SBX2 2: Medi-Cal: managed care organization tax.
- Session Year: 2015-2016
- House: Senate
- Latest Version Date: 2016-03-01
(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 201617, 201718, and 201819 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 2/3 of the membership of each house of the Legislature.
(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 201617, 201718, and 201819 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 2/3 of the membership of each house of the Legislature.
(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 201617, 201718, and 201819 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 2/3 of the membership of each house of the Legislature.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services, and under which qualified, low-income individuals receive health care services. Existing law provides for the reimbursement of providers under the Medi-Cal program.
The Lanterman Developmental Disabilities Services Act requires the State Department of Developmental Services to contract with regional centers to provide services and support to individuals with developmental disabilities. Under existing law, the regional centers purchase needed services for individuals with developmental disabilities through approved service providers or arrange for those services through other publicly funded agencies.
The bill would declare the intent of the Legislature to enact statutory changes that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services, and under which qualified, low-income individuals receive health care services. Existing law provides for the reimbursement of providers under the Medi-Cal program.
The Lanterman Developmental Disabilities Services Act requires the State Department of Developmental Services to contract with regional centers to provide services and support to individuals with developmental disabilities. Under existing law, the regional centers purchase needed services for individuals with developmental disabilities through approved service providers or arrange for those services through other publicly funded agencies.
The bill would declare the intent of the Legislature to enact legislation statutory changes that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services, and under which qualified, low-income individuals receive health care services. Existing law provides for the reimbursement of providers under the Medi-Cal program.
The Lanterman Developmental Disabilities Services Act requires the State Department of Developmental Services to contract with regional centers to provide services and support to individuals with developmental disabilities. Under existing law, the regional centers purchase needed services for individuals with developmental disabilities through approved service providers or arrange for those services through other publicly funded agencies.
The bill would declare the intent of the Legislature to enact legislation that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
It is the intent of the Legislature that Franchise Tax Board Legal Ruling 2006-01 (April 28, 2006) regarding the treatment of apportionment factors attributable to income exempt from income tax shall apply to apportionment factors attributable to the income of qualified health care service plans excluded by Section 24330 of the Revenue and Taxation Code, as added by Section 4 of this act.
SEC. 2.Section 685.5 is added to the Insurance Code, to read:685.5.The reduction in the gross premiums tax rate made by Section 12202.2 of the Revenue and Taxation Code shall not be considered in any determination by the Insurance Commissioner to impose or enforce a tax under the retaliatory tax provisions of Sections 685 to 685.4, inclusive, and reported pursuant to Sections 12281, 12287, 12288, and 12289 of the Revenue and Taxation Code.
SEC. 3.Section 12202.2 is added to the Revenue and Taxation Code, to read:12202.2.(a)Notwithstanding the rate specified by Section 12202, the gross premiums tax rate for premiums received for the provision of health insurance, as defined in subdivision (b) of Section 106 of the Insurance Code, paid by an insurer described in this subdivision shall be 0 percent for any of those premiums received on or after July 1, 2016, and on or before June 30, 2019. Only an insurer that provides health insurance that has a corporate affiliate that is a health care service plan or health plan, defined as a health care service plan that meets all of the following requirements, shall be subject to the rate change provided in this section:
(1)Is licensed by the Department of Managed Health Care or is a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services.
(2)Had at least one enrollee enrolled in the health plan in the base year, as defined in subdivision (e) of Section 14199.51 of the Welfare and Institutions Code, not including individuals who are enrolled in a Medicare plan, who receive health care services through a health plan pursuant to a subcontract from another health plan, or who are enrollees through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382).
(3)Is subject to the tax imposed by Section 14199.54 of the Welfare and Institutions Code.
(b)For purposes of this section, an insurer that has a corporate affiliate that is a health care service plan or health plan means an insurer that is, directly or indirectly, controlled by, under common control with, or controls a health care service plan.
(c)This section shall remain in effect only until June 30, 2019, and as of June 30, 2020, is repealed.
SEC. 4.Section 24330 is added to the Revenue and Taxation Code, to read:24330.(a)Gross income shall not include the qualified health care service plan income of a qualified health care service plan properly accrued with respect to enrollment or services that occur on or after July 1, 2016, and on or before June 30, 2019.
(b)For purposes of this section, the following definitions shall apply:
(1)Qualified health care service plan means a health care service plan, as defined in subdivision (k) of Section 14199.51 of the Welfare and Institutions Code, that is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code.
(2)Qualified health care service plan income means the revenue listed in subparagraphs (A) to (J), inclusive, that is associated with the operation of a qualified health care service plan and that is required to be reported to the Department of Managed Health Care pursuant to the instructions for filing financial statements and Section 1384 of the Health and Safety Code and the regulations adopted thereunder.
(A)Premiums (commercial).
(B)Copayments, COB, subrogation.
(C)Title XIX Medicaid.
(D)Point-of-service premiums.
(E)Risk pool revenue.
(F)Capitation payments.
(G)Title XVIII Medicare.
(H)Fee-for-service.
(I)Interest.
(J)Aggregate write-ins for other revenues, including capital gains and other investment income.
(c)(1)No later than December 1, 2016, and annually thereafter, the State Department of Health Care Services shall provide to the Franchise Tax Board information regarding every health care service plan that is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code. The information shall include the corporate name, address, and calendar period for which each health care service plan is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code, and, if applicable, the owner or owners of those health care service plans.
(2)A qualified health care service plan with no income other than qualified health care service plan income that is excluded from gross income pursuant to this section for a taxable year shall be exempt from the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101) for that taxable year.
(d)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(e)This section shall remain in effect only until December 1, 2019, and as of June 30, 2020, is repealed.
SEC. 5.Article 6.7 (commencing with Section 14199.50) is added to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, to read:6.7.Managed Care Organization Provider Tax14199.50.It is the intent of the Legislature that the department implement a managed care organization provider tax effective July 1, 2016, to provide ongoing funding for health care and prevention, minimize to the extent possible any need for new reductions to the program, and meet all of the following goals:
(a)Generate an amount of nonfederal funds for the Medi-Cal program equivalent to the funds generated by the tax imposed pursuant to Article 5 (commencing with Section 6174) of Chapter 2 of Part 1 of Division 2 of the Revenue and Taxation Code.
(b)Comply with federal Medicaid requirements applicable to permissible health care-related taxes, including, but not limited to, Section 433.68 of Title 42 of the Code of Federal Regulations.
14199.51.The following definitions shall apply for the purposes of this article:
(a)Alternate Health Care Service Plan or AHCSP means a nonprofit health care service plan with at least four million enrollees statewide, that owns or operates pharmacies, and provides professional medical services to enrollees in specific geographic regions through an exclusive contract with a single medical group in each specific geographic region in which it is licensed.
(b)AHCSP enrollee means an individual enrolled in an AHCSP, as defined in subdivision (a), who is not a Medi-Cal beneficiary.
(c)AHCSP enrollee tax amount means the amount of tax assessed per countable enrollee within an AHCSP taxing tier.
(d)AHCSP taxing tier means a range of cumulative enrollment of countable AHCSP enrollees for the base year.
(e)Base year means the 12-month period of October 1, 2014, through September 30, 2015.
(f)Base data source means the quarterly financial statement filings submitted by health plans to the Department of Managed Health Care retrieved by the department as of January 1, 2016, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by the department and retrieved as of January 1, 2016.
(g)Countable enrollee means an individual enrolled in a health plan, as defined in subdivision (k), during a month of the base year according to the base data source. Countable enrollee does not include an individual enrolled in a Medicare plan, a plan-to-plan enrollee, as defined in subdivision (r), or an individual enrolled in a health plan pursuant to the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) to the extent the imposition of the tax under this article is preempted pursuant to Section 8909(f) of Title 5 of the United States Code.
(h)Department means the State Department of Health Care Services.
(i)Director means the Director of Health Care Services.
(j)Excluded plan means any of the following:
(1)A health plan licensed pursuant to Section 1351.2 of the Health and Safety Code.
(2)A health plan that is owned and operated by a 501(c)(3) hospital or health system or multiple 501(c)(3) hospitals or health systems if that health plan has both a substantial amount of its enrollment in and is headquartered in either the County of Sacramento or San Diego.
(k)Health care service plan or health plan means a health care service plan, other than a plan that provides only specialized or discount services, that is licensed by the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) or a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services.
(l)Medi-Cal enrollee means an individual enrolled in a health plan, as defined in subdivision (k), who is a Medi-Cal beneficiary for whom the department directly pays the health plan a capitated payment.
(m)Medi-Cal per enrollee tax amount means the amount of tax assessed per countable Medi-Cal enrollee within a Medi-Cal taxing tier.
(n)Medi-Cal taxing tier means a range of cumulative enrollment of countable Medi-Cal enrollees for the base year.
(o)Other enrollee means an individual enrolled in a health plan, as defined in subdivision (k), who is not a Medi-Cal beneficiary or an AHCSP enrollee.
(p)Other per enrollee tax amount means the amount of tax assessed per countable other enrollee within another taxing tier.
(q)Other taxing tier means a range of cumulative enrollment of countable other enrollees for the base year.
(r)Plan-to-plan enrollee means an individual who receives his or her health care services through a health plan pursuant to a subcontract from another health plan.
14199.52.(a)The Health and Human Services Special Fund is hereby created in the State Treasury.
(b)All revenues, less refunds, derived from the taxes provided for in this article shall be deposited in the State Treasury to the credit of the Health and Human Services Special Fund.
(c)Notwithstanding Section 16305.7 of the Government Code, any interest and dividends earned on moneys in the Health and Human Services Special Fund shall be retained in the fund and used solely for the purpose specified in subdivision (d).
(d)Notwithstanding Section 13340 of the Government Code, the funds deposited in the Health and Human Services Special Fund pursuant to this article shall be continuously appropriated, without regard to fiscal year, to the department for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to children, adults, seniors and persons with disabilities, and persons dually eligible for Medi-Cal and Medicare.
(e)The department shall provide an annual report to all health plans accounting for the funds deposited in and expended from the Health and Human Services Special Fund, in a time and manner as deemed appropriate by the director. The report shall identify the taxes imposed on each health plan pursuant to this article, and shall provide an itemized accounting of expenditures from the fund.
14199.53.(a)The department shall determine for each health plan using the base data source all of the following:
(1)Total cumulative enrollment for the base year.
(2)Total Medicare cumulative enrollment for the base year.
(3)Total Medi-Cal cumulative enrollment for the base year.
(4)Total plan-to-plan cumulative enrollment for the base year.
(5)Total cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) for the base year.
(6)Total other cumulative enrollment for the base year that is not otherwise counted in paragraphs (2) to (5), inclusive.
(b)Notwithstanding any provision in this article, the director may correct any identified material or significant errors in the data, including, but not limited to, the overall cumulative enrollment, Medicare cumulative enrollment, Medi-Cal cumulative enrollment, cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382), and other cumulative enrollment. The directors determination whether to exercise his or her discretion under this section and any determination made by the director under this section shall not be subject to judicial review, except that a health plan may bring a writ of mandate under Section 1085 of the Code of Civil Procedure to rectify an abuse of discretion by the department in correcting that health plans data when that correction results in a greater tax amount for that health plan pursuant to Section 14199.55.
14199.54.(a)A managed care organization provider tax shall be imposed on each health plan that is not an excluded plan. The tax shall be imposed for the following fiscal years:
(1)201617 fiscal year.
(2)201718 fiscal year.
(3)201819 fiscal year.
(b)The department shall compute the annual tax for each health plan subject to the tax during each applicable state fiscal year pursuant to Section 14199.55.
(c)The department shall collect the annual tax for each health plan in four installments and shall determine the amount due for each installment in the state fiscal year by dividing the annual tax for that state fiscal year by four.
(d)The department shall not collect the tax imposed pursuant to this article until the department receives approval from the federal Centers for Medicare and Medicaid Services that this tax is a permissible health care-related tax in accordance with Section 433.68 of Title 42 of the Code of Federal Regulations and is eligible for federal financial participation. On October 1, 2016, or the date the department receives that federal approval from the federal Centers for Medicare and Medicaid Services, whichever is later, the following activities shall commence:
(1)The director shall certify in writing that federal approval has been received, and within five business days, the department shall post the certification on its Internet Web site and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.
(2)By October 14, 2016, or within 10 business days following receipt of the notice of federal approval, whichever is later, the department shall send a notice to each health plan subject to the tax, which shall contain the following information:
(A)The annual tax due for each fiscal year.
(B)The dates on which the four installment tax payments are due for each fiscal year.
(3)A health plan shall pay the annual tax in installments as calculated pursuant to Section 14199.55, based on a schedule developed by the department. The department shall establish the date that each tax payment is due, provided that the first tax payment shall be due no earlier than 20 days following the date the department sends the notice pursuant to paragraph (2), and the tax payments shall be paid at least one month apart, but no more than one-quarter apart.
(4)A health plan shall pay the taxes that are due, if any, in the amounts and at the times set forth in the notice unless superseded by a subsequent notice issued by the department.
(e)The tax assessed pursuant to this article shall be paid by each health plan subject to the tax to the department for deposit in the Health and Human Services Special Fund created pursuant to Section 14199.52.
