Lawmakers to advance health-plan tax

February 23, 2016, 05:00 AM By Jonathan J. Cooper The
 

SACRAMENTO — A California legislative panel on Monday advanced a compromise plan to restructure taxes on health plans and increase funding for developmental disability services — the first legislative action in a monthslong effort to prevent a massive hole in the state health care budget.

The move came after influential groups on the right said they would not oppose the tax proposal, giving Republicans political cover to help Democrats reach the supermajority required to pass the legislation.
Still, only Democrats supported the tax plan negotiated by Gov. Jerry Brown in a joint Assembly-Senate committee Monday.

California has for years levied a tax on Medi-Cal managed care organizations, drawing down federal matching dollars to help pay for the state’s health insurance plan for the poor. But President Barack Obama’s administration said it would not renew the arrangement once it expires this summer unless California restructured its tax to apply more broadly, including to lucrative private insurance plans.
Allowing the tax to lapse would open a $1.1 billion hole in the budget for Medi-Cal, even as doctors warn that already low payments make it difficult for them to take on patients covered by the program.
Brown last year called a special session to resolve the issue but was unable to craft a plan that could clear the Legislature.

The Brown administration and insurers this month agreed to impose a new tax on insurance plans, allowing the state to continue collecting the federal matching dollars. The new tax would be offset by reductions in other levies on insurance plans. The industry as a whole is expected to pay about $100 million less in taxes, but each company would be affected differently.

The tax changes would need the Obama administration’s approval before taking effect.
Most insurers have publicly supported the measure or at least said they’re not opposed. The California Association of Health Plans said the agreement would secure funding for Medi-Cal while “protecting affordability” of insurance premiums.

Last week, the National Federation of Independent Business and the Howard Jarvis Taxpayers Association, two groups influential with Republicans, said they were not opposed.

“There is no concrete evidence that any costs that may result from the (tax plan) will be passed onto ratepayers,” the Howard Jarvis group wrote in a memo to lawmakers.

To win Republican votes, the administration agreed to devote nearly $300 million to services for people with developmental disabilities, whose care providers have struggled to manage years of stagnant wages. That spending plan, ABX2-1, cleared the committee unanimously.

But in a sign of how divided the GOP still is, Republicans withheld their support from the tax plan, SBX2-2. Some Republicans argue lawmakers should use the state’s budget surplus to beef up the Medi-Cal budget.
“We should all be encouraged with how far this proposal has come since last year, including restoring funding services for the most vulnerable in our society,” Fuller said in a statement. “I still believe we can invest in California’s priorities without this health care revenue plan.”