Proposed Conference Report No. 1 February 22, 2016

Amended in Assembly September 4, 2015

California Legislature—2015–16 Second Extraordinary Session

Senate Bill No. 2

Introduced by Senator Hernandez

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(Coauthors: Assembly Members Bonta and Levine)

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July 6, 2015

begin delete An act relating to human services financing. end delete begin insert An act to add Section 685.5 to the Insurance Code, to add and repeal Sections 12202.2 and 24330 of the Revenue and Taxation Code, and to add and repeal Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, relating to Medi-Cal, and making an appropriation therefor. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 2, as amended, Hernandez. begin delete Medi-Cal: developmental services: provider rate increases. end delete begin insert Medi-Cal: managed care organization tax. end insert

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(1) 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, until July 1, 2016, imposes a sales tax on sellers of Medi-Cal managed care plans.

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This bill, on July 1, 2016, and until July 1, 2019, would establish a new managed care organization provider tax, to be administered by the State Department of Health Care Services. The tax would be assessed by the department on licensed health care service plans, managed care plans contracted with the department to provide Medi-Cal services, and alternate health care service plans (AHCSP), as defined, except as excluded by the bill. The bill would require the department to determine for each health plan using the base data source, as defined, specified enrollment information for the base year. By October 14, 2016, or within 10 business days following the date upon which the department receives approval for federal financial participation, whichever is later, the bill would require the department to commence notification to the health plans of the assessed tax amount due for each fiscal year and the dates on which the installment tax payments are due for each fiscal year.

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This bill would establish applicable taxing tiers and per enrollee amounts for the 2016-17, 2017-18, and 2018-19 fiscal years, respectively, for Medi-Cal enrollees, AHCSP enrollees, and all other enrollees, as defined. The bill would require the department to request approval from the federal Centers for Medicare and Medicaid Services as necessary to implement this 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.

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This bill would establish the Health and Human Services Special Fund in the State Treasury, into which all revenues, less refunds, derived from the taxes imposed by the bill would be deposited into the State Treasury to the credit of the fund. Interest and dividends earned on moneys in the fund would be retained in the fund, as specified. The bill would continuously appropriate the moneys in the fund to the State Department of Health Care Services for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to specified persons, thereby making an appropriation.

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(2) Existing law imposes a gross premiums tax of 2.35% on all insurers, as defined, doing business in this state, as set forth in the California Constitution. For purposes of the Corporation Tax Law, existing law sets forth items specifically excluded from gross income.

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This bill would provide that the qualified health care service plan income, as defined, of health plans that are subject to the managed care organization provider tax would be excluded from the definition of gross income for purposes of taxation under the above provisions, as specified. The bill would reduce the gross premiums tax rate from 2.35% to 0% for those premiums received on or after July 1, 2016, and on or before June 30, 2019, for the provision of health insurance paid by health insurers providing health insurance that has a corporate affiliate, as defined, that is a health care service plan or health plan that is subject to the managed care organization provider tax imposed under the bill, as specified. The bill would require the State Department of Health Care Services to annually report specified information to the Franchise Tax Board with regard to these provisions. The bill would authorize the board to implement these provisions and would exempt the board from the administrative rulemaking process.

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Existing law provides that when the laws of another state or foreign county impose certain taxes or other amounts on California insurers, or their agents or representatives, the same taxes or other amounts are imposed in this state upon the insurers, or their agents or representatives, of the other state or country doing business in this state.

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The bill would prohibit the Insurance Commissioner from considering the reduction of the gross premiums tax rate under this bill in any determination to impose or enforce a tax under those retaliatory tax provisions.

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The bill would provide that these provisions become operative on the later of July 1, 2016, or on the date the Director of Health Care Services certifies in writing that federal approval necessary for receipt of federal financial participation has been obtained.

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(3) 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.

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Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services, and under which qualified, low-income individuals receive health care services. Existing law provides for the reimbursement of providers under the Medi-Cal program.