(f)(1)Interest shall be assessed on an applicable health plan for any amount of the managed care organization provider taxes that are not paid on the date due at a rate of 10 percent per annum. Interest shall begin to accrue the day after the date the tax payment was due and shall be deposited in the Health and Human Services Special Fund created pursuant to Section 14199.52.
(2)If a tax payment is more than 60 days overdue, a penalty equal to the total accrued interest charge described in paragraph (1) shall also be assessed on the applicable health plan and due for each month for which the tax payment is not received after 60 days.
(g)(1)Subject to paragraph (2), the director may waive a portion or all of either the interest or penalties, or both, assessed under this article in the event that the director determines, in his or her sole discretion, that the health plan has demonstrated that imposition of the full amount of the tax pursuant to the timelines applicable under this article has a high likelihood of creating an undue financial hardship for the health plan or creates a significant financial difficulty in providing needed services to Medi-Cal beneficiaries.
(2)Waiver of some or all of the interest or penalties pursuant to this subdivision shall be conditioned on the health plans agreement to make tax payments on an alternative schedule developed by the department that takes into account the financial situation of the health plan and the potential impact on the delivery of services to Medi-Cal beneficiaries.
(h)In the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees under this article from a health plan to another health plan or similar entity, and that occurs at any time during which this article is operative, the resultant health plan or similar entity shall be responsible for paying the full tax amount as provided in this article that would have been the responsibility of the health plan to which that full tax amount was assessed, upon the effective date of any such transaction. If a merger, acquisition, establishment, or any other similar transaction results in the transfer of health plan responsibility for only some of a health plans countable enrollees under this article but not all countable enrollees, the full tax amount as provided in this article shall remain the responsibility of that health plan to which that full tax amount was assessed.
14199.55.(a)For each fiscal year, the Medi-Cal taxing tiers shall be as follows:
(1)Medi-Cal taxing tier I shall consist of all countable Medi-Cal enrollees in a health plan from zero to 2,000,000, inclusive.
(2)Medi-Cal taxing tier II shall consist of all countable Medi-Cal enrollees in a health plan from 2,000,001 to 4,000,000, inclusive.
(3)Medi-Cal taxing tier III shall consist of all countable Medi-Cal enrollees in a health plan greater than 4,000,000.
(b)For each fiscal year, the other taxing tiers shall be as follows:
(1)Other taxing tier I shall consist of all countable other enrollees in a health plan from zero to 4,000,000, inclusive.
(2)Other taxing tier II shall consist of all countable other enrollees in a health plan from 4,000,001 to 8,000,000, inclusive.
(3)Other taxing tier III shall consist of all countable other enrollees in a health plan greater than 8,000,000.
(c)For each fiscal year, the AHCSP taxing tier shall consist of all countable AHCSP enrollees in a health plan from zero to 8,000,000, inclusive.
(d)For the 201617 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty dollars ($40).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be nineteen dollars ($19).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(e)For the 201617 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be seven dollars and fifty cents ($7.50).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars and fifty cents ($2.50).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(f)For the 201617 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars ($2).
(g)For the 201718 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty-two dollars and fifty cents ($42.50).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be twenty dollars and twenty-five cents ($20.25).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(h)For the 201718 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be eight dollars ($8).
(2)The other per enrollee tax for the other taxing tier II shall be three dollars ($3).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(i)For the 201718 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars and twenty-five cents ($2.25).
(j)For the 201819 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty-five dollars ($45).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be twenty-one dollars ($21).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(k)For the 201819 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be eight dollars and fifty cents ($8.50).
(2)The other per enrollee tax for the other taxing tier II shall be three dollars and fifty cents ($3.50).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(l)For the 201819 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars and fifty cents ($2.50).
(m)(1)The department may modify or make adjustments to any methodology, tax amount, taxing tier, or other similar provision specified in this article to the extent necessary to meet the requirements of federal law or regulations, obtain federal approval, or to ensure federal financial participation is available provided the modification or adjustment does not otherwise conflict with the purposes of this article. Any modification or adjustment that would result in more than the following aggregate tax amounts for the other enrollees and AHCSP enrollees, combined, shall be considered to conflict with the purposes of this article:
(A)Two hundred sixty-six million dollars ($266,000,000) in the 201617 fiscal year.
(B)Two hundred eighty-seven million dollars ($287,000,000) in the 201718 fiscal year.
(C)Three hundred nine million dollars ($309,000,000) in the 201819 fiscal year.
(2)In implementing any modification or adjustment, the department may only make an adjustment that would result in lowering the amounts in subparagraph (A), (B), or (C) of paragraph (1). Nothing in this subdivision shall limit the authority of the department to make an adjustment that does not impact the amounts in subparagraph (A), (B), or (C) of paragraph (1).
(3)If the department identifies that a modification or adjustment may be necessary in accordance with paragraph (1), the department shall consult with affected health plans, to the extent practicable, to implement that modification or adjustment.
(4)In the event of a modification or adjustment made pursuant to this subdivision, the department shall notify affected health plans, the Joint Legislative Budget Committee, the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days of that modification or adjustment.
(n)The department shall request approval from the federal Centers for Medicare and Medicaid Services as is necessary to implement this article. In making that request, the department may seek, as it deems necessary, a request for waiver of the broad-based requirement, waiver of the uniformity requirement, or both, pursuant to Section 433.68(e)(1) and (2) of Title 42 of the Code of Federal Regulations, or a request for waiver of any other provision of federal law or regulation necessary to implement this article.
(o)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this article by means of provider bulletins, all-plan letters, or other similar instructions, without taking regulatory action. The department shall provide notification to the Joint Legislative Budget Committee and to the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days after the above-described action is taken.
14199.56.This article shall become operative on July 1, 2016, and shall become inoperative on July 1, 2019. As of June 30, 2020, this article is repealed. Notwithstanding this section, a tax and any applicable interest and penalties imposed under this article shall continue to be due and payable until the tax and any applicable interest and penalties are fully paid.
SEC. 6.Section 685.5 of the Insurance Code, and Sections 12202.2 and 24330 of the Revenue and Taxation Code shall become effective and operative on the later of July 1, 2016, or the effective date, certified in writing by the Director of the Health Care Services, of the federal approval necessary for receipt of federal financial participation in conjunction with the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code. The Director of Health Care Services shall post the certification of federal approval on the State Department of Health Care Services Internet Web site and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
SEC. 7.Section 685.5 of the Insurance Code, and Sections 12202.2 and 24330 of the Revenue and Taxation Code, and Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code shall cease to be operative the first day of the state fiscal year beginning on or after the date the Director of Health Care Services, in consultation with the Director of Finance, determines that the taxes have not met the intent as outlined in Section 14199.50 of the Welfare and Institutions Code for the purposes of providing funding for health care and prevention, or the state does not have the federal approval necessary for receipt of federal financial participation in conjunction with the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code. The Director of Health Care Services shall post the determination on the State Department of Health Care Services Internet Web site and send a copy of the determination to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
SEC. 8.Section 685.5 of the Insurance Code, Sections 12202.2 and 24330 of the Revenue and Taxation Code, and Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code shall cease to be operative the first day of the state fiscal year beginning on or after the effective date of a final judicial determination made by any court of appellate jurisdiction that Section 685.5 of the Insurance Code, Section 12202.2 or 24330 of the Revenue and Taxation Code, or the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, cannot be implemented. The Director of Health Care Services shall post a notification of that final judicial determination on the State Department of Health Care Services Internet Web site and provide this notification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
It is the intent of the Legislature that Franchise Tax Board Legal Ruling 2006-01 (April 28, 2006) regarding the treatment of apportionment factors attributable to income exempt from income tax shall apply to apportionment factors attributable to the income of qualified health care service plans excluded by Section 24330 of the Revenue and Taxation Code, as added by Section 4 of this act.
SEC. 2.Section 685.5 is added to the Insurance Code, to read:685.5.The reduction in the gross premiums tax rate made by Section 12202.2 of the Revenue and Taxation Code shall not be considered in any determination by the Insurance Commissioner to impose or enforce a tax under the retaliatory tax provisions of Sections 685 to 685.4, inclusive, and reported pursuant to Sections 12281, 12287, 12288, and 12289 of the Revenue and Taxation Code.
SEC. 3.Section 12202.2 is added to the Revenue and Taxation Code, to read:12202.2.(a)Notwithstanding the rate specified by Section 12202, the gross premiums tax rate for premiums received for the provision of health insurance, as defined in subdivision (b) of Section 106 of the Insurance Code, paid by an insurer described in this subdivision shall be 0 percent for any of those premiums received on or after July 1, 2016, and on or before June 30, 2019. Only an insurer that provides health insurance that has a corporate affiliate that is a health care service plan or health plan, defined as a health care service plan that meets all of the following requirements, shall be subject to the rate change provided in this section:
(1)Is licensed by the Department of Managed Health Care or is a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services.
(2)Had at least one enrollee enrolled in the health plan in the base year, as defined in subdivision (e) of Section 14199.51 of the Welfare and Institutions Code, not including individuals who are enrolled in a Medicare plan, who receive health care services through a health plan pursuant to a subcontract from another health plan, or who are enrollees through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382).
(3)Is subject to the tax imposed by Section 14199.54 of the Welfare and Institutions Code.
(b)For purposes of this section, an insurer that has a corporate affiliate that is a health care service plan or health plan means an insurer that is, directly or indirectly, controlled by, under common control with, or controls a health care service plan.
(c)This section shall remain in effect only until June 30, 2019, and as of June 30, 2020, is repealed.
SEC. 4.Section 24330 is added to the Revenue and Taxation Code, to read:24330.(a)Gross income shall not include the qualified health care service plan income of a qualified health care service plan properly accrued with respect to enrollment or services that occur on or after July 1, 2016, and on or before June 30, 2019.
(b)For purposes of this section, the following definitions shall apply:
(1)Qualified health care service plan means a health care service plan, as defined in subdivision (k) of Section 14199.51 of the Welfare and Institutions Code, that is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code.
(2)Qualified health care service plan income means the revenue listed in subparagraphs (A) to (J), inclusive, that is associated with the operation of a qualified health care service plan and that is required to be reported to the Department of Managed Health Care pursuant to the instructions for filing financial statements and Section 1384 of the Health and Safety Code and the regulations adopted thereunder.
(A)Premiums (commercial).
(B)Copayments, COB, subrogation.
(C)Title XIX Medicaid.
(D)Point-of-service premiums.
(E)Risk pool revenue.
(F)Capitation payments.
(G)Title XVIII Medicare.
(H)Fee-for-service.
(I)Interest.
(J)Aggregate write-ins for other revenues, including capital gains and other investment income.
(c)(1)No later than December 1, 2016, and annually thereafter, the State Department of Health Care Services shall provide to the Franchise Tax Board information regarding every health care service plan that is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code. The information shall include the corporate name, address, and calendar period for which each health care service plan is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code, and, if applicable, the owner or owners of those health care service plans.
(2)A qualified health care service plan with no income other than qualified health care service plan income that is excluded from gross income pursuant to this section for a taxable year shall be exempt from the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101) for that taxable year.
(d)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(e)This section shall remain in effect only until December 1, 2019, and as of June 30, 2020, is repealed.
SEC. 5.Article 6.7 (commencing with Section 14199.50) is added to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, to read:6.7.Managed Care Organization Provider Tax14199.50.It is the intent of the Legislature that the department implement a managed care organization provider tax effective July 1, 2016, to provide ongoing funding for health care and prevention, minimize to the extent possible any need for new reductions to the program, and meet all of the following goals:
(a)Generate an amount of nonfederal funds for the Medi-Cal program equivalent to the funds generated by the tax imposed pursuant to Article 5 (commencing with Section 6174) of Chapter 2 of Part 1 of Division 2 of the Revenue and Taxation Code.
(b)Comply with federal Medicaid requirements applicable to permissible health care-related taxes, including, but not limited to, Section 433.68 of Title 42 of the Code of Federal Regulations.
14199.51.The following definitions shall apply for the purposes of this article:
(a)Alternate Health Care Service Plan or AHCSP means a nonprofit health care service plan with at least four million enrollees statewide, that owns or operates pharmacies, and provides professional medical services to enrollees in specific geographic regions through an exclusive contract with a single medical group in each specific geographic region in which it is licensed.
(b)AHCSP enrollee means an individual enrolled in an AHCSP, as defined in subdivision (a), who is not a Medi-Cal beneficiary.
(c)AHCSP enrollee tax amount means the amount of tax assessed per countable enrollee within an AHCSP taxing tier.
(d)AHCSP taxing tier means a range of cumulative enrollment of countable AHCSP enrollees for the base year.
(e)Base year means the 12-month period of October 1, 2014, through September 30, 2015.
(f)Base data source means the quarterly financial statement filings submitted by health plans to the Department of Managed Health Care retrieved by the department as of January 1, 2016, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by the department and retrieved as of January 1, 2016.
(g)Countable enrollee means an individual enrolled in a health plan, as defined in subdivision (k), during a month of the base year according to the base data source. Countable enrollee does not include an individual enrolled in a Medicare plan, a plan-to-plan enrollee, as defined in subdivision (r), or an individual enrolled in a health plan pursuant to the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) to the extent the imposition of the tax under this article is preempted pursuant to Section 8909(f) of Title 5 of the United States Code.
(h)Department means the State Department of Health Care Services.
(i)Director means the Director of Health Care Services.
