California Expands Health Insurance Tax After Fight With Feds
By Melody Gutierrez
Gov. Jerry Brown signed legislation Tuesday to expand a tax on the health insurance industry so that the state doesn't lose $1 billion in federal funding.
Under the expansion, managed-care organizations -- such as Blue Shield, Cigna and Aetna -- will have to pay the state tax regardless of whether they serve Medi-Cal patients. Previously, only those serving Medi-Cal patients had to pay the tax and received federal matching funds to offset it. The newly added health plans will get a break on their corporate and insurance taxes so they don't raise patients' premiums.
The Obama administration told state officials in 2014 that the state's tax on managed-care organizations violated federal law because it singled out plans that accept Medi-Cal patients.
Brown called a special session last year and asked state lawmakers to create a better way to fund Medi-Cal, the state's health program for the poor.
A bipartisan vote was needed in the state Legislature to expand the tax, sending Democratic lawmakers to the bargaining table to get Republican support.
The deal approved by lawmakers Monday was spread across three bills, all of which Brown signed Tuesday. They include $307 million for community-based developmental services, which were deeply cut during the recession. The legislation also sets aside $123 million to restore rate freezes for skilled-nursing centers that are part of acute-care hospitals, $173 million to repay transportation loans and $240 million to pay down the state's retiree health care liability.
"Democrats and Republicans came together today to do what's best for California," Brown said in a statement Monday. "This legislation will save money and help millions of people with health care and disability services."
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