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The Lanterman Developmental Disabilities Services Act requires the State Department of Developmental Services to contract with regional centers to provide services and support to individuals with developmental disabilities. Under existing law, the regional centers purchase needed services for individuals with developmental disabilities through approved service providers or arrange for those services through other publicly funded agencies.

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The bill would declare the intent of the Legislature to enact statutory changes that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.

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Vote:  begin delete majority end delete begin insert ²⁄₃ end insert . Appropriation:  begin delete no end delete begin insert yes end insert . Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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It is the intent of the Legislature that Franchise
Tax Board Legal Ruling 2006-01 (April 28, 2006) regarding the
treatment of apportionment factors attributable to income exempt
from income tax shall apply to apportionment factors attributable
to the income of qualified health care service plans excluded by
Section 24330 of the Revenue and Taxation Code, as added by
Section 4 of this act.

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begin insert SEC. 2. end insert   

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begin insert Section 685.5 is added to the end insert begin insert Insurance Code end insert begin insert , to read: end insert

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begin insert 685.5. end insert   

The reduction in the gross premiums tax rate made by
Section 12202.2 of the Revenue and Taxation Code shall not be
considered in any determination by the Insurance Commissioner
to impose or enforce a tax under the retaliatory tax provisions of
Sections 685 to 685.4, inclusive, and reported pursuant to Sections
12281, 12287, 12288, and 12289 of the Revenue and Taxation
Code.

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begin insert SEC. 3. end insert   

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begin insert Section 12202.2 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

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begin insert 12202.2. end insert   

(a) Notwithstanding the rate specified by Section
12202, the gross premiums tax rate for premiums received for the
provision of health insurance, as defined in subdivision (b) of
Section 106 of the Insurance Code, paid by an insurer described
in this subdivision shall be 0 percent for any of those premiums
received on or after July 1, 2016, and on or before June 30, 2019.
Only an insurer that provides health insurance that has a corporate
affiliate that is a “health care service plan” or “health plan,”
defined as a health care service plan that meets all of the following
requirements, shall be subject to the rate change provided in this
section:

(1) Is licensed by the Department of Managed Health Care or
is a managed care plan contracted with the State Department of
Health Care Services to provide Medi-Cal services.

(2) Had at least one enrollee enrolled in the health plan in the
base year, as defined in subdivision (e) of Section 14199.51 of the
Welfare and Institutions Code, not including individuals who are
enrolled in a Medicare plan, who receive health care services
through a health plan pursuant to a subcontract from another
health plan, or who are enrollees through the Federal Employees
Health Benefits Act of 1959 (Public Law 86-382).

(3) Is subject to the tax imposed by Section 14199.54 of the
Welfare and Institutions Code.

(b) For purposes of this section, an “insurer that has a corporate
affiliate that is a health care service plan or health plan” means
an insurer that is, directly or indirectly, controlled by, under
common control with, or controls a health care service plan.

(c) This section shall remain in effect only until June 30, 2019,
and as of June 30, 2020, is repealed.

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begin insert SEC. 4. end insert   

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begin insert Section 24330 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

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begin insert 24330. end insert   

(a) Gross income shall not include the qualified health
care service plan income of a qualified health care service plan
properly accrued with respect to enrollment or services that occur
on or after July 1, 2016, and on or before June 30, 2019.

(b) For purposes of this section, the following definitions shall
apply:

(1) “Qualified health care service plan” means a health care
service plan, as defined in subdivision (k) of Section 14199.51 of
the Welfare and Institutions Code, that is subject to the tax imposed
under Section 14199.54 of the Welfare and Institutions Code.

(2) “Qualified health care service plan income” means the
revenue listed in subparagraphs (A) to (J), inclusive, that is
associated with the operation of a qualified health care service
plan and that is required to be reported to the Department of
Managed Health Care pursuant to the Instructions for filing
Financial Statements and Section 1384 of the Health and Safety
Code and the regulations adopted thereunder.

(A) Premiums (commercial).

(B) Copayments, COB, subrogation.