(j)Excluded plan means any of the following:
(1)A health plan licensed pursuant to Section 1351.2 of the Health and Safety Code.
(2)A health plan that is owned and operated by a 501(c)(3) hospital or health system or multiple 501(c)(3) hospitals or health systems if that health plan has both a substantial amount of its enrollment in and is headquartered in either the County of Sacramento or San Diego.
(k)Health care service plan or health plan means a health care service plan, other than a plan that provides only specialized or discount services, that is licensed by the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) or a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services.
(l)Medi-Cal enrollee means an individual enrolled in a health plan, as defined in subdivision (k), who is a Medi-Cal beneficiary for whom the department directly pays the health plan a capitated payment.
(m)Medi-Cal per enrollee tax amount means the amount of tax assessed per countable Medi-Cal enrollee within a Medi-Cal taxing tier.
(n)Medi-Cal taxing tier means a range of cumulative enrollment of countable Medi-Cal enrollees for the base year.
(o)Other enrollee means an individual enrolled in a health plan, as defined in subdivision (k), who is not a Medi-Cal beneficiary or an AHCSP enrollee.
(p)Other per enrollee tax amount means the amount of tax assessed per countable other enrollee within another taxing tier.
(q)Other taxing tier means a range of cumulative enrollment of countable other enrollees for the base year.
(r)Plan-to-plan enrollee means an individual who receives his or her health care services through a health plan pursuant to a subcontract from another health plan.
14199.52.(a)The Health and Human Services Special Fund is hereby created in the State Treasury.
(b)All revenues, less refunds, derived from the taxes provided for in this article shall be deposited in the State Treasury to the credit of the Health and Human Services Special Fund.
(c)Notwithstanding Section 16305.7 of the Government Code, any interest and dividends earned on moneys in the Health and Human Services Special Fund shall be retained in the fund and used solely for the purpose specified in subdivision (d).
(d)Notwithstanding Section 13340 of the Government Code, the funds deposited in the Health and Human Services Special Fund pursuant to this article shall be continuously appropriated, without regard to fiscal year, to the department for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to children, adults, seniors and persons with disabilities, and persons dually eligible for Medi-Cal and Medicare.
(e)The department shall provide an annual report to all health plans accounting for the funds deposited in and expended from the Health and Human Services Special Fund, in a time and manner as deemed appropriate by the director. The report shall identify the taxes imposed on each health plan pursuant to this article, and shall provide an itemized accounting of expenditures from the fund.
14199.53.(a)The department shall determine for each health plan using the base data source all of the following:
(1)Total cumulative enrollment for the base year.
(2)Total Medicare cumulative enrollment for the base year.
(3)Total Medi-Cal cumulative enrollment for the base year.
(4)Total plan-to-plan cumulative enrollment for the base year.
(5)Total cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) for the base year.
(6)Total other cumulative enrollment for the base year that is not otherwise counted in paragraphs (2) to (5), inclusive.
(b)Notwithstanding any provision in this article, the director may correct any identified material or significant errors in the data, including, but not limited to, the overall cumulative enrollment, Medicare cumulative enrollment, Medi-Cal cumulative enrollment, cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382), and other cumulative enrollment. The directors determination whether to exercise his or her discretion under this section and any determination made by the director under this section shall not be subject to judicial review, except that a health plan may bring a writ of mandate under Section 1085 of the Code of Civil Procedure to rectify an abuse of discretion by the department in correcting that health plans data when that correction results in a greater tax amount for that health plan pursuant to Section 14199.55.
14199.54.(a)A managed care organization provider tax shall be imposed on each health plan that is not an excluded plan. The tax shall be imposed for the following fiscal years:
(1)201617 fiscal year.
(2)201718 fiscal year.
(3)201819 fiscal year.
(b)The department shall compute the annual tax for each health plan subject to the tax during each applicable state fiscal year pursuant to Section 14199.55.
(c)The department shall collect the annual tax for each health plan in four installments and shall determine the amount due for each installment in the state fiscal year by dividing the annual tax for that state fiscal year by four.
(d)The department shall not collect the tax imposed pursuant to this article until the department receives approval from the federal Centers for Medicare and Medicaid Services that this tax is a permissible health care-related tax in accordance with Section 433.68 of Title 42 of the Code of Federal Regulations and is eligible for federal financial participation. On October 1, 2016, or the date the department receives that federal approval from the federal Centers for Medicare and Medicaid Services, whichever is later, the following activities shall commence:
(1)The director shall certify in writing that federal approval has been received, and within five business days, the department shall post the certification on its Internet Web site and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.
(2)By October 14, 2016, or within 10 business days following receipt of the notice of federal approval, whichever is later, the department shall send a notice to each health plan subject to the tax, which shall contain the following information:
(A)The annual tax due for each fiscal year.
(B)The dates on which the four installment tax payments are due for each fiscal year.
(3)A health plan shall pay the annual tax in installments as calculated pursuant to Section 14199.55, based on a schedule developed by the department. The department shall establish the date that each tax payment is due, provided that the first tax payment shall be due no earlier than 20 days following the date the department sends the notice pursuant to paragraph (2), and the tax payments shall be paid at least one month apart, but no more than one-quarter apart.
(4)A health plan shall pay the taxes that are due, if any, in the amounts and at the times set forth in the notice unless superseded by a subsequent notice issued by the department.
(e)The tax assessed pursuant to this article shall be paid by each health plan subject to the tax to the department for deposit in the Health and Human Services Special Fund created pursuant to Section 14199.52.
(f)(1)Interest shall be assessed on an applicable health plan for any amount of the managed care organization provider taxes that are not paid on the date due at a rate of 10 percent per annum. Interest shall begin to accrue the day after the date the tax payment was due and shall be deposited in the Health and Human Services Special Fund created pursuant to Section 14199.52.
(2)If a tax payment is more than 60 days overdue, a penalty equal to the total accrued interest charge described in paragraph (1) shall also be assessed on the applicable health plan and due for each month for which the tax payment is not received after 60 days.
(g)(1)Subject to paragraph (2), the director may waive a portion or all of either the interest or penalties, or both, assessed under this article in the event that the director determines, in his or her sole discretion, that the health plan has demonstrated that imposition of the full amount of the tax pursuant to the timelines applicable under this article has a high likelihood of creating an undue financial hardship for the health plan or creates a significant financial difficulty in providing needed services to Medi-Cal beneficiaries.
(2)Waiver of some or all of the interest or penalties pursuant to this subdivision shall be conditioned on the health plans agreement to make tax payments on an alternative schedule developed by the department that takes into account the financial situation of the health plan and the potential impact on the delivery of services to Medi-Cal beneficiaries.
(h)In the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees under this article from a health plan to another health plan or similar entity, and that occurs at any time during which this article is operative, the resultant health plan or similar entity shall be responsible for paying the full tax amount as provided in this article that would have been the responsibility of the health plan to which that full tax amount was assessed, upon the effective date of any such transaction. If a merger, acquisition, establishment, or any other similar transaction results in the transfer of health plan responsibility for only some of a health plans countable enrollees under this article but not all countable enrollees, the full tax amount as provided in this article shall remain the responsibility of that health plan to which that full tax amount was assessed.
14199.55.(a)For each fiscal year, the Medi-Cal taxing tiers shall be as follows:
(1)Medi-Cal taxing tier I shall consist of all countable Medi-Cal enrollees in a health plan from zero to 2,000,000, inclusive.
(2)Medi-Cal taxing tier II shall consist of all countable Medi-Cal enrollees in a health plan from 2,000,001 to 4,000,000, inclusive.
(3)Medi-Cal taxing tier III shall consist of all countable Medi-Cal enrollees in a health plan greater than 4,000,000.
(b)For each fiscal year, the other taxing tiers shall be as follows:
(1)Other taxing tier I shall consist of all countable other enrollees in a health plan from zero to 4,000,000, inclusive.
(2)Other taxing tier II shall consist of all countable other enrollees in a health plan from 4,000,001 to 8,000,000, inclusive.
(3)Other taxing tier III shall consist of all countable other enrollees in a health plan greater than 8,000,000.
(c)For each fiscal year, the AHCSP taxing tier shall consist of all countable AHCSP enrollees in a health plan from zero to 8,000,000, inclusive.
(d)For the 201617 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty dollars ($40).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be nineteen dollars ($19).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(e)For the 201617 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be seven dollars and fifty cents ($7.50).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars and fifty cents ($2.50).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(f)For the 201617 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars ($2).
(g)For the 201718 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty-two dollars and fifty cents ($42.50).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be twenty dollars and twenty-five cents ($20.25).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(h)For the 201718 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be eight dollars ($8).
(2)The other per enrollee tax for the other taxing tier II shall be three dollars ($3).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(i)For the 201718 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars and twenty-five cents ($2.25).
(j)For the 201819 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty-five dollars ($45).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be twenty-one dollars ($21).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(k)For the 201819 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be eight dollars and fifty cents ($8.50).
(2)The other per enrollee tax for the other taxing tier II shall be three dollars and fifty cents ($3.50).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(l)For the 201819 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars and fifty cents ($2.50).
(m)(1)The department may modify or make adjustments to any methodology, tax amount, taxing tier, or other similar provision specified in this article to the extent necessary to meet the requirements of federal law or regulations, obtain federal approval, or to ensure federal financial participation is available provided the modification or adjustment does not otherwise conflict with the purposes of this article. Any modification or adjustment that would result in more than the following aggregate tax amounts for the other enrollees and AHCSP enrollees, combined, shall be considered to conflict with the purposes of this article:
(A)Two hundred sixty-six million dollars ($266,000,000) in the 201617 fiscal year.
(B)Two hundred eighty-seven million dollars ($287,000,000) in the 201718 fiscal year.
(C)Three hundred nine million dollars ($309,000,000) in the 201819 fiscal year.
(2)In implementing any modification or adjustment, the department may only make an adjustment that would result in lowering the amounts in subparagraph (A), (B), or (C) of paragraph (1). Nothing in this subdivision shall limit the authority of the department to make an adjustment that does not impact the amounts in subparagraph (A), (B), or (C) of paragraph (1).
(3)If the department identifies that a modification or adjustment may be necessary in accordance with paragraph (1), the department shall consult with affected health plans, to the extent practicable, to implement that modification or adjustment.
(4)In the event of a modification or adjustment made pursuant to this subdivision, the department shall notify affected health plans, the Joint Legislative Budget Committee, the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days of that modification or adjustment.
(n)The department shall request approval from the federal Centers for Medicare and Medicaid Services as is necessary to implement this article. In making that request, the department may seek, as it deems necessary, a request for waiver of the broad-based requirement, waiver of the uniformity requirement, or both, pursuant to Section 433.68(e)(1) and (2) of Title 42 of the Code of Federal Regulations, or a request for waiver of any other provision of federal law or regulation necessary to implement this article.
(o)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this article by means of provider bulletins, all-plan letters, or other similar instructions, without taking regulatory action. The department shall provide notification to the Joint Legislative Budget Committee and to the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days after the above-described action is taken.
14199.56.This article shall become operative on July 1, 2016, and shall become inoperative on July 1, 2019. As of June 30, 2020, this article is repealed. Notwithstanding this section, a tax and any applicable interest and penalties imposed under this article shall continue to be due and payable until the tax and any applicable interest and penalties are fully paid.
SEC. 6.Section 685.5 of the Insurance Code, and Sections 12202.2 and 24330 of the Revenue and Taxation Code shall become effective and operative on the later of July 1, 2016, or the effective date, certified in writing by the Director of the Health Care Services, of the federal approval necessary for receipt of federal financial participation in conjunction with the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code. The Director of Health Care Services shall post the certification of federal approval on the State Department of Health Care Services Internet Web site and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
SEC. 7.Section 685.5 of the Insurance Code, and Sections 12202.2 and 24330 of the Revenue and Taxation Code, and Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code shall cease to be operative the first day of the state fiscal year beginning on or after the date the Director of Health Care Services, in consultation with the Director of Finance, determines that the taxes have not met the intent as outlined in Section 14199.50 of the Welfare and Institutions Code for the purposes of providing funding for health care and prevention, or the state does not have the federal approval necessary for receipt of federal financial participation in conjunction with the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code. The Director of Health Care Services shall post the determination on the State Department of Health Care Services Internet Web site and send a copy of the determination to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
SEC. 8.Section 685.5 of the Insurance Code, Sections 12202.2 and 24330 of the Revenue and Taxation Code, and Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code shall cease to be operative the first day of the state fiscal year beginning on or after the effective date of a final judicial determination made by any court of appellate jurisdiction that Section 685.5 of the Insurance Code, Section 12202.2 or 24330 of the Revenue and Taxation Code, or the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, cannot be implemented. The Director of Health Care Services shall post a notification of that final judicial determination on the State Department of Health Care Services Internet Web site and provide this notification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
It is the intent of the Legislature that Franchise Tax Board Legal Ruling 2006-01 (April 28, 2006) regarding the treatment of apportionment factors attributable to income exempt from income tax shall apply to apportionment factors attributable to the income of qualified health care service plans excluded by Section 24330 of the Revenue and Taxation Code, as added by Section 4 of this act.
