Medi-Cal: managed care organization tax.

(1) Existing law establishes the Medi-Cal program, administered by the State Department of Health Care Services, under which health care services are provided to qualified low-income persons. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Under existing law, one of the methods by which Medi-Cal services are provided is pursuant to contracts with various types of managed care plans. Existing law, until July 1, 2016, imposes a sales tax on sellers of Medi-Cal managed care plans. This bill, on July 1, 2016, and until July 1, 2019, would establish a new managed care organization provider tax, to be administered by the State Department of Health Care Services. The tax would be assessed by the department on licensed health care service plans, managed care plans contracted with the department to provide Medi-Cal services, and alternate health care service plans (AHCSP) , as defined, except as excluded by the bill. The bill would require the department to determine for each health plan using the base data source, as defined, specified enrollment information for the base year. By October 14, 2016, or within 10 business days following the date upon which the department receives approval for federal financial participation, whichever is later, the bill would require the department to commence notification to the health plans of the assessed tax amount due for each fiscal year and the dates on which the installment tax payments are due for each fiscal year. This bill would establish applicable taxing tiers and per enrollee amounts for the 2016–17, 2017–18, and 2018–19 fiscal years, respectively, for Medi-Cal enrollees, AHCSP enrollees, and all other enrollees, as defined. The bill would require the department to request approval from the federal Centers for Medicare and Medicaid Services as necessary to implement this bill. The bill would authorize the department to implement its provisions by means of provider bulletins, all-plan letters, or similar instructions, and to notify the Legislature of this action. This bill would establish the Health and Human Services Special Fund in the State Treasury, into which all revenues, less refunds, derived from the taxes imposed by the bill would be deposited into the State Treasury to the credit of the fund. Interest and dividends earned on moneys in the fund would be retained in the fund, as specified. The bill would continuously appropriate the moneys in the fund to the State Department of Health Care Services for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to specified persons, thereby making an appropriation. (2) Existing law imposes a gross premiums tax of 2.35% on all insurers, as defined, doing business in this state, as set forth in the California Constitution. For purposes of the Corporation Tax Law, existing law sets forth items specifically excluded from gross income. This bill would provide that the qualified health care service plan income, as defined, of health plans that are subject to the managed care organization provider tax would be excluded from the definition of gross income for purposes of taxation under the above provisions, as specified. The bill would reduce the gross premiums tax rate from 2.35% to 0% for those premiums received on or after July 1, 2016, and on or before June 30, 2019, for the provision of health insurance paid by health insurers providing health insurance that has a corporate affiliate, as defined, that is a health care service plan or health plan that is subject to the managed care organization provider tax imposed under the bill, as specified. The bill would require the State Department of Health Care Services to annually report specified information to the Franchise Tax Board with regard to these provisions. The bill would authorize the board to implement these provisions and would exempt the board from the administrative rulemaking process. Existing law provides that when the laws of another state or foreign county impose certain taxes or other amounts on California insurers, or their agents or representatives, the same taxes or other amounts are imposed in this state upon the insurers, or their agents or representatives, of the other state or country doing business in this state. The bill would prohibit the Insurance Commissioner from considering the reduction of the gross premiums tax rate under this bill in any determination to impose or enforce a tax under those retaliatory tax provisions. The bill would provide that these provisions become operative on the later of July 1, 2016, or on the date the Director of Health Care Services certifies in writing that federal approval necessary for receipt of federal financial participation has been obtained. (3) This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.