BILL ANALYSIS Ó
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PROPOSED CONFERENCE REPORT NO.
1 - February 22, 2016
SB 2
X2 (Hernandez)
As Amended September 4, 2015
2/3 vote
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|SENATE: | |(September 10, |ASSEMBLY: | |(September 9, |
| | |2015) | | |2015) |
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(vote not relevant) (vote not relevant)
SENATE CONFERENCE VOTE: 3-2 ASSEMBLY CONFERENCE VOTE: 3-2
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|Ayes:|Ed Hernandez, Leno, |Ayes:|Bonta, Bonilla, Santiago |
| |Mitchell | | |
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|Noes:|Anderson, Nielsen |Noes:|Gallagher, Patterson |
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Original Committee Reference: Not relevant
SUMMARY: Reforms the existing managed care organization (MCO)
provider tax that is only paid by Medi-Cal managed care plans
(MCPs) and replaces it with a tax that would be assessed on
health care service plans licensed by the Department of Managed
Health Care (DMHC), and/or managed care plans contracted with
the Department of Health Care Services (DHCS) to provide
services to Medi-Cal beneficiaries, unless exempted, from July
1, 2016 to July 1, 2019 Specifically, the conference committee
amendments:
1)Specify it is the intent of the Legislature that DHCS
implement an MCO provider tax, effective July 1, 2016, to
provide ongoing funding for health care and prevention, and
minimize 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
sales tax currently imposed on MCPs; and, b) comply with
federal Medicaid requirements, as specified.
2)Define various terms, including the following:
a) Alternate Health Care Service Plan (AHCSP) is a
nonprofit health care service plan with at least 4 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 geographic region in
which it is licensed;
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b) AHCSP enrollee is an individual enrolled in an AHCSP,
who is not a Medi-Cal beneficiary;
c) Base year means the 12-month period of October 1, 2014
through September 30, 2015;
d) Base data source means the quarterly financial statement
filings submitted by health plans to DMHC retrieved by DHCS
as of January 1, 2016, and supplemented by, as necessary,
Medi-Cal enrollment data for the base year as maintained by
DHCS and retrieved as of January 1, 2016:
e) Countable enrollee means an individual enrolled in a
health plan, during a month of the base year according to
the base data source. Excludes from this definition an
individual enrolled in a Medicare plan, a plan-to plan
enrollee, or an individual enrolled in a health plan
pursuant to the Federal Employees Health Benefits Act of
1959;
f) Exclude plan means a prepaid health plan operating under
the laws of Mexico or a health plan owned and operated by a
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;
g) Health care service plan or health plan is a health care
service plan, other than a plan that provides only
specialized or discount services, that is licensed by DMHC
under the Knox-Keene Health Care Service Plan Act of 1975
or a managed care plan contracted with DHCS to provide
Medi-Cal services;
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h) Medi-Cal enrollee is an individual enrolled in a health
plan who is a Medi-Cal beneficiary for whom DHCS directly
pays the health plan in a capitated payment;
i) Other enrollee means an individual enrolled in a health
plan who is not a Medi-Cal beneficiary or an AHCSP
enrollee; and,
j) 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.
aa) Impose a MCO provider tax on each health plan, unless
excluded, for the following fiscal years (FY): a) 2016-17;
b) 2017-18; and, 2018-19.
3)Specify the following Medi-Cal taxing tiers:
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|Enrollees |2016-17 |2017-18|2018-19|
| | | | |
|-------------------+--------+-------+-------|
| 0 to 2,000,000 | $40.00| $42.50| $45.00|
|-------------------+--------+-------+-------|
| 2,000,001 to | $19.00| $20.25| $21.00|
| 4,000,000 | | | |
|-------------------+--------+-------+-------|
| Over 4,000,000 | $1.00| $1.00| $1.00|
| | | | |
| | | | |
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4)Specify the following other taxing tiers:
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|Enrollees |2016-17 |2017-18|2018-19|
| | | | |
|-------------------+--------+-------+-------|
| 0 to 4,000,000 | $7.50| $8.00| $8.50|
|-------------------+--------+-------+-------|
| 4,000,001 to | $2.50| $3.00| $3.50|
| 8,000,000 | | | |
|-------------------+--------+-------+-------|
| Over 8,000,000 | $1.00| $1.00| $1.00|
| | | | |
| | | | |
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5)Establish the following taxing tier for AHCSP (Kaiser):
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|Enrollees | 2016-17|2017-18|2018-19|
| | | | |
|-------------------+--------+-------+-------|
| 0 to 8,000,000 | $2.00| $2.25| $2.50|
| | | | |
| | | | |
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6)Establish the Health and Human Services Special Fund (HHSS
Fund) where all revenues, less refunds derived from the taxes
specified in this bill, would be deposited to the credit of
the HHSS Fund. Requires that any interest and dividends
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earned on moneys to be retained in the HHSS Fund for 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.
7)Require DHCS to provide an annual report to all health plans
accounting for the funds deposited in and expended from the
HHSS Fund, as determined by the DHCS Director. Require the
report to identify the taxes imposed on each health plan and
provide an itemized accounting of expenditures from the HHSS
Fund.