SEC. 2.Section 685.5 is added to the Insurance Code, to read:685.5.The reduction in the gross premiums tax rate made by Section 12202.2 of the Revenue and Taxation Code shall not be considered in any determination by the Insurance Commissioner to impose or enforce a tax under the retaliatory tax provisions of Sections 685 to 685.4, inclusive, and reported pursuant to Sections 12281, 12287, 12288, and 12289 of the Revenue and Taxation Code.
SEC. 3.Section 12202.2 is added to the Revenue and Taxation Code, to read:12202.2.(a)Notwithstanding the rate specified by Section 12202, the gross premiums tax rate for premiums received for the provision of health insurance, as defined in subdivision (b) of Section 106 of the Insurance Code, paid by an insurer described in this subdivision shall be 0 percent for any of those premiums received on or after July 1, 2016, and on or before June 30, 2019. Only an insurer that provides health insurance that has a corporate affiliate that is a health care service plan or health plan, defined as a health care service plan that meets all of the following requirements, shall be subject to the rate change provided in this section:
(1)Is licensed by the Department of Managed Health Care or is a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services.
(2)Had at least one enrollee enrolled in the health plan in the base year, as defined in subdivision (e) of Section 14199.51 of the Welfare and Institutions Code, not including individuals who are enrolled in a Medicare plan, who receive health care services through a health plan pursuant to a subcontract from another health plan, or who are enrollees through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382).
(3)Is subject to the tax imposed by Section 14199.54 of the Welfare and Institutions Code.
(b)For purposes of this section, an insurer that has a corporate affiliate that is a health care service plan or health plan means an insurer that is, directly or indirectly, controlled by, under common control with, or controls a health care service plan.
(c)This section shall remain in effect only until June 30, 2019, and as of June 30, 2020, is repealed.
SEC. 4.Section 24330 is added to the Revenue and Taxation Code, to read:24330.(a)Gross income shall not include the qualified health care service plan income of a qualified health care service plan properly accrued with respect to enrollment or services that occur on or after July 1, 2016, and on or before June 30, 2019.
(b)For purposes of this section, the following definitions shall apply:
(1)Qualified health care service plan means a health care service plan, as defined in subdivision (k) of Section 14199.51 of the Welfare and Institutions Code, that is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code.
(2)Qualified health care service plan income means the revenue listed in subparagraphs (A) to (J), inclusive, that is associated with the operation of a qualified health care service plan and that is required to be reported to the Department of Managed Health Care pursuant to the Instructions for filing Financial Statements and Section 1384 of the Health and Safety Code and the regulations adopted thereunder.
(A)Premiums (commercial).
(B)Copayments, COB, subrogation.
(C)Title XIX Medicaid.
(D)Point-of-service premiums.
(E)Risk pool revenue.
(F)Capitation payments.
(G)Title XVIII Medicare.
(H)Fee-for-service.
(I)Interest.
(J)Aggregate write-ins for other revenues, including capital gains and other investment income.
(c)(1)No later than December 1, 2016, and annually thereafter, the State Department of Health Care Services shall provide to the Franchise Tax Board information regarding every health care service plan that is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code. The information shall include the corporate name, address, and calendar period for which each health care service plan is subject to the tax imposed under Section 14199.54 of the Welfare and Institutions Code, and, if applicable, the owner or owners of those health care service plans.
(2)A qualified health care service plan with no income other than qualified health care service plan income that is excluded from gross income pursuant to this section for a taxable year shall be exempt from the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101) for that taxable year.
(d)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(e)This section shall remain in effect only until December 1, 2019, and as of June 30, 2020, is repealed.
SEC. 5.Article 6.7 (commencing with Section 14199.50) is added to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, to read:6.7.Managed Care Organization Provider Tax14199.50.It is the intent of the Legislature that the department implement a managed care organization provider tax effective July 1, 2016, to provide ongoing funding for health care and prevention, minimize to the extent possible any need for new reductions to the program, and meet all of the following goals:
(a)Generate an amount of nonfederal funds for the Medi-Cal program equivalent to the funds generated by the tax imposed pursuant to Article 5 (commencing with Section 6174) of Chapter 2 of Part 1 of Division 2 of the Revenue and Taxation Code.
(b)Comply with federal Medicaid requirements applicable to permissible health care-related taxes, including, but not limited to, Section 433.68 of Title 42 of the Code of Federal Regulations.
14199.51.The following definitions shall apply for the purposes of this article:
(a)Alternate Health Care Service Plan or AHCSP means a nonprofit health care service plan with at least four million enrollees statewide, that owns or operates pharmacies, and provides professional medical services to enrollees in specific geographic regions through an exclusive contract with a single medical group in each specific geographic region in which it is licensed.
(b)AHCSP enrollee means an individual enrolled in an AHCSP, as defined in subdivision (a), who is not a Medi-Cal beneficiary.
(c)AHCSP enrollee tax amount means the amount of tax assessed per countable enrollee within an AHCSP taxing tier.
(d)AHCSP taxing tier means a range of cumulative enrollment of countable AHCSP enrollees for the base year.
(e)Base year means the 12-month period of October 1, 2014, through September 30, 2015.
(f)Base data source means the quarterly financial statement filings submitted by health plans to the Department of Managed Health Care retrieved by the department as of January 1, 2016, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by the department and retrieved as of January 1, 2016.
(g)Countable enrollee means an individual enrolled in a health plan, as defined in subdivision (k), during a month of the base year according to the base data source. Countable enrollee does not include an individual enrolled in a Medicare plan, a plan-to-plan enrollee, as defined in subdivision (r), or an individual enrolled in a health plan pursuant to the Federal Employees Health Benefits Act of 1959 (Public law 86-382) to the extent the imposition of the tax under this article is preempted pursuant to Section 8909(f) of Title 5 of the United States Code.
(h)Department means the State Department of Health Care Services.
(i)Director means the Director of Health Care Services.
(j)Excluded plan means any of the following:
(1)A health plan licensed pursuant to Section 1351.2 of the Health and Safety Code.
(2)A health plan that is owned and operated by a 501(c)(3) hospital or health system or multiple 501(c)(3) hospitals or health systems if that health plan has both a substantial amount of its enrollment in and is headquartered in either the County of Sacramento or San Diego.
(k)Health care service plan or health plan means a health care service plan, other than a plan that provides only specialized or discount services, that is licensed by the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) or a managed care plan contracted with the State Department of Health Care Services to provide Medi-Cal services.
(l)Medi-Cal enrollee means an individual enrolled in a health plan, as defined in subdivision (k), who is a Medi-Cal beneficiary for whom the department directly pays the health plan a capitated payment.
(m)Medi-Cal per enrollee tax amount means the amount of tax assessed per countable Medi-Cal enrollee within a Medi-Cal taxing tier.
(n)Medi-Cal taxing tier means a range of cumulative enrollment of countable Medi-Cal enrollees for the base year.
(o)Other enrollee means an individual enrolled in a health plan, as defined in subdivision (k), who is not a Medi-Cal beneficiary or an AHCSP enrollee.
(p)Other per enrollee tax amount means the amount of tax assessed per countable other enrollee within another taxing tier.
(q)Other taxing tier means a range of cumulative enrollment of countable other enrollees for the base year.
(r)Plan-to-plan enrollee means an individual who receives his or her health care services through a health plan pursuant to a subcontract from another health plan.
14199.52.(a)The Health and Human Services Special Fund is hereby created in the State Treasury.
(b)All revenues, less refunds, derived from the taxes provided for in this article shall be deposited in the State Treasury to the credit of the Health and Human Services Special Fund.
(c)Notwithstanding Section 16305.7 of the Government Code, any interest and dividends earned on moneys in the Health and Human Services Special Fund shall be retained in the fund and used solely for the purpose specified in subdivision (d).
(d)Notwithstanding Section 13340 of the Government Code, the funds deposited in the Health and Human Services Special Fund pursuant to this article shall be continuously appropriated, without regard to fiscal year, to the department for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to children, adults, seniors and persons with disabilities, and persons dually eligible for Medi-Cal and Medicare.
(e)The department shall provide an annual report to all health plans accounting for the funds deposited in and expended from the Health and Human Services Special Fund, in a time and manner as deemed appropriate by the director. The report shall identify the taxes imposed on each health plan pursuant to this article, and shall provide an itemized accounting of expenditures from the fund.
14199.53.(a)The department shall determine for each health plan using the base data source all of the following:
(1)Total cumulative enrollment for the base year.
(2)Total Medicare cumulative enrollment for the base year.
(3)Total Medi-Cal cumulative enrollment for the base year.
(4)Total plan-to-plan cumulative enrollment for the base year.
(5)Total cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) for the base year.
(6)Total other cumulative enrollment for the base year that is not otherwise counted in paragraphs (2) to (5), inclusive.
(b)Notwithstanding any provision in this article, the director may correct any identified material or significant errors in the data, including, but not limited to, the overall cumulative enrollment, Medicare cumulative enrollment, Medi-Cal cumulative enrollment, cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382), and other cumulative enrollment. The directors determination whether to exercise his or her discretion under this section and any determination made by the director under this section shall not be subject to judicial review, except that a health plan may bring a writ of mandate under Section 1085 of the Code of Civil Procedure to rectify an abuse of discretion by the department in correcting that health plans data when that correction results in a greater tax amount for that health plan pursuant to Section 14199.55.
14199.54.(a)A managed care organization provider tax shall be imposed on each health plan that is not an excluded plan. The tax shall be imposed for the following fiscal years:
(1)201617 fiscal year.
(2)201718 fiscal year.
(3)201819 fiscal year.
(b)The department shall compute the annual tax for each health plan subject to the tax during each applicable state fiscal year pursuant to Section 14199.55.
(c)The department shall collect the annual tax for each health plan in four installments and shall determine the amount due for each installment in the state fiscal year by dividing the annual tax for that state fiscal year by four.
(d)The department shall not collect the tax imposed pursuant to this article until the department receives approval from the federal Centers for Medicare and Medicaid Services that this tax is a permissible health care-related tax in accordance with Section 433.68 of Title 42 of the Code of Federal Regulations and is eligible for federal financial participation. On October 1, 2016, or the date the department receives that federal approval from the federal Centers for Medicare and Medicaid Services, whichever is later, the following activities shall commence:
(1)The director shall certify in writing that federal approval has been received, and within five business days, the department shall post the certification on its Internet Web site and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.
(2)By October 14, 2016, or within 10 business days following receipt of the notice of federal approval, whichever is later, the department shall send a notice to each health plan subject to the tax, which shall contain the following information:
(A)The annual tax due for each fiscal year.
(B)The dates on which the four installment tax payments are due for each fiscal year.
(3)A health plan shall pay the annual tax in installments as calculated pursuant to Section 14199.55, based on a schedule developed by the department. The department shall establish the date that each tax payment is due, provided that the first tax payment shall be due no earlier than 20 days following the date the department sends the notice pursuant to paragraph (2), and the tax payments shall be paid at least one month apart, but no more than one quarter apart.
(4)A health plan shall pay the taxes that are due, if any, in the amounts and at the times set forth in the notice unless superseded by a subsequent notice issued by the department.
(e)The tax assessed pursuant to this article shall be paid by each health plan subject to the tax to the department for deposit in the Health and Human Services Special Fund created pursuant to Section 14199.52.
(f)(1)Interest shall be assessed on an applicable health plan for any amount of the managed care organization provider taxes that are not paid on the date due at a rate of 10 percent per annum. Interest shall begin to accrue the day after the date the tax payment was due and shall be deposited in the Health and Human Services Special Fund created pursuant to Section 14199.52.
(2)If a tax payment is more than 60 days overdue, a penalty equal to the total accrued interest charge described in paragraph (1) shall also be assessed on the applicable health plan and due for each month for which the tax payment is not received after 60 days.
(g)(1)Subject to paragraph (2), the director may waive a portion or all of either the interest or penalties, or both, assessed under this article in the event that the director determines, in his or her sole discretion, that the health plan has demonstrated that imposition of the full amount of the tax pursuant to the timelines applicable under this article has a high likelihood of creating an undue financial hardship for the health plan or creates a significant financial difficulty in providing needed services to Medi-Cal beneficiaries.
(2)Waiver of some or all of the interest or penalties pursuant to this subdivision shall be conditioned on the health plans agreement to make tax payments on an alternative schedule developed by the department that takes into account the financial situation of the health plan and the potential impact on the delivery of services to Medi-Cal beneficiaries.
(h)In the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees under this article from a health plan to another health plan or similar entity, and that occurs at any time during which this article is operative, the resultant health plan or similar entity shall be responsible for paying the full tax amount as provided in this article that would have been the responsibility of the health plan to which that full tax amount was assessed, upon the effective date of any such transaction. If a merger, acquisition, establishment, or any other similar transaction results in the transfer of health plan responsibility for only some of a health plans countable enrollees under this article but not all countable enrollees, the full tax amount as provided in this article shall remain the responsibility of that health plan to which that full tax amount was assessed.
14199.55.(a)For each fiscal year, the Medi-Cal taxing tiers shall be as follows:
(1)Medi-Cal taxing tier I shall consist of all countable Medi-Cal enrollees in a health plan from zero to 2,000,000, inclusive.
(2)Medi-Cal taxing tier II shall consist of all countable Medi-Cal enrollees in a health plan from 2,000,001 to 4,000,000, inclusive.
(3)Medi-Cal taxing tier III shall consist of all countable Medi-Cal enrollees in a health plan greater than 4,000,000.