(C) Title XIX Medicaid.

(D) Point-of-service premiums.

(E) Risk pool revenue.

(F) Capitation payments.

(G) Title XVIII Medicare.

(H) Fee-for-service.

(I) Interest.

(J) Aggregate write-ins for other revenues, including capital
gains and other investment income.

(c) (1) No later than December 1, 2016, and annually thereafter,
the State Department of Health Care Services shall provide to the
Franchise Tax Board information regarding every health care
service plan that is subject to the tax imposed under Section
14199.54 of the Welfare and Institutions Code. The information
shall include the corporate name, address, and calendar period
for which each health care service plan is subject to the tax
imposed under Section 14199.54 of the Welfare and Institutions
Code, and, if applicable, the owner or owners of those health care
service plans.

(2) A qualified health care service plan with no income other
than qualified health care service plan income that is excluded
from gross income pursuant to this section for a taxable year shall
be exempt from the minimum franchise tax imposed under Chapter
2 (commencing with Section 23101) for that taxable year.

(d) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section. Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code does not
apply to any rule, guideline, or procedure prescribed by the
Franchise Tax Board pursuant to this section.

(e) This section shall remain in effect only until December 1,
2019, and as of June 30, 2020, is repealed.

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begin insert SEC. 5. end insert   

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begin insert Article 6.7 (commencing with Section 14199.50) is
added to Chapter 7 of Part 3 of Division 9 of the end insert begin insert Welfare and
Institutions Code end insert begin insert , to read: end insert

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Article begin insert 6.7. end insert   Managed Care Organization Provider Tax

 

begin insert 14199.50. end insert   

It is the intent of the Legislature that the department
implement a managed care organization provider tax effective
July 1, 2016, to provide ongoing funding for health care and
prevention, minimize to the extent possible any need for new
reductions to the program, and meet all of the following goals:

(a) 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.

(b) Comply with federal Medicaid requirements applicable to
permissible health care-related taxes, including, but not limited
to, Section 433.68 of Title 42 of the Code of Federal Regulations.

begin insert 14199.51. end insert   

The following definitions shall apply for the purposes
of this article:

(a) “Alternate Health Care Service Plan” or “AHCSP” means
a nonprofit health care service 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 region in which it is
licensed.

(b) “AHCSP enrollee” means an individual enrolled in an
AHCSP, as defined in subdivision (a), who is not a Medi-Cal
beneficiary.

(c) “AHCSP enrollee tax amount” means the amount of tax
assessed per countable enrollee within an AHCSP taxing tier.

(d) “AHCSP taxing tier” means a range of cumulative
enrollment of countable AHCSP enrollees for the base year.

(e) “Base year” means the 12-month period of October 1, 2014,
through September 30, 2015.

(f) “Base data source” means the quarterly financial statement
filings submitted by health plans to the Department of Managed
Health Care retrieved by the department as of January 1, 2016,
and supplemented by, as necessary, Medi-Cal enrollment data for
the base year as maintained by the department and retrieved as
of January 1, 2016.

(g) “Countable enrollee” means an individual enrolled in a
health plan, as defined in subdivision (k), 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 in subdivision (r), or an individual
enrolled in a health plan pursuant to the Federal Employees Health
Benefits Act of 1959 (Public law 86-382) to the extent the
imposition of the tax under this article is preempted pursuant to
Section 8909(f) of Title 5 of the United States Code.

(h) “Department” means the State Department of Health Care
Services.

(i) “Director” means the Director of Health Care Services.

(j) “Excluded plan” means any of the following:

(1) A health plan licensed pursuant to Section 1351.2 of the
Health and Safety Code.

(2) A health plan that is owned and operated by a 501(c)(3)
hospital or health system or multiple 501(c)(3) hospitals or health
systems if that health plan has both a substantial amount of its
enrollment in and is headquartered in either the County of
Sacramento or San Diego.

(k) “Health care service plan” or “health plan” means a health
care service plan, other than a plan that provides only specialized
or discount services, that is 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.

