Dive Brief:
- California lawmakers appear likely to pass a new tax on healthcare plans that would replace an old tax set to expire this July because it fails to meet new federal rules on how states can levy such taxes, the Contra Costa Times reports.
- The new tax would generate $1.27 billion annually -- about $270 million more than the old tax -- and would contribute new funding, for the first time in 10 years, to care for the state's developmentally disabled.
- The proposed tax has recently garnered some bipartisan support as well as the endorsement of numerous leading insurers and health plans, though opponents argue the cost to insurers will be passed on to already cash-strapped Californians through higher premiums.
Dive Insight:
Much of the issue centers around California's distinction between insurers and health plans, which is currently facing legal challenges.
The proposed new tax would fall on nine more health plans than the old one because it wouldn't only apply to the 26 that accept Medi-Cal patients. Also, by targeting health plans and not just insurers, it grabs those that have avoided paying millions in other state taxes including one on health insurance premiums.
So far, Kaiser Permanente, Anthem Blue Cross, Blue Shield of California and Health Net -- which control nearly 70% of the state's health insurance market -- have not been subject to the state's 2.35% tax on health insurance premiums because of their designation as health plans. Even if the challenge against that is successful, the plans could be excused from paying taxes on their premiums for at least another three years, the Contra Costa Times reports.
As a result, some suggest it makes no sense to wait on the outcome of that case when the state can act now to pass a new tax plan.
"These new dollars could be a new and dedicated revenue source independent of the general fund," state Sen. Mark Leno said. "It's a rare opportunity. We'd be fools not to grab it."