(b)For each fiscal year, the other taxing tiers shall be as follows:
(1)Other taxing tier I shall consist of all countable other enrollees in a health plan from zero to 4,000,000, inclusive.
(2)Other taxing tier II shall consist of all countable other enrollees in a health plan from 4,000,001 to 8,000,000, inclusive.
(3)Other taxing tier III shall consist of all countable other enrollees in a health plan greater than 8,000,000.
(c)For each fiscal year, the AHCSP taxing tier shall consist of all countable AHCSP enrollees in a health plan from zero to 8,000,000, inclusive.
(d)For the 201617 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty dollars ($40).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be nineteen dollars ($19).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(e)For the 201617 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be seven dollars and fifty cents ($7.50).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars and fifty cents ($2.50).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(f)For the 201617 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars ($2).
(g)For the 201718 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty-two dollars and fifty cents ($42.50).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be twenty dollars and twenty-five cents ($20.25).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(h)For the 201718 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be eight dollars ($8).
(2)The other per enrollee tax for the other taxing tier II shall be three dollars ($3).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(i)For the 201718 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars and twenty-five cents ($2.25).
(j)For the 201819 fiscal year, the Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier shall be as follows:
(1)The Medi-Cal per enrollee tax for Medi-Cal taxing tier I shall be forty-five dollars ($45).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be twenty-one dollars ($21).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be one dollar ($1).
(k)For the 201819 fiscal year, the other per enrollee tax amount for each other taxing tier shall be as follows:
(1)The other per enrollee tax for the other taxing tier I shall be eight dollars and fifty cents ($8.50).
(2)The other per enrollee tax for the other taxing tier II shall be three dollars and fifty cents ($3.50).
(3)The other per enrollee tax for the other taxing tier III shall be one dollar ($1).
(l)For the 201819 fiscal year, the AHCSP per enrollee tax for the AHCSP taxing tier shall be two dollars and fifty cents ($2.50).
(m)(1)The department may modify or make adjustments to any methodology, tax amount, taxing tier, or other similar provision specified in this article to the extent necessary to meet the requirements of federal law or regulations, obtain federal approval, or to ensure federal financial participation is available provided the modification or adjustment does not otherwise conflict with the purposes of this article. Any modification or adjustment that would result in more than the following aggregate tax amounts for the other enrollees and AHCSP enrollees, combined, shall be considered to conflict with the purposes of this article:
(A)Two hundred sixty-six million dollars ($266,000,000) in the 201617 fiscal year.
(B)Two hundred eighty-seven million dollars ($287,000,000) in the 201718 fiscal year.
(C)Three hundred nine million dollars ($309,000,000) in the 201819 fiscal year.
(2)In implementing any modification or adjustment, the department may only make an adjustment that would result in lowering the amounts in subparagraph (A), (B), or (C) of paragraph (1). Nothing in this subdivision shall limit the authority of the department to make an adjustment that does not impact the amounts in subparagraph (A), (B), or (C) of paragraph (1).
(3)If the department identifies that a modification or adjustment may be necessary in accordance with paragraph (1), the department shall consult with affected health plans, to the extent practicable, to implement that modification or adjustment.
(4)In the event of a modification or adjustment made pursuant to this subdivision, the department shall notify affected health plans, the Joint Legislative Budget Committee, the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days of that modification or adjustment.
(n)The department shall request approval from the federal Centers for Medicare and Medicaid Services as is necessary to implement this article. In making that request, the department may seek, as it deems necessary, a request for waiver of the broad-based requirement, waiver of the uniformity requirement, or both, pursuant to Section 433.68(e)(1) and (2) of Title 42 of the Code of Federal Regulations, or a request for waiver of any other provision of federal law or regulation necessary to implement this article.
(o)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this article by means of provider bulletins, all-plan letters, or other similar instructions, without taking regulatory action. The department shall provide notification to the Joint Legislative Budget Committee and to the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days after the above-described action is taken.
14199.56.This article shall become operative on July 1, 2016, and shall become inoperative on July 1, 2019. As of June 30, 2020, this article is repealed. Notwithstanding this section, a tax and any applicable interest and penalties imposed under this article shall continue to be due and payable until the tax and any applicable interest and penalties are fully paid.
SEC. 6.Section 685.5 of the Insurance Code, and Sections 12202.2 and 24330 of the Revenue and Taxation Code shall become effective and operative on the later of July 1, 2016, or the effective date, certified in writing by the Director of the Health Care Services, of the federal approval necessary for receipt of federal financial participation in conjunction with the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code. The Director of Health Care Services shall post the certification of federal approval on the State Department of Health Care Services Internet Web site and send a copy of the certification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
SEC. 7.Section 685.5 of the Insurance Code, and Sections 12202.2 and 24330 of the Revenue and Taxation Code, and Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code shall cease to be operative the first day of the state fiscal year beginning on or after the date the Director of Health Care Services, in consultation with the Director of Finance, determines that the taxes have not met the intent as outlined in Section 14199.50 of the Welfare and Institutions Code for the purposes of providing funding for health care and prevention, or the state does not have the federal approval necessary for receipt of federal financial participation in conjunction with the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code. The Director of Health Care Services shall post the determination on the State Department of Health Care Services Internet Web site and send a copy of the determination to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
SEC. 8.Section 685.5 of the Insurance Code, Sections 12202.2 and 24330 of the Revenue and Taxation Code, and Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code shall cease to be operative the first day of the state fiscal year beginning on or after the effective date of a final judicial determination made by any court of appellate jurisdiction that Section 685.5 of the Insurance Code, Section 12202.2 or 24330 of the Revenue and Taxation Code, or the tax assessed pursuant to Article 6.7 (commencing with Section 14199.50) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, cannot be implemented. The Director of Health Care Services shall post a notification of that final judicial determination on the State Department of Health Care Services Internet Web site and provide this notification to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, the Legislative Counsel, the State Board of Equalization, the Department of Insurance, and the Executive Officer of the Franchise Tax Board.
SECTION 1.It is the intent of the Legislature to enact statutory changes that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
It is the intent of the Legislature to enact legislation statutory changes that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
It is the intent of the Legislature to enact legislation that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
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Date
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Status
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|---|---|
| Feb 23, 2016 | From printer. |
| Sep 10, 2015 | Senate refused to concur in Assembly amendments. (Ayes 1. Noes 39.) |
| Sep 23, 2015 | Assembly Members Bonta (Co-Chair), Bonilla, Gallagher, Patterson and Santiago appointed to Conference Committee. |
| Sep 24, 2015 | Senators Hernandez (Co-Chair), Leno, Mitchell, Nielsen and Vacancy appointed to Conference Committee. |
| Feb 8, 2016 | Senator Anderson appointed to Conference Committee. |
| Feb 9, 2016 | February 10 hearing postponed by committee. |
| Feb 9, 2016 | Set for hearing February 10. |
| Feb 12, 2016 | Set for hearing February 19. |
| Feb 19, 2016 | Set for hearing February 22. |
| Feb 22, 2016 | From Conference Committee: Be adopted. (Ayes 6: Senators Mitchell, Leno and Hernandez, Assembly Members Bonilla, Santiago and Bonta. Noes 4: Senators Nielsen and Anderson, Assembly Members Gallagher and Patterson) |
| Feb 22, 2016 | To print. |
| Sep 10, 2015 | Senate refused to concur in Assembly amendments. (Ayes 1. Noes 39. Page 77.) |
| Feb 29, 2016 | Assembly adopted Conference Committee report. |
| Feb 29, 2016 | Assembly adopted Conference Committee report. (Ayes 61. Noes 16. Page 161.) |
| Feb 29, 2016 | Assembly adopted Conference Committee report. (Ayes 61. Noes 16.) |
| Feb 29, 2016 | Senate adopted Conference Committee report. (Ayes 28. Noes 11. Page 92.) |
| Feb 29, 2016 | Senate adopted Conference Committee report. (Ayes 28. Noes 11.) |
| Mar 1, 2016 | Approved by the Governor. |
| Mar 1, 2016 | Chaptered by Secretary of State. Chapter 2, Statutes of 2015-16 Second Extraordinary Session. |
| Mar 1, 2016 | Chaptered by Secretary of State. Chapter 2, Statutes of 2016. |
| Mar 1, 2016 | Enrolled and presented to the Governor at 2 p.m. |
| Mar 1, 2016 | Ordered to enrgrossing and enrolling. |
| Sep 4, 2015 | Ordered to third reading. |
| Jul 6, 2015 | Ordered to second reading. |
| Jul 6, 2015 | Read first time. |
| Jul 6, 2015 | To print. |
| Jul 7, 2015 | From printer. |
| Jul 7, 2015 | Read second time. Ordered to third reading. |
| Sep 1, 2015 | In Assembly. Read first time. Held at Desk. |
| Sep 1, 2015 | Read third time. Passed. (Ayes 25. Noes 13. Page 58.) Ordered to the Assembly. |
| Sep 1, 2015 | Read third time. Passed. (Ayes 25. Noes 13.) Ordered to the Assembly. |
| Sep 4, 2015 | Assembly Rule 63 suspended. |
| Sep 4, 2015 | Assembly Rule 63 suspended. (Ayes 52. Noes 28. Page 76.) |
| Jul 6, 2015 | Introduced. |
| Sep 4, 2015 | Read second time and amended. |
| Sep 4, 2015 | Read second time. Ordered to third reading. |
| Sep 4, 2015 | Read third time and amended. |
| Sep 4, 2015 | Without reference to committee or file. |
| Sep 4, 2015 | Without reference to committee. |
| Sep 9, 2015 | In Senate. Concurrence in Assembly amendments pending. |
| Sep 9, 2015 | Read third time. Passed. Ordered to the Senate. |
| Sep 9, 2015 | Read third time. Passed. (Ayes 53. Noes 1. Page 89.) Ordered to the Senate. |
| Sep 10, 2015 | Ordered to Conference Committee. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Feb 29, 2016 | SB 2 Hernandez Conference Report By BONTA Second Extraordinary Session | Assembly Floor |
Passed |
|
| Feb 29, 2016 | Conference Report SB2 Hernandez | Senate Floor |
Passed |
|
| Sep 10, 2015 | Unfinished Business SB2 Hernandez Concurrence | Senate Floor |
Failed |
|
| Sep 9, 2015 | SB 2 Hernandez Senate Third Reading By BONTA Second Extraordinary Session | Assembly Floor |
Passed |
|
| Sep 1, 2015 | Senate 3rd Reading SB2 Hernandez | Senate Floor |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Alameda County Developmental Disabilities Council | * Support | Feb 22, 2016 |
| Anthem | ** Support | Feb 29, 2016 |
| Association Of Regional Center Agencies | ** Support | Feb 29, 2016 |
| Barton Health | ** Support | Feb 29, 2016 |
| Bay Area Council | ** Support | Feb 29, 2016 |
| Blue Shield Of California | ** Support | Feb 29, 2016 |
| Brea Chamber of Commerce | ** Support | Feb 29, 2016 |
| Cal-TASH | ** Support | Feb 29, 2016 |
| California Association of Health Facilities Developmental Services Conference | ** Support | Feb 29, 2016 |
| California Association Of Health Plans | ** Support | Feb 29, 2016 |
| California Chamber Of Commerce | ** Support | Feb 29, 2016 |
| California Disability Services Association | ** Support | Feb 29, 2016 |
| California Hospital Association | ** Support | Feb 29, 2016 |
| California Respite Association | ** Support | Feb 29, 2016 |
| California State Association Of Counties | ** Support | Feb 29, 2016 |
| California State Council on Developmental Disabilities | ** Support | Feb 29, 2016 |
| California Supported Living Network | ** Support | Feb 29, 2016 |
| Choices in Sacramento | * Support | Feb 22, 2016 |
| Choices Person-Centered Services | * Support | Feb 22, 2016 |
| Coalinga Regional Medical Center | ** Support | Feb 29, 2016 |
| Community Regional Medical Center | ** Support | Feb 29, 2016 |
| Developmental Services Network | ** Support | Feb 29, 2016 |
| Disability Rights California | ** Support | Feb 29, 2016 |
| Easter Seals Disability Services | ** Support | Feb 29, 2016 |
| Eastern Plumas Health Care | ** Support | Feb 29, 2016 |
| Educate.Advocate. | ** Support | Feb 29, 2016 |
| Family Resource Centers Network of California | ** Support | Feb 29, 2016 |
| Gatepath | * Support | Feb 22, 2016 |
| George L. Mee Memorial Hospital | ** Support | Feb 29, 2016 |
| Health Access California | ** Support | Feb 29, 2016 |
| Health Net | ** Support | Feb 29, 2016 |
| IDA California | ** Support | Feb 29, 2016 |
| Infant Development Association of California | * Support | Feb 22, 2016 |
| Jewish Home of San Francisco | ** Support | Feb 29, 2016 |
| Kaweah Delta Health Care District | ** Support | Feb 29, 2016 |
| Kern Valley Healthcare District | ** Support | Feb 29, 2016 |
| Local Health Plans Of California | ** Support | Feb 29, 2016 |
| Los Angeles Area Chamber Of Commerce | ** Support | Feb 29, 2016 |
| Mayers Memorial Hospital District | ** Support | Feb 29, 2016 |
| Modoc Medical Center | ** Support | Feb 29, 2016 |
| Motion Picture & Television Fund | ** Support | Feb 29, 2016 |
| Mountains Community Hospital | ** Support | Feb 29, 2016 |
| North Orange County Chamber | ** Support | Feb 29, 2016 |
| Orchard Hospital | ** Support | Feb 29, 2016 |
| Palomar Health | ** Support | Feb 29, 2016 |
| People First of California | ** Support | Feb 29, 2016 |
| Person-Centered Services Partnership | * Support | Feb 22, 2016 |
| Rancho Cordova Chamber of Commerce | ** Support | Feb 29, 2016 |
| ResCoalition | ** Support | Feb 29, 2016 |
| Seneca Healthcare District | ** Support | Feb 29, 2016 |
| Sharp Healthcare | ** Support | Feb 29, 2016 |
| SoCal Association of People Supporting Employment First | ** Support | Feb 29, 2016 |
| Sonora Regional Medical Center | ** Support | Feb 29, 2016 |
| Southwest California Legislative Council | ** Support | Feb 29, 2016 |
| Tahoe Forest Hospital District | ** Support | Feb 29, 2016 |
| The Arc California | ** Support | Feb 29, 2016 |
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | SBX2 2 |
CONFERENCE REPORT NO. 1
Bill No: SBX2 2
Proposed: 2/22/16
CONFERENCE COMMITTEE: 6-4, 2/22/16
AYES: Senator Mitchell, Senator Leno, Senator Hernandez, Assemblymember Bonilla, Assemblymember Santiago, Assemblymember Bonta
NOES: Senator Nielsen, Senator Anderson, Assemblymember Gallagher, Assemblymember Patterson
SUBJECT: Medi-Cal: managed care organization provider tax
DIGEST:
This bill imposes a three-year managed care organization provider tax (MCO tax) on health plans, with different taxing tiers and based on enrollment assessed during a base year period of October 1, 2014 through September 30, 2015. Continuously appropriates funds from the MCO tax for purposes of funding the nonfederal share of Medi-Cal managed care rates. Reduces the amount of the Corporate or Gross Premium taxes that specified health plans and insurers are required to pay for the three years of the MCO tax assessment. Sunsets these provisions on June 30, 2020.
