plan
counterparts, local plans will also begin paying a tax on
their commercial lines of business. Notably, because of their
non-profit status, the LHPC plans will not benefit from policy
reforms included in the package. Despite this, the public
plans still believe that the tax applied to their commercial
lines of business is absorbable and supportable - particularly
because they recognize it is a critical component to ensuring
the continuation of the MCO tax altogether. If this MCO tax
package fails, the Medi-Cal program will lose an estimated
$1.1 billion in critical funding. This loss can neither be
absorbed without crisis nor replaced with a source of funding
that is nearly as predictable and stable as the MCO tax.
Health Access writes in support, now that the federal
government has disallowed the earlier approaches, it is
appropriate to revamp the MCO tax so we do not leave these
federal dollars in Washington D.C. In the years when the state
budget was in deficit, hideous cuts to the Medi-Cal program
were enacted, some of which have not yet been restored. Going
SBX2 15 (Hernandez) Page 16 of ?
back to the dark days of denying Californians the care they
need by eliminating benefits, reducing eligibility or cutting
provider reimbursement is something we fervently wish to
avoid. California does not need a $1 billion hole in its
Medi-Cal budget. Molina Healthcare believes that this bill
has reduced the burden on commercial plans significantly,
demonstrating a strong dedication on the part of the
Administration and health plan community to work together to
keep this tax in place while protecting those who pay for
commercial health care coverage. The California Chamber of
Commerce writes that any replacement proposal would have to
raise enough revenue to offset the expiring tax and prevent a
reduction in Medi-Cal provider reimbursements, but would also
need to apply broadly to most, if not all, health care plans
without creating unreasonable disparities between them that
might generate pressure in the commercial health insurance
marketplace to increase costs for California purchasers. The
Chamber believes this proposal sufficiently meets these
important goals and states together these bills present a
comprehensive solution that is a win-win for California.
SUPPORT AND OPPOSITION :
Support: Anthem Blue Cross
Bay Area Council
Blue Shield of California
California Academy of Family Physicians
California Association of Health Facilities
California Association of Health Plans
California Chamber of Commerce
California Chapters of the American College of
Physicians Services
California Dental Association
California Medical Association
California Orthotic & Prosthetic Association
California Society of Anesthesiologists
California State Association of Counties
County Health Executives Association of California
Health Access California
Health Net
Hearing Healthcare Providers
LA Care Health Plan
Local Health Plans of California
Los Angeles Area Chamber of Commerce
Molina Health Care
SBX2 15 (Hernandez) Page 17 of ?
North Orange County Chamber
Nurse Family Partnership
Planned Parenthood Affiliates of California
Rancho Cordova Chamber of Commerce
Sutter Health Plan
Urban Counties of California
Western Center on Law and Poverty
Oppose: None received
-- END --