Dive Brief:
- A decades-old tax code has allowed Kaiser Permanente, Anthem Blue Cross, Blue Shield of California and Health Net to identify as health plans rather than insurers, allowing them to be regulated by California's Department of Managed Health Care instead of its Department of Insurance.
- A legal case is now questioning the difference between "health care service plans" and "insurance plans" as they have become more difficult to distinguish, the San Jose Mercury News reports.
- The plans note they do pay a corporation tax and a fee based on business volume. Critics argue that still saves them millions each year compared to their insurer competitors.
Dive Insight:
By identifying as health plans, Kaiser Permanente, Anthem Blue Cross, Blue Shield of California and Health Net are also not subject to the state's 2.35% tax on health insurance premiums. The four players control nearly 70% of the state's health insurance market.
If the plans lose the case, there will be both positive and negative implications for the state.
The highlight would be the approximately $10 billion the state would receive from the statutory limit of eight years' worth of back-taxes and the ongoing annual collections. In addition, it would level the playing field for all those participating in California's health insurance market, state Sen. Bill Monning, member of the Senate Health Committee, told the San Jose Mercury News.
However, the cost to the four plans would presumably be passed on to consumers via hikes in insurance premiums, and despite the state's interest in collecting those taxes, the governor's administration has so far supported the legal standing of the plans.