Conference Committee Amendments delete the prior version of the bill and insert the current language.
Existing law:
- Establishes the Medi-Cal program, administered by the Department of Health Care Services (DHCS), under which health care services are provided to approximately 13 million qualified, low-income persons. Under existing law, one of the methods by which Medi-Cal services are provided is through contracts with various types of MCOs.
- Imposes a 3.9 % tax on the total revenue of Medi-Cal MCOs until July 1, 2016. The Department of Managed Health Care (DMHC) licenses and regulates health care service plans (health plans) and the California Department of Insurance (CDI), regulates insurers, including health insurers. Depending upon the structure, a health plan or insurer will pay either the Corporation Tax Law, which applies a tax rate of 8.84% on the apportioned net income of a corporation with a taxable nexus to California, or a minimum franchise tax of $800, whichever is more; or a Gross Premiums Tax (GPT) at a rate of 2.35% of gross premium income, in lieu of all other taxes, except for real estate taxes, motor vehicle license fees, and retaliatory exactions.
This bill:
1) Establishes a new MCO tax, to be administered by DHCS, for three fiscal years (FYs) 2016-17, 2017-18, and 2018-19.
2) Assesses the MCO tax on health plans and entities contracted with DHCS to provide Medi-Cal services (county organized health services are contracted to provide Medi-Cal services but are not all licensed as health plans). Excludes from the MCO tax a health plan that provides only specialized or discount services, international plans, as specified, and a plan owned and operated by a nonprofit hospital or health system or multiple hospitals or health systems, headquartered in Sacramento or San Diego County, as specified.
3) Defines as the base year for purposes of assessing the MCO tax the 12-month period of October 1, 2014 through September 30, 2015.
4) Defines for purposes of assessing the MCO tax, countable enrollee as an individual enrolled in a health plan, as defined, during a month of the base year according to the base data source. Countable enrollee does not include an individual enrolled in a Medicare plan, a plan-to-plan enrollee, as defined, or an individual enrolled in a Federal Employee Health Plan (FEHP), to the extent the imposition of the tax under this bill is preempted, as specified.
5) Establishes applicable taxing tiers and per enrollee tax amounts for FYs 2016-17, 2017-18, and 2018-19 for health plans and an alternate health care service plan (AHCSP), defined as, a non-profit health plan with at least four million enrollees statewide, that owns or operates pharmacies, and provides professional medical services to enrollees in specific geographic regions through an exclusive contract with a single medical group in each specific geographic regions in which it is licensed.
6) Prohibits DHCS from collecting the MCO tax until DHCS receives approval from federal Centers for Medicare and Medicaid Services (CMS) that this is a permissible health care-related tax, as specified in federal regulations. Requires, on October 1, 2016, or the date DHCS receives such federal approval from CMS, whichever is later, certain activities to occur, such as certification by DHCS that approval was obtained and notification to the affected plans of the approval, payment schedule and other details related to the payment of the tax.
7) Requires DHCS to determine for each health plan, other than excluded plans, using the base data source all of the following:
a) Total cumulative enrollment for the base year;
b) Total Medicare cumulative enrollment for the base year;
c) Total Medi-Cal cumulative enrollment for the base year;
d) Total plan-to-plan cumulative enrollment for the base year;
e) Total cumulative enrollment through the FEHP for the base year; and,
f) Total other cumulative enrollment for the base year that is not otherwise counted in b) through e), inclusive.
8) Requires, in the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees from a health plan to another health plan or similar entity, and that occurs at any time during which this MCO tax is operative, the resultant health plan or similar entity to be responsible for paying the full tax amount provided in this bill that would have been the responsibility of the health plan to which that full tax amount was assessed, upon the effective date of any transaction. Specifies that if a transaction transfers responsibility for some of a health plan’s countable enrollees but not all countable enrollees, the full tax amount as provided in this bill remains the responsibility of that health plan to which that full tax amount was assessed.
9) Permits DHCS to modify or make adjustments to any methodology, tax amount, taxing tier, or other similar provision to the extent necessary to meet the requirements of federal law or regulation, obtain federal approval, or to ensure federal financial participation is available provided the modification or adjustment does not otherwise conflict with this bill’s purposes.
10) Requires any modification or adjustment that would result in more than the following aggregate tax amounts for the other enrollees and AHCSP enrollees combined, to be considered in conflict with the purposes of this bill:
a) $266 million in the 2016-17 FY.
b) $287 million in the 2017-18 FY.
c) $309 million in the 2018-19 FY.
11) Authorizes DHCS in implementing any modification or adjustment, to only make an adjustment that would result in lowering the amounts in #10) above. States that this does not limit DHCS’ authority to make an adjustment that does not impact the amount in #10) above.
12) Establishes the Health and Human Services Fund (fund) in the State Treasury, and requires all revenues, less refunds, derived from the MCO tax to be deposited to the credit of the fund. Requires interest and dividends to be retained in the fund. Requires a continuous appropriation, without regard to fiscal year, for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to children, adults, seniors and persons with disabilities, and persons dually eligible for Medi-Cal and Medicare.
13) Requires DHCS to provide an annual report to all health plans accounting for the funds deposited in and expended from the fund in a time and manner as deemed appropriate by the director. Requires the report to identify the MCO tax imposed on each health plan, and to provide an itemized accounting of expenditures.
14) Permits DHCS to implement this bill by means of provider bulletins, all-plan letters, or other similar instructions, without taking regulatory action. Requires DHCS to notify the Joint Legislative Budget Committee and the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days after approval from CMS has been obtained, and also in the event of a modification or adjustment.
15) Makes the MCO tax provisions operative on July 1, 2016, and inoperative on July 1, 2019. Repeals the MCO provisions on June 30, 2020. Requires, notwithstanding this provision, the MCO tax and any applicable interest and penalties imposed under this bill to continue to be due and payable until the tax and any applicable interest and penalties are fully paid.
16) Excludes the income of a health plan subject to the MCO tax, as defined, for Corporation Tax purposes. Specifically, this bill excludes the health plan’s income properly accrued with respect to enrollment or services occurring between July 1, 2016 and June 30, 2019. To be eligible for the exclusion, the revenue must be associated with the plan’s operation, and subject to current requirements for the plan to report to DMHC, as specified, including:
a) Premiums (commercial);
b) Co-payments, continuation of benefits, Subrogation;
c) Medicaid;
d) Point-of-Service premiums;
e) Risk pool revenue;
f) Capitation payments;
g) Medicare;
h) Fee-for-service;
i) Interest, and,
j) Aggregate write-ins for other revenues, including capital gains and other investment income.
17) Excludes health plans whose entire income is excluded by this bill from the $800 minimum franchise tax.
18) Requires DMHC to provide specified information to the Franchise Tax Board (FTB) regarding each plan subject to the MCO tax by December 1, 2016, and annually thereafter. Allows FTB to prescribe rules, guidelines, or procedures to implement this bill, which are exempt from the Administrative Procedures Act.
19) States the intent of the Legislature that FTB Legal Ruling 2006-01 apply to apportionment factors attributable to income excluded by this bill.
20) Sets a GPT rate of zero on premiums received for the provision of health insurance, as defined. Limits the zero rate only to insurers that provide health insurance that has a corporate affiliate that is a health plan, meaning the insurer is directly or indirectly, controlled by, under common control with, or controls a health plan, and, that is:
a) Licensed by DMHC, or who contracts with DHCS to provide Medi-Cal services,
b) Had at least one enrollee enrolled in the health plan in the base year, not including Medicare plan enrollees, individuals who receive health care services under subcontract with another plan, or enrollees under the Federal Employees Health Benefits Act, and,
c) Subject to the MCO tax.
21) Directs the Insurance Commissioner not to consider the zero GPT rate as part of any determination to impose or enforce a retaliatory insurance tax.
22) Requires the provisions of this bill to cease to be operative for each taxable year beginning on or after the date the DHCS director, in consultation with the Director of Finance, determines the taxes have not met the intent for purposes of providing funding for health care and prevention or the state does not have federal approval necessary for receipt of federal financial participation; or on or after the effective date of a final judicial determination made by any court of appellate jurisdiction that the provisions of this bill cannot be implemented. Requires the director to post notification to this effect.
23) Provides that this bill’s changes to the GPT and Corporation Tax become effective and operative on the latter of July 1, 2016, or the effective date certified in writing by the DHCS director of federal approval of the MCO tax. The director must post certification of federal approval on DHCS’s website, and send notice to the Secretary of State, Secretary of the Senate, the Chief Clerk of the Assembly, Legislative Counsel, the State Board of Equalization, CDI, and FTB’s Executive Officer.
24) Renders the tax provisions in effect until December 1, 2019, and repeals them on June 30, 2020.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No
Anthem
Association of Regional Center Agencies
Barton Health
Bay Area Council
Blue Shield of California
Brea Chamber of Commerce
California Association of Health Facilities Developmental Services Conference
California Association of Health Plans
California Chamber of Commerce
California Disability Services Association
California Hospital Association
California Respite Association
California State Association of Counties
California State Council on Developmental Disabilities
California Supported Living Network
Cal-TASH
Coalinga Regional Medical Center
Community Regional Medical Center
Developmental Services Network
Disability Rights California
Easter Seals Disability Services
Eastern Plumas Health Care
Educate.Advocate.
Family Resource Centers Network of California
George L. Mee Memorial Hospital
Health Access California
Health Net
IDA California
Jewish Home of San Francisco
Kaweah Delta Health Care District
Kern Valley Healthcare District
Lanterman Coalition
Mayers Memorial Hospital District
Modoc Medical Center
Mountains Community Hospital
Local Health Plans of California
Los Angeles Area Chamber of Commerce
Motion Picture & Television Fund
North Orange County Chamber
Orchard Hospital
Palomar Health
People First of California
Rancho Cordova Chamber of Commerce
ResCoalition
Seneca Healthcare District
Service Employees International Union
Sharp HealthCare
SoCal Association of People Supporting Employment First
Sonora Regional Medical Center
Southwest California Legislative Council
Tahoe Forest Hospital District
The Alliance
The Arc California
United Cerebral Palsy California Collaboration
Western Center on Law & Poverty
OPPOSITION: (Verified 2/24/16)
None received
Prepared by: Teri Boughton / P.H. & D.S. /
2/26/16 14:07:38
**** END ****
PROPOSED CONFERENCE REPORT NO. 1
- February 22, 2016
SCC Bill Id:SB 2 X2
Author:(Hernandez)
As Amended Ver:September 4, 2015
2/3 vote
SENATE: |
| (September 10, 2015) | ASSEMBLY: |
| (September 9, 2015) |
(vote not relevant) (vote not relevant)
SENATE CONFERENCE VOTE: 3-2 ASSEMBLY CONFERENCE VOTE: 3-2
Ayes: | Ayes: | ||
Noes: | Noes: |
Original Committee Reference: Not relevant
SUMMARY: Reforms the existing managed care organization (MCO) provider tax that is only paid by Medi-Cal managed care plans (MCPs) and replaces it with a tax that would be assessed on health care service plans licensed by the Department of Managed Health Care (DMHC), and/or managed care plans contracted with the Department of Health Care Services (DHCS) to provide services to Medi-Cal beneficiaries, unless exempted, from July 1, 2016 to July 1, 2019 Specifically, the conference committee amendments:
- Specify it is the intent of the Legislature that DHCS implement an MCO provider tax, effective July 1, 2016, to provide ongoing funding for health care and prevention, and minimize any need for new reductions to the program, and meet all of the following goals: a) generate an amount of nonfederal funds for the Medi-Cal program, equivalent to the sales tax currently imposed on MCPs; and, b) comply with federal Medicaid requirements, as specified.