8)Require DHCS to determine for each health plan 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 Federal Employees Health Benefits Act of 1959;
and, f) total cumulative enrollment for the base year that is
not otherwise counted in b) to e). Authorizes the DHCS
Director to correct any identified material or significant
errors in the data. Specifies that the DHCS Director's
determination on whether to exercise discretion and any
determination made by the DHCS Director is not subject to
judicial review, as specified. Authorizes a health plan to
bring a writ of mandate to rectify an abuse of discretion
relating to the data specified above.
9)Require DHCS to compute the annual tax for each health plan
subject to the tax, as specified.
10)Require DHCS to collect the annual tax in four installments
and to determine the amount due for each installment in the
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state FY by dividing the annual tax for that state FY by four.
11)Prohibit DHCS from collecting the tax until it has received
approval from the federal Centers for Medicare and Medicaid
Services (CMS) that the tax is a permissible health
care-related tax and is eligible for federal financial
participation (FFP).
12)Require, on October 1, 2016, or the date DHCS receives the
federal approval, whichever is later, the following to
commence:
a) The DHCS Director to certify in writing that the federal
approval was received and within five business days, the
DHCS to post the certification on its Internet Website and
send a copy of the certification to the Legislature and
Legislative Counsel;
b) By October 14, 2016 or within 10 business days following
receipt of the notice of federal approval, whichever is
later, DHCS to send a notice to each health plan subject to
the tax, to contain: i) the annual tax due for each FY;
and, ii) the dates on which the four installment tax
payments are due;
c) Requires a health plan to pay the annual tax in
installments, based on a schedule developed by DHCS.
Requires DHCS to establish the date that each tax payment
is due, provided that the first tax payment is due no
earlier than 20 days following the date the department
sends the notice specified in b) above, and the tax
payments to be paid at least one month apart, but no more
than one quarter apart;
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d) A health plan to pay the taxes that are due, in the
amounts and at times set forth in the notice, as specified.
The taxes assessed to be deposited in the HHSS Fund; and,
e) Interest accrues the day after the date the tax payment
is due. Interest will be assessed for any amount that is
not paid on the due date at a rate of 10% per annum.
Provides that if a tax payment is more than 60 days
overdue, a penalty shall be assessed for each month for
which tax payment is not received after 60 days.
Authorizes the DHCS Director to waive a portion or all of
the interest or penalties or both, if the DHCS Director
determines that the imposition of the full amount of the
tax pursuant to the timelines 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. Conditions a
waiver of the interest or penalties on the health plan's
agreement to make tax payments on an alternative schedule
that takes into account the financial situation of the
health plan and the potential impact on the delivery of
services to Medi-Cal beneficiaries.
13)Provide that 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, the resultant health plan shall be
responsible for paying the full tax amount upon the effective
date of such transaction. If a merger or acquisition results
in the transfer of health plan responsibility for only some of
a health plan's countable enrollees, the full tax amount shall
remain the responsibility of the health plan to which that
full tax amount was assessed.
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14)Authorize DHCS to modify or adjust the methodology, tax
amount, taxing tier or other similar provision to the extent
necessary to meet the requirements of federal law or
regulations, obtain federal approval, or to ensure FFP is
available, as specified. Specifies that any modification or
adjustment that would be higher than the following aggregate
amounts for the other enrollees and AHCSP enrollees, combined,
would be in conflict with this measure:
a) $266,000,000 in the 2016-17 FY;
b) $287,000,000 in the 2017-18 FY; and,
c) $309,000,000 in the 2018-19 FY.
15)Authorize DHCS to make an adjustment that would result in
lowering the amounts in 15) above. States that nothing would
limit the authority of DHCS to make an adjustment that does
not impact the amounts in 15) above.
16)Require, if DHCS identifies that a modification or adjustment
may be necessary under 15) above, to consult with affected
health plans, to the extent practicable, to implement that
modification or adjustment. Requires DHCS to notify affected
health plans, and the Legislature within 10 business days of
the modification or adjustment.
17)Require DHCS to request approval from CMS to implement this
bill. Authorize DHCS to request a waiver of the broad-based
and uniformity requirements, as specified.
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18)Authorize DHCS to implement the provisions of this bill
outside of the administrative rulemaking process and to
implement this measure pursuant to provider bulletins, all
plan letters, or other similar instructions. Require DHCS to
notify specified committees of the Legislature within 10
business days of such action.
19)Establish a the gross premiums tax (GPT) rate of 0% for
premiums received for the provision of health insurance on or
after July 1, 2016, and on or before June 30, 2019. Limits
the application of this GPT rate to premiums received by an
insurer that provides health insurance and has a corporate
affiliate, which is either a "health care service plan" or
"health plan" that meets the following requirements:
a) Is licensed by DMHC or is a MCP;
b) Has had at least one enrollee enrolled in the health
plan in the base year, as defined, 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, as specified; and,
c) Is subject to the MCO provider tax imposed by this bill.
20)Define an insurer that has a corporate affiliate as a health
care service plan or health plan as an "insurer that is,
directly or indirectly, controlled by, under common control
with, or controls a health care service plan".