(l) “Medi-Cal enrollee” means an individual enrolled in a health
plan, as defined in subdivision (k), who is a Medi-Cal beneficiary
for whom the department directly pays the health plan a capitated
payment.

(m) “Medi-Cal per enrollee tax amount” means the amount of
tax assessed per countable Medi-Cal enrollee within a Medi-Cal
taxing tier.

(n) “Medi-Cal taxing tier” means a range of cumulative
enrollment of countable Medi-Cal enrollees for the base year.

(o) “Other enrollee” means an individual enrolled in a health
plan, as defined in subdivision (k), who is not a Medi-Cal
beneficiary or an AHCSP enrollee.

(p) “Other per enrollee tax amount” means the amount of tax
assessed per countable other enrollee within another taxing tier.

(q) “Other taxing tier” means a range of cumulative enrollment
of countable other enrollees for the base year.

(r) “Plan-to-plan enrollee” means an individual who receives
his or her health care services through a health plan pursuant to
a subcontract from another health plan.

begin insert 14199.52. end insert   

(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 Health and Human Services Special Fund.

(c) Notwithstanding Section 16305.7 of the Government Code,
any interest and dividends earned on moneys in the Health and
Human Services Special Fund shall be retained in the fund and
used solely for the purpose specified in subdivision (d).

(d) Notwithstanding Section 13340 of the Government Code,
the funds deposited in the Health and Human Services Special
Fund pursuant to this article shall be continuously appropriated,
without regard to fiscal year, to the department 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.

(e) The department shall provide an annual report to all health
plans accounting for the funds deposited in and expended from
the Health and Human Services Special Fund, in a time and
manner as deemed appropriate by the director. The report shall
identify the taxes imposed on each health plan pursuant to this
article, and shall provide an itemized accounting of expenditures
from the fund.

begin insert 14199.53. end insert   

(a) The department shall determine for each health
plan using the base data source all of the following:

(1) Total cumulative enrollment for the base year.

(2) Total Medicare cumulative enrollment for the base year.

(3) Total Medi-Cal cumulative enrollment for the base year.

(4) Total plan-to-plan cumulative enrollment for the base year.

(5) Total cumulative enrollment through the Federal Employees
Health Benefits Act of 1959 (Public Law 86-382) for the base year.

(6) Total other cumulative enrollment for the base year that is
not otherwise counted in paragraphs (2) to (5), inclusive.

(b) Notwithstanding any provision in this article, the director
may correct any identified material or significant errors in the
data, including, but not limited to, the overall cumulative
enrollment, Medicare cumulative enrollment, Medi-Cal cumulative
enrollment, cumulative enrollment through the Federal Employees
Health Benefits Act of 1959 (Public Law 86-382), and other
cumulative enrollment. The director’s determination whether to
exercise his or her discretion under this section and any
determination made by the director under this section shall not be
subject to judicial review, except that a health plan may bring a
writ of mandate under Section 1085 of the Code of Civil Procedure
to rectify an abuse of discretion by the department in correcting
that health plan’s data when that correction results in a greater
tax amount for that health plan pursuant to Section 14199.55.

begin insert 14199.54. end insert   

(a) A managed care organization provider tax shall
be imposed on each health plan that is not an excluded plan. The
tax shall be imposed for the following fiscal years:

(1) 2016-17 fiscal year.

(2) 2017-18 fiscal year.

(3) 2018-19 fiscal year.

(b) The department shall compute the annual tax for each health
plan subject to the tax during each applicable state fiscal year
pursuant to Section 14199.55.

(c) The department shall collect the annual tax for each health
plan in four installments and shall determine the amount due for
each installment in the state fiscal year by dividing the annual tax
for that state fiscal year by four.

(d) The department shall not collect the tax imposed pursuant
to this article until the department receives approval from the
federal Centers for Medicare and Medicaid Services that this tax
is a permissible health care-related tax in accordance with Section
433.68 of Title 42 of the Code of Federal Regulations and is
eligible for federal financial participation. On October 1, 2016,
or the date the department receives that federal approval from the
federal Centers for Medicare and Medicaid Services, whichever
is later, the following activities shall commence:

(1) The director shall certify in writing that federal approval
has been received, and within five business days, the department
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) By October 14, 2016, or within 10 business days following
receipt of the notice of federal approval, whichever is later, the
department shall send a notice to each health plan subject to the
tax, which shall contain the following information:

(A) The annual tax due for each fiscal year.

(B) The dates on which the four installment tax payments are
due for each fiscal year.

(3) A health plan shall pay the annual tax in installments as
calculated pursuant to Section 14199.55, based on a schedule
developed by the department. The department shall establish the
date that each tax payment is due, provided that the first tax
payment shall be due no earlier than 20 days following the date
the department sends the notice pursuant to paragraph (2), and
the tax payments shall be paid at least one month apart, but no
more than one quarter apart.

(4) A health plan shall pay the 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.

(e) The tax assessed pursuant to this article shall be paid by
each health plan subject to the tax to the department for deposit
in the Health and Human Services Special Fund created pursuant
to Section 14199.52.

(f) (1) Interest shall be assessed on an applicable health plan
for any amount of the 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 tax payment
was due and shall be deposited in the Health and Human Services
Special Fund created pursuant to Section 14199.52.

(2) If a tax payment is more than 60 days overdue, a penalty
equal to the total accrued interest charge described in paragraph
(1) shall also be assessed on the applicable health plan and due
for each month for which the tax payment is not received after 60
days.

(g) (1) Subject to paragraph (2), the director may waive a
portion or all of either the interest or penalties, or both, 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 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 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 the delivery
of services to Medi-Cal beneficiaries.

(h) 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 under this article from
a health plan to another health plan or similar entity, and that
occurs at any time during which this article is operative, the
resultant health plan or similar entity shall be responsible for
paying the full tax amount as provided in this article that would
have been the responsibility of the health plan to which that full
tax amount was assessed, upon the effective date of any such
transaction. If a merger, acquisition, establishment, or any other
similar transaction results in the transfer of health plan
responsibility for only some of a health plan’s countable enrollees
under this article but not all countable enrollees, the full tax
amount as provided in this article shall remain the responsibility
of that health plan to which that full tax amount was assessed.

begin insert 14199.55. end insert   

(a) For each fiscal year, the Medi-Cal taxing tiers
shall be as follows:

(1) Medi-Cal taxing tier I shall consist of all countable Medi-Cal
enrollees in a health plan from zero to 2,000,000, inclusive.

(2) Medi-Cal taxing tier II shall consist of all countable
Medi-Cal enrollees in a health plan from 2,000,001 to 4,000,000,
inclusive.

(3) Medi-Cal taxing tier III shall consist of all countable
Medi-Cal enrollees in a health plan greater than 4,000,000.

(b) For each fiscal year, the other taxing tiers shall be as
follows:

(1) Other taxing tier I shall consist of all countable other
enrollees in a health plan from zero to 4,000,000, inclusive.

(2) Other taxing tier II shall consist of all countable other
enrollees in a health plan from 4,000,001 to 8,000,000, inclusive.

(3) Other taxing tier III shall consist of all countable other
enrollees in a health plan greater than 8,000,000.

(c) For each fiscal year, the AHCSP taxing tier shall consist of
all countable AHCSP enrollees in a health plan from zero to
8,000,000, inclusive.

(d) For the 2016-17 fiscal year, the Medi-Cal per enrollee tax
amount for each Medi-Cal taxing tier shall be as follows:

(1) The Medi-Cal per enrollee tax for Medi-Cal taxing tier I
shall be forty dollars ($40).

(2) The Medi-Cal per enrollee tax for Medi-Cal taxing tier II
shall be nineteen dollars ($19).

(3) The Medi-Cal per enrollee tax for Medi-Cal taxing tier III
shall be one dollar ($1).

(e) For the 2016-17 fiscal year, the other per enrollee tax
amount for each other taxing tier shall be as follows:

(1) The other per enrollee tax for the other taxing tier I shall
be seven dollars and fifty cents ($7.50).

(2) The other per enrollee tax for the other taxing tier II shall
be two dollars and fifty cents ($2.50).

(3) The other per enrollee tax for the other taxing tier III shall
be one dollar ($1).

(f) For the 2016-17 fiscal year, the AHCSP per enrollee tax for
the AHCSP taxing tier shall be two dollars ($2).

(g) For the 2017-18 fiscal year, the Medi-Cal per enrollee tax
amount for each Medi-Cal taxing tier shall be as follows:

(1) The Medi-Cal per enrollee tax for Medi-Cal taxing tier I
shall be forty-two dollars and fifty cents ($42.50).

(2) The Medi-Cal per enrollee tax for Medi-Cal taxing tier II
shall be twenty dollars and twenty-five cents ($20.25).

(3) The Medi-Cal per enrollee tax for Medi-Cal taxing tier III
shall be one dollar ($1).

(h) For the 2017-18 fiscal year, the other per enrollee tax
amount for each other taxing tier shall be as follows:

(1) The other per enrollee tax for the other taxing tier I shall
be eight dollars ($8).

(2) The other per enrollee tax for the other taxing tier II shall
be three dollars ($3).

(3) The other per enrollee tax for the other taxing tier III shall
be one dollar ($1).

(i) For the 2017-18 fiscal year, the AHCSP per enrollee tax for
the AHCSP taxing tier shall be two dollars and twenty-five cents
($2.25).

(j) For the 2018-19 fiscal year, the Medi-Cal per enrollee tax
amount for each Medi-Cal taxing tier shall be as follows:

(1) The Medi-Cal per enrollee tax for Medi-Cal taxing tier I
shall be forty-five dollars ($45).

(2) The Medi-Cal per enrollee tax for Medi-Cal taxing tier II
shall be twenty-one dollars ($21).

(3) The Medi-Cal per enrollee tax for Medi-Cal taxing tier III
shall be one dollar ($1).

(k) For the 2018-19 fiscal year, the other per enrollee tax
amount for each other taxing tier shall be as follows:

(1) The other per enrollee tax for the other taxing tier I shall
be eight dollars and fifty cents ($8.50).

(2) The other per enrollee tax for the other taxing tier II shall
be three dollars and fifty cents ($3.50).

(3) The other per enrollee tax for the other taxing tier III shall
be one dollar ($1).

(l) For the 2018-19 fiscal year, the AHCSP per enrollee tax for
the AHCSP taxing tier shall be two dollars and fifty cents ($2.50).

(m) (1) The department may modify or make adjustments to
any methodology, tax amount, taxing tier, or other similar
provision specified in this article to the extent necessary to meet
the requirements of federal law or regulations, 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 article. Any modification or adjustment
that would result in more than the following aggregate tax amounts
for the other enrollees and AHCSP enrollees, combined, shall be
considered to conflict with the purposes of this article:

(A) Two hundred sixty-six million dollars ($266,000,000) in the
2016-17 fiscal year.

(B) Two hundred eighty-seven million dollars ($287,000,000)
in the 2017-18 fiscal year.

(C) Three hundred nine million dollars ($309,000,000) in the
2018-19 fiscal year.

(2) In implementing any modification or adjustment, the
department may only make an adjustment that would result in
lowering the amounts in subparagraph (A), (B), or (C) of
paragraph (1). Nothing in this subdivision shall limit the authority
of the department to make an adjustment that does not impact the
amounts in subparagraph (A), (B), or (C) of paragraph (1).

(3) If the department identifies that a modification or adjustment
may be necessary in accordance with paragraph (1), the
department shall consult with affected health plans, to the extent
practicable, to implement that modification or adjustment.

(4) In the event of a modification or adjustment made pursuant
to this subdivision, the department shall notify affected health
plans, the Joint Legislative Budget Committee, the Senate
Committees on Appropriations, Budget and Fiscal Review, and
Health, and the Assembly Committees on Appropriations, Budget,
and Health within 10 business days of that modification or
adjustment.

(n) The department shall request approval from the federal
Centers for Medicare and Medicaid Services as is necessary to
implement this article. In making that 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 Section 433.68(e)(1) and (2) 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.

(o) 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 instructions, without
taking 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.

begin insert 14199.56. end insert   

This article shall become operative on July 1, 2016,
and shall become inoperative on July 1, 2019. As of June 30, 2020,
this article is repealed. Notwithstanding this section, a tax and
any applicable interest and penalties imposed under this article
shall continue to be due and payable until the tax and any
applicable interest and penalties are fully paid.

end insert

begin insert

begin insert SEC. 6. end insert   

end insert begin insert

Section 685.5 of the Insurance Code, and Sections
12202.2 and 24330 of the Revenue and Taxation Code shall
become effective and operative on the later of July 1, 2016, or the
effective date, certified in writing by the Director of the Health
Care Services, of the federal approval necessary for receipt of
federal financial participation in conjunction with the tax assessed
pursuant to Article 6.7 (commencing with Section 14199.50) of
Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code. The Director of Health Care Services shall post the
certification of federal approval on the State Department of Health
Care Services’ 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, the Legislative Counsel, the State
Board of Equalization, the Department of Insurance, and the
Executive Officer of the Franchise Tax Board.

end insert

begin insert

begin insert SEC. 7. end insert   

end insert begin insert

Section 685.5 of the Insurance Code, and Sections
12202.2 and 24330 of the Revenue and Taxation Code, and Article
6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3
of Division 9 of the Welfare and Institutions Code shall cease to
be operative the first day of the state fiscal year beginning on or
after the date the Director of Health Care Services, in consultation
with the Director of Finance, determines that the taxes have not
met the intent as outlined in Section 14199.50 of the Welfare and
Institutions Code for the purposes of providing funding for health
care and prevention, or the state does not have the federal approval
necessary for receipt of federal financial participation in
conjunction with the tax assessed pursuant to Article 6.7
(commencing with Section 14199.50) of Chapter 7 of Part 3 of
Division 9 of the Welfare and Institutions Code. The Director of
Health Care Services shall post the determination on the State
Department of Health Care Services’ Internet Web site and send
a copy of the determination to the Secretary of State, the Secretary
of the Senate, the Chief Clerk of the Assembly, the Legislative
Counsel, the State Board of Equalization, the Department of
Insurance, and the Executive Officer of the Franchise Tax Board.

end insert

begin insert

begin insert SEC. 8. end insert   

end insert begin insert

Section 685.5 of the Insurance Code, Sections 12202.2
and 24330 of the Revenue and Taxation Code, and Article 6.7
(commencing with Section 14199.50) of Chapter 7 of Part 3 of
Division 9 of the Welfare and Institutions Code shall cease to be
operative the first day of the state fiscal year beginning on or after
the effective date of a final judicial determination made by any
court of appellate jurisdiction that Section 685.5 of the Insurance
Code, Section 12202.2 or 24330 of the Revenue and Taxation
Code, or the tax assessed pursuant to Article 6.7 (commencing
with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the
Welfare and Institutions Code, cannot be implemented. The
Director of Health Care Services shall post a notification of that
final judicial determination on the State Department of Health
Care Services’ Internet Web site and provide this notification to
the Secretary of State, the Secretary of the Senate, the Chief Clerk
of the Assembly, the Legislative Counsel, the State Board of
Equalization, the Department of Insurance, and the Executive
Officer of the Franchise Tax Board.

end insert

begin delete

SECTION 1.  

It is the intent of the Legislature to enact statutory
changes that would stabilize funding for the Medi-Cal program
and provide rate increases for providers of Medi-Cal and
developmental services.

end delete