- Define various terms, including the following:
- Alternate Health Care Service Plan (AHCSP) is a nonprofit health care service plan with at least 4 million enrollees statewide, that owns or operates pharmacies, and provides professional medical services to enrollees in specific geographic regions through an exclusive contract with a single medical group in each geographic region in which it is licensed;
- AHCSP enrollee is an individual enrolled in an AHCSP, who is not a Medi-Cal beneficiary;
- Base year means the 12-month period of October 1, 2014 through September 30, 2015;
- Base data source means the quarterly financial statement filings submitted by health plans to DMHC retrieved by DHCS as of January 1, 2016, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by DHCS and retrieved as of January 1, 2016:
- Countable enrollee means an individual enrolled in a health plan, during a month of the base year according to the base data source. Excludes from this definition an individual enrolled in a Medicare plan, a plan-to plan enrollee, or an individual enrolled in a health plan pursuant to the Federal Employees Health Benefits Act of 1959;
- Exclude plan means a prepaid health plan operating under the laws of Mexico or a health plan owned and operated by a 501(c)(3) hospitals or health systems if that health plan has both a substantial amount of its enrollment in and is headquartered in either the County of Sacramento or San Diego;
- Health care service plan or health plan is a health care service plan, other than a plan that provides only specialized or discount services, that is licensed by DMHC under the Knox-Keene Health Care Service Plan Act of 1975 or a managed care plan contracted with DHCS to provide Medi-Cal services;
- Medi-Cal enrollee is an individual enrolled in a health plan who is a Medi-Cal beneficiary for whom DHCS directly pays the health plan in a capitated payment;
- Other enrollee means an individual enrolled in a health plan who is not a Medi-Cal beneficiary or an AHCSP enrollee; and,
- Plan to plan enrollee means an individual who receives his or her health care services through a health plan pursuant to a subcontract from another health plan.
- Impose a MCO provider tax on each health plan, unless excluded, for the following fiscal years (FY): a) 2016-17; b) 2017-18; and, 2018-19.
- Specify the following Medi-Cal taxing tiers:
Enrollees | 2016-17 | 2017-18 | 2018-19 |
0 to 2,000,000 | $40.00 | $42.50 | $45.00 |
2,000,001 to 4,000,000 | $19.00 | $20.25 | $21.00 |
Over 4,000,000 | $1.00 | $1.00 | $1.00 |
- Specify the following other taxing tiers:
Enrollees | 2016-17 | 2017-18 | 2018-19 |
0 to 4,000,000 | $7.50 | $8.00 | $8.50 |
4,000,001 to 8,000,000 | $2.50 | $3.00 | $3.50 |
Over 8,000,000 | $1.00 | $1.00 | $1.00 |
- Establish the following taxing tier for AHCSP (Kaiser):
Enrollees | 2016-17 | 2017-18 | 2018-19 |
0 to 8,000,000 | $2.00 | $2.25 | $2.50 |
- Establish the Health and Human Services Special Fund (HHSS Fund) where all revenues, less refunds derived from the taxes specified in this bill, would be deposited to the credit of the HHSS Fund. Requires that any interest and dividends earned on moneys to be retained in the HHSS Fund for funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to children, adults, seniors and persons with disabilities, and persons dually eligible for Medi-Cal and Medicare.
- Require DHCS to provide an annual report to all health plans accounting for the funds deposited in and expended from the HHSS Fund, as determined by the DHCS Director. Require the report to identify the taxes imposed on each health plan and provide an itemized accounting of expenditures from the HHSS Fund.
- Require DHCS to determine for each health plan using the base data source all of the following: a) total cumulative enrollment for the base year; b) total Medicare cumulative enrollment for the base year; c) total Medi-Cal cumulative enrollment for the base year; d) total plan-to-plan cumulative enrollment for the base year; e) total cumulative enrollment through the Federal Employees Health Benefits Act of 1959; and, f) total cumulative enrollment for the base year that is not otherwise counted in b) to e). Authorizes the DHCS Director to correct any identified material or significant errors in the data. Specifies that the DHCS Director's determination on whether to exercise discretion and any determination made by the DHCS Director is not subject to judicial review, as specified. Authorizes a health plan to bring a writ of mandate to rectify an abuse of discretion relating to the data specified above.
- Require DHCS to compute the annual tax for each health plan subject to the tax, as specified.
- Require DHCS to collect the annual tax in four installments and to determine the amount due for each installment in the state FY by dividing the annual tax for that state FY by four.
- Prohibit DHCS from collecting the tax until it has received approval from the federal Centers for Medicare and Medicaid Services (CMS) that the tax is a permissible health care-related tax and is eligible for federal financial participation (FFP).
- Require, on October 1, 2016, or the date DHCS receives the federal approval, whichever is later, the following to commence:
- The DHCS Director to certify in writing that the federal approval was received and within five business days, the DHCS to post the certification on its Internet Website and send a copy of the certification to the Legislature and Legislative Counsel;
- By October 14, 2016 or within 10 business days following receipt of the notice of federal approval, whichever is later, DHCS to send a notice to each health plan subject to the tax, to contain: i) the annual tax due for each FY; and, ii) the dates on which the four installment tax payments are due;
- Requires a health plan to pay the annual tax in installments, based on a schedule developed by DHCS. Requires DHCS to establish the date that each tax payment is due, provided that the first tax payment is due no earlier than 20 days following the date the department sends the notice specified in b) above, and the tax payments to be paid at least one month apart, but no more than one quarter apart;
- A health plan to pay the taxes that are due, in the amounts and at times set forth in the notice, as specified. The taxes assessed to be deposited in the HHSS Fund; and,
- Interest accrues the day after the date the tax payment is due. Interest will be assessed for any amount that is not paid on the due date at a rate of 10% per annum. Provides that if a tax payment is more than 60 days overdue, a penalty shall be assessed for each month for which tax payment is not received after 60 days. Authorizes the DHCS Director to waive a portion or all of the interest or penalties or both, if the DHCS Director determines that the imposition of the full amount of the tax pursuant to the timelines has a high likelihood of creating an undue financial hardship for the health plan or creates a significant financial difficulty in providing needed services to Medi-Cal beneficiaries. Conditions a waiver of the interest or penalties on the health plan's agreement to make tax payments on an alternative schedule that takes into account the financial situation of the health plan and the potential impact on the delivery of services to Medi-Cal beneficiaries.
- Provide that in the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees from a health plan to another health plan or similar entity, the resultant health plan shall be responsible for paying the full tax amount upon the effective date of such transaction. If a merger or acquisition results in the transfer of health plan responsibility for only some of a health plan's countable enrollees, the full tax amount shall remain the responsibility of the health plan to which that full tax amount was assessed.
- Authorize DHCS to modify or adjust the methodology, tax amount, taxing tier or other similar provision to the extent necessary to meet the requirements of federal law or regulations, obtain federal approval, or to ensure FFP is available, as specified. Specifies that any modification or adjustment that would be higher than the following aggregate amounts for the other enrollees and AHCSP enrollees, combined, would be in conflict with this measure:
- $266,000,000 in the 2016-17 FY;
- $287,000,000 in the 2017-18 FY; and,
- $309,000,000 in the 2018-19 FY.
- Authorize DHCS to make an adjustment that would result in lowering the amounts in 15) above. States that nothing would limit the authority of DHCS to make an adjustment that does not impact the amounts in 15) above.
- Require, if DHCS identifies that a modification or adjustment may be necessary under 15) above, to consult with affected health plans, to the extent practicable, to implement that modification or adjustment. Requires DHCS to notify affected health plans, and the Legislature within 10 business days of the modification or adjustment.
- Require DHCS to request approval from CMS to implement this bill. Authorize DHCS to request a waiver of the broad-based and uniformity requirements, as specified.
- Authorize DHCS to implement the provisions of this bill outside of the administrative rulemaking process and to implement this measure pursuant to provider bulletins, all plan letters, or other similar instructions. Require DHCS to notify specified committees of the Legislature within 10 business days of such action.
- Establish a the gross premiums tax (GPT) rate of 0% for premiums received for the provision of health insurance on or after July 1, 2016, and on or before June 30, 2019. Limits the application of this GPT rate to premiums received by an insurer that provides health insurance and has a corporate affiliate, which is either a "health care service plan" or "health plan" that meets the following requirements:
- Is licensed by DMHC or is a MCP;
- Has had at least one enrollee enrolled in the health plan in the base year, as defined, not including individuals who are enrolled in a Medicare plan, who receive health care services through a health plan pursuant to a subcontract from another health plan or who are enrollees through the Federal Employees Health Benefits Act of 1959, as specified; and,
- Is subject to the MCO provider tax imposed by this bill.
- Define an insurer that has a corporate affiliate as a health care service plan or health plan as an "insurer that is, directly or indirectly, controlled by, under common control with, or controls a health care service plan".
- Prohibit the Insurance Commissioner from considering the reduction of the GPT rate authorized by this bill in any determination to impose or enforce a tax under the relevant retaliatory tax provisions of the Insurance Code and the Revenue and Taxation Code.
- Exclude from the definition of "gross income," under the Corporation Tax (CT) Law, the qualified health care service plan income of a health plan that is subject to the MCO provider tax. Specifies that the income must properly accrue with respect to enrollment or services that occur on or after July 1, 2016, and on or before June 30, 2019. Defines a "qualified health care service plan" as a health care service plan that: a) is licensed by DMHC or is a MCP, and, b) subject to the MCO provider tax imposed by this bill.
- Define "qualified health care service plan income" as any of the following revenue associated with the operation of a qualified health care service plan and required to be reported to the DMHC, including the following:
- Premiums (commercial);
- Copayments, coordination of benefits, and subrogation;
- Title XIX Medicaid;
- Point-of-Service Premiums;
- Risk pool revenue;
- Capitation payments;
- Title XVIII Medicare;
- Fee-for-service (FFS);
- Interest; and,
- Aggregate write-ins for other revenues, including capital gains and other investment income.
- Require DHCS to submit to the Franchise Tax Board (FTB), no later than December 1, 2016, information regarding every health care service plan that is subject to the tax, as specified. Require the information to include the corporate name, address, and calendar period for which each health care service plan is subject to the MCO provider tax.
- Exempt from the minimum franchise tax, a qualified health care service plan with no income other than the excluded qualified health care service plan income.
- Authorize the FTB to prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of the provisions relating to the gross income exclusion for health care service plans. Exempt the FTB from the administrative rulemaking process.
- Provide Legislative intent that the FTB Legal Ruling 2006-01 of April 28, 2006 regarding the treatment of apportionment factors attributable to income exempt from taxation shall apply to the apportionment factors attributable to the income of qualified health care service plans excluded by this bill.
- Sunset this measure on July 1, 2019, and as of June 30, 2020, is repealed. State that any tax and applicable interest and penalties imposed under this bill continues to be due and payable until the tax and any applicable interest and penalties are fully paid.
- Provide that this bill's reduction in the GPT rate and gross income exclusion shall become operative on the later of July 1, 2016, or the effective date of the federal approval necessary for receipt of federal financial participation in conjunction with the new MCO provider tax.
- Provide that this bill's tax law modifications shall cease to operate on the first day of the first FY beginning on or after:
- The date the Director of DHCS, in consultation with the Director of the Department of Finance, determines that the taxes have not met their goal of providing funding for health care and prevention, or the state does not have the federal approval necessary for receipt of FFP; or,
- The effective date of a final judicial determination made by a court of appellate jurisdiction that any of the tax law modifications cannot be implemented.
SUPPORT (Verified 02/25/2016 12:49 p.m.)
Anthem Blue Cross
Autism Health Insurance Project
Barton Memorial Hospital
Bay Area Council
Bear Valley Community Healthcare District
Blue Shield of California
Brea Chamber
California Academy of Family Physicians
California Association of Health Facilities
California Association of Health Plans
California Chamber of Commerce
California Chapter of the American College of Physicians Services
California Dental Association
California Hospital Association
California Medical Association
California Orthotics and Prosthetics Association
California Person Centered Advocacy Partnership
California Society of Anesthesiologists
California State Association of Counties
Catalina Island Medical Center
Center for Autism and Related Disorders
Coalinga Regional Medical Center
Community Medical Centers
County Health Executives Association of California
Dignity Health
District Hospital Leadership Forum
Eastern Plumas Health Care
East Bay Developmental Disabilities Legislative Coalition
Health Access California
Health Net
Hearing Healthcare Providers California
Infant Development Association of California
Jewish Home of San Francisco
Kaweah Delta Health Care District
Lanterman Coalition
LA Care Health Plan
Local Health Plans of California
Los Angeles Area Chamber of Commerce
Mayers Memorial Hospital District
Mee Memorial Hospital
Modoc Medical Center
Molina Healthcare of California
Motion Picture and Television Fund Hospital
North Orange County Chamber
Nurse Family Partnership
Orchard Hospital
Palomar Health
Planned Parenthood Affiliates of California
Rancho Cordova Chamber of Commerce
Regional Center of the East Bay
San Bernardino Mountains Community Hospital District
Seneca Healthcare District
Sharp HealthCare
Sonora Regional Medical Center
Southwest California Legislative Council
Special Needs Network, Inc.