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21)Prohibit the Insurance Commissioner from considering the
reduction of the GPT rate authorized by this bill in any
determination to impose or enforce a tax under the relevant
retaliatory tax provisions of the Insurance Code and the
Revenue and Taxation Code.
22)Exclude from the definition of "gross income," under the
Corporation Tax (CT) Law, the qualified health care service
plan income of a health plan that is subject to the MCO
provider tax. Specifies that the income must properly accrue
with respect to enrollment or services that occur on or after
July 1, 2016, and on or before June 30, 2019. Defines a
"qualified health care service plan" as a health care service
plan that: a) is licensed by DMHC or is a MCP, and, b)
subject to the MCO provider tax imposed by this bill.
23)Define "qualified health care service plan income" as any of
the following revenue associated with the operation of a
qualified health care service plan and required to be reported
to the DMHC, including the following:
a) Premiums (commercial);
b) Copayments, coordination of benefits, and subrogation;
c) Title XIX Medicaid;
d) Point-of-Service Premiums;
e) Risk pool revenue;
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f) Capitation payments;
g) Title XVIII Medicare;
h) Fee-for-service (FFS);
i) Interest; and,
j) Aggregate write-ins for other revenues, including
capital gains and other investment income.
24)Require DHCS to submit to the Franchise Tax Board (FTB), no
later than December 1, 2016, information regarding every
health care service plan that is subject to the tax, as
specified. Require the information to include the corporate
name, address, and calendar period for which each health care
service plan is subject to the MCO provider tax.
25)Exempt from the minimum franchise tax, a qualified health
care service plan with no income other than the excluded
qualified health care service plan income.
26)Authorize the FTB to prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes
of the provisions relating to the gross income exclusion for
health care service plans. Exempt the FTB from the
administrative rulemaking process.
27)Provide Legislative intent that the FTB Legal Ruling 2006-01
of April 28, 2006 regarding the treatment of apportionment
factors attributable to income exempt from taxation shall
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apply to the apportionment factors attributable to the income
of qualified health care service plans excluded by this bill.
28)Sunset this measure on July 1, 2019, and as of June 30, 2020,
is repealed. State that any tax and applicable interest and
penalties imposed under this bill continues to be due and
payable until the tax and any applicable interest and
penalties are fully paid.
29)Provide that this bill's reduction in the GPT rate and gross
income exclusion shall become operative on the later of July
1, 2016, or the effective date of the federal approval
necessary for receipt of federal financial participation in
conjunction with the new MCO provider tax.
30)Provide that this bill's tax law modifications shall cease to
operate on the first day of the first FY beginning on or
after:
a) The date the Director of DHCS, in consultation with the
Director of the Department of Finance, determines that the
taxes have not met their goal of providing funding for
health care and prevention, or the state does not have the
federal approval necessary for receipt of FFP; or,
b) The effective date of a final judicial determination
made by a court of appellate jurisdiction that any of the
tax law modifications cannot be implemented.
SUPPORT (Verified 02/25/2016 12:49 p.m.)
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Anthem Blue Cross
Autism Health Insurance Project
Barton Memorial Hospital
Bay Area Council
Bear Valley Community Healthcare District
Blue Shield of California
Brea Chamber
California Academy of Family Physicians
California Association of Health Facilities
California Association of Health Plans
California Chamber of Commerce
California Chapter of the American College of Physicians
Services
California Dental Association
California Hospital Association
California Medical Association
California Orthotics and Prosthetics Association
California Person Centered Advocacy Partnership
California Society of Anesthesiologists
California State Association of Counties
Catalina Island Medical Center
Center for Autism and Related Disorders
Coalinga Regional Medical Center
Community Medical Centers
County Health Executives Association of California
Dignity Health
District Hospital Leadership Forum
Eastern Plumas Health Care
East Bay Developmental Disabilities Legislative Coalition
Health Access California
Health Net
Hearing Healthcare Providers California
Infant Development Association of California
Jewish Home of San Francisco
Kaweah Delta Health Care District
Lanterman Coalition
LA Care Health Plan
Local Health Plans of California
Los Angeles Area Chamber of Commerce
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Mayers Memorial Hospital District
Mee Memorial Hospital
Modoc Medical Center
Molina Healthcare of California
Motion Picture and Television Fund Hospital
North Orange County Chamber
Nurse Family Partnership
Orchard Hospital
Palomar Health
Planned Parenthood Affiliates of California
Rancho Cordova Chamber of Commerce
Regional Center of the East Bay
San Bernardino Mountains Community Hospital District
Seneca Healthcare District
Sharp HealthCare
Sonora Regional Medical Center
Southwest California Legislative Council
Special Needs Network, Inc.
State Council on Developmental Disabilities
Sutter Health
Tahoe Forest Hospital District
Urban Counties of California
Western Center on Law and Poverty
OPPOSITION (Verified 02/25/2016 12:49 p.m.)
None on file.
Analysis Prepared by:
Rosielyn Pulmano / P.H. & D.S. / (916) 319-2097
FN:
0002624
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