State Council on Developmental Disabilities
Sutter Health
Tahoe Forest Hospital District
Urban Counties of California
Western Center on Law and Poverty
OPPOSITION (Verified 02/25/2016 12:49 p.m.)
None on file.
Analysis Prepared by: Rosielyn Pulmano / P.H. & D.S. / (916) 319-2097 FN: 0002624
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | SBX2 2 |
CONFERENCE REPORT NO. 1
Bill No: SBX2 2
Proposed: 2/22/16
CONFERENCE COMMITTEE: 6-4, 2/22/16
AYES: Senator Mitchell, Senator Leno, Senator Hernandez, Assemblymember Bonilla, Assemblymember Santiago, Assemblymember Bonta
NOES: Senator Nielsen, Senator Anderson, Assemblymember Gallagher, Assemblymember Patterson
SUBJECT: Medi-Cal: managed care organization provider tax
DIGEST:
This bill imposes a three-year managed care organization provider tax (MCO tax) on health plans, with different taxing tiers and based on enrollment assessed during a base year period of October 1, 2014 through September 30, 2015. Continuously appropriates funds from the MCO tax for purposes of funding the nonfederal share of Medi-Cal managed care rates. Reduces the amount of the Corporate or Gross Premium taxes that specified health plans and insurers are required to pay for the three years of the MCO tax assessment. Sunsets these provisions on June 30, 2020.
Conference Committee Amendments delete the prior version of the bill and insert the current language.
Existing law:
- Establishes the Medi-Cal program, administered by the Department of Health Care Services (DHCS), under which health care services are provided to approximately 13 million qualified, low-income persons. Under existing law, one of the methods by which Medi-Cal services are provided is through contracts with various types of MCOs.
- Imposes a 3.9 % tax on the total revenue of Medi-Cal MCOs until July 1, 2016. The Department of Managed Health Care (DMHC) licenses and regulates health care service plans (health plans) and the California Department of Insurance (CDI), regulates insurers, including health insurers. Depending upon the structure, a health plan or insurer will pay either the Corporation Tax Law, which applies a tax rate of 8.84% on the apportioned net income of a corporation with a taxable nexus to California, or a minimum franchise tax of $800, whichever is more; or a Gross Premiums Tax (GPT) at a rate of 2.35% of gross premium income, in lieu of all other taxes, except for real estate taxes, motor vehicle license fees, and retaliatory exactions.
This bill:
1) Establishes a new MCO tax, to be administered by DHCS, for three fiscal years (FYs) 2016-17, 2017-18, and 2018-19.
2) Assesses the MCO tax on health plans and entities contracted with DHCS to provide Medi-Cal services (county organized health services are contracted to provide Medi-Cal services but are not all licensed as health plans). Excludes from the MCO tax a health plan that provides only specialized or discount services, international plans, as specified, and a plan owned and operated by a nonprofit hospital or health system or multiple hospitals or health systems, headquartered in Sacramento or San Diego County, as specified.
3) Defines as the base year for purposes of assessing the MCO tax the 12-month period of October 1, 2014 through September 30, 2015.
4) Defines for purposes of assessing the MCO tax, countable enrollee as an individual enrolled in a health plan, as defined, during a month of the base year according to the base data source. Countable enrollee does not include an individual enrolled in a Medicare plan, a plan-to-plan enrollee, as defined, or an individual enrolled in a Federal Employee Health Plan (FEHP), to the extent the imposition of the tax under this bill is preempted, as specified.
5) Establishes applicable taxing tiers and per enrollee tax amounts for FYs 2016-17, 2017-18, and 2018-19 for health plans and an alternate health care service plan (AHCSP), defined as, a non-profit health plan with at least four million enrollees statewide, that owns or operates pharmacies, and provides professional medical services to enrollees in specific geographic regions through an exclusive contract with a single medical group in each specific geographic regions in which it is licensed.
6) Prohibits DHCS from collecting the MCO tax until DHCS receives approval from federal Centers for Medicare and Medicaid Services (CMS) that this is a permissible health care-related tax, as specified in federal regulations. Requires, on October 1, 2016, or the date DHCS receives such federal approval from CMS, whichever is later, certain activities to occur, such as certification by DHCS that approval was obtained and notification to the affected plans of the approval, payment schedule and other details related to the payment of the tax.
7) Requires DHCS to determine for each health plan, other than excluded plans, using the base data source all of the following:
a) Total cumulative enrollment for the base year;
b) Total Medicare cumulative enrollment for the base year;
c) Total Medi-Cal cumulative enrollment for the base year;
d) Total plan-to-plan cumulative enrollment for the base year;
e) Total cumulative enrollment through the FEHP for the base year; and,
f) Total other cumulative enrollment for the base year that is not otherwise counted in b) through e), inclusive.
8) Requires, in the event of a merger, acquisition, establishment, or any other similar transaction that results in the transfer of health plan responsibility for all countable enrollees from a health plan to another health plan or similar entity, and that occurs at any time during which this MCO tax is operative, the resultant health plan or similar entity to be responsible for paying the full tax amount provided in this bill that would have been the responsibility of the health plan to which that full tax amount was assessed, upon the effective date of any transaction. Specifies that if a transaction transfers responsibility for some of a health plan’s countable enrollees but not all countable enrollees, the full tax amount as provided in this bill remains the responsibility of that health plan to which that full tax amount was assessed.
9) Permits DHCS to modify or make adjustments to any methodology, tax amount, taxing tier, or other similar provision to the extent necessary to meet the requirements of federal law or regulation, obtain federal approval, or to ensure federal financial participation is available provided the modification or adjustment does not otherwise conflict with this bill’s purposes.
10) Requires any modification or adjustment that would result in more than the following aggregate tax amounts for the other enrollees and AHCSP enrollees combined, to be considered in conflict with the purposes of this bill:
a) $266 million in the 2016-17 FY.
b) $287 million in the 2017-18 FY.
c) $309 million in the 2018-19 FY.
11) Authorizes DHCS in implementing any modification or adjustment, to only make an adjustment that would result in lowering the amounts in #10) above. States that this does not limit DHCS’ authority to make an adjustment that does not impact the amount in #10) above.
12) Establishes the Health and Human Services Fund (fund) in the State Treasury, and requires all revenues, less refunds, derived from the MCO tax to be deposited to the credit of the fund. Requires interest and dividends to be retained in the fund. Requires a continuous appropriation, without regard to fiscal year, for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services furnished to children, adults, seniors and persons with disabilities, and persons dually eligible for Medi-Cal and Medicare.
13) Requires DHCS to provide an annual report to all health plans accounting for the funds deposited in and expended from the fund in a time and manner as deemed appropriate by the director. Requires the report to identify the MCO tax imposed on each health plan, and to provide an itemized accounting of expenditures.
14) Permits DHCS to implement this bill by means of provider bulletins, all-plan letters, or other similar instructions, without taking regulatory action. Requires DHCS to notify the Joint Legislative Budget Committee and the Senate Committees on Appropriations, Budget and Fiscal Review, and Health, and the Assembly Committees on Appropriations, Budget, and Health within 10 business days after approval from CMS has been obtained, and also in the event of a modification or adjustment.
15) Makes the MCO tax provisions operative on July 1, 2016, and inoperative on July 1, 2019. Repeals the MCO provisions on June 30, 2020. Requires, notwithstanding this provision, the MCO tax and any applicable interest and penalties imposed under this bill to continue to be due and payable until the tax and any applicable interest and penalties are fully paid.
16) Excludes the income of a health plan subject to the MCO tax, as defined, for Corporation Tax purposes. Specifically, this bill excludes the health plan’s income properly accrued with respect to enrollment or services occurring between July 1, 2016 and June 30, 2019. To be eligible for the exclusion, the revenue must be associated with the plan’s operation, and subject to current requirements for the plan to report to DMHC, as specified, including:
a) Premiums (commercial);
b) Co-payments, continuation of benefits, Subrogation;
c) Medicaid;
d) Point-of-Service premiums;
e) Risk pool revenue;
f) Capitation payments;
g) Medicare;
h) Fee-for-service;
i) Interest, and,
j) Aggregate write-ins for other revenues, including capital gains and other investment income.
17) Excludes health plans whose entire income is excluded by this bill from the $800 minimum franchise tax.
18) Requires DMHC to provide specified information to the Franchise Tax Board (FTB) regarding each plan subject to the MCO tax by December 1, 2016, and annually thereafter. Allows FTB to prescribe rules, guidelines, or procedures to implement this bill, which are exempt from the Administrative Procedures Act.
19) States the intent of the Legislature that FTB Legal Ruling 2006-01 apply to apportionment factors attributable to income excluded by this bill.
20) Sets a GPT rate of zero on premiums received for the provision of health insurance, as defined. Limits the zero rate only to insurers that provide health insurance that has a corporate affiliate that is a health plan, meaning the insurer is directly or indirectly, controlled by, under common control with, or controls a health plan, and, that is:
a) Licensed by DMHC, or who contracts with DHCS to provide Medi-Cal services,
b) Had at least one enrollee enrolled in the health plan in the base year, not including Medicare plan enrollees, individuals who receive health care services under subcontract with another plan, or enrollees under the Federal Employees Health Benefits Act, and,
c) Subject to the MCO tax.
21) Directs the Insurance Commissioner not to consider the zero GPT rate as part of any determination to impose or enforce a retaliatory insurance tax.
22) Requires the provisions of this bill to cease to be operative for each taxable year beginning on or after the date the DHCS director, in consultation with the Director of Finance, determines the taxes have not met the intent for purposes of providing funding for health care and prevention or the state does not have federal approval necessary for receipt of federal financial participation; or on or after the effective date of a final judicial determination made by any court of appellate jurisdiction that the provisions of this bill cannot be implemented. Requires the director to post notification to this effect.
23) Provides that this bill’s changes to the GPT and Corporation Tax become effective and operative on the latter of July 1, 2016, or the effective date certified in writing by the DHCS director of federal approval of the MCO tax. The director must post certification of federal approval on DHCS’s website, and send notice to the Secretary of State, Secretary of the Senate, the Chief Clerk of the Assembly, Legislative Counsel, the State Board of Equalization, CDI, and FTB’s Executive Officer.
24) Renders the tax provisions in effect until December 1, 2019, and repeals them on June 30, 2020.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No
Anthem
Association of Regional Center Agencies
Bay Area Council
Blue Shield of California
Brea Chamber of Commerce
California Association of Health Facilities Developmental Services Conference
California Association of Health Plans
California Chamber of Commerce
California Disability Services Association
California Hospital Association
California Respite Association
California State Association of Counties
California State Council on Developmental Disabilities
California Supported Living Network
Cal-TASH
Community Regional Medical Center
Developmental Services Network
Disability Rights California
Easter Seals Disability Services
Eastern Plumas Health Care
Educate.Advocate.
Family Resource Centers Network of California
Health Access California
Health Net
IDA California
Kern Valley Healthcare District
Lanterman Coalition
Mayers Memorial Hospital District
Modoc Medical Center
Local Health Plans of California
Los Angeles Area Chamber of Commerce
North Orange County Chamber
Orchard Hospital
People First of California
Rancho Cordova Chamber of Commerce
ResCoalition
Seneca Healthcare District
Service Employees International Union
SoCal Association of People Supporting Employment First
Southwest California Legislative Council
Tahoe Forest Hospital District
The Alliance
The Arc California
United Cerebral Palsy California Collaboration
Western Center on Law & Poverty
OPPOSITION: (Verified 2/24/16)
None received
Prepared by: Teri Boughton / P.H. & D.S. /
2/25/16 14:50:47
**** END ****
SBX2 2
Page 4
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
UNFINISHED BUSINESS
Bill No: SBX2 2
Amended: 9/4/15
AYES: Allen, Beall, Block, De León, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Roth, Wieckowski, Wolk
NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Huff, Moorlach, Morrell, Nguyen, Nielsen, Runner, Stone, Vidak
NO VOTE RECORDED: Cannella, Galgiani
ASSEMBLY FLOOR: 53-1, 9/9/15 - See last page for vote
SUBJECT: Medi-Cal: developmental services: provider rate increases
DIGEST: This bill states it is the intent of the Legislature to enact statutory changes that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
Assembly Amendments are technical and clarifying.
ANALYSIS: On June 19, 2015, the 2nd Extraordinary Session of the California State Legislature was convened pursuant to a proclamation by Governor Brown, which read:
WHEREAS the state’s recent expansion of health care coverage has resulted in more than four million additional Californians receiving coverage through Medi– Cal; and
WHEREAS to date, the managed care organization tax has provided a stable source of funding to help pay for the costs of the health care expansion; and
WHEREAS the federal government has issued guidance to the state that it cannot extend the managed care organization tax in its current format; and
WHEREAS the state will be forced to make more than $1 billion in program cuts beginning next year if the managed care organization tax is not extended; and
WHEREAS the state’s General Fund cannot afford to provide additional rate increases for providers of services for Medi–Cal recipients and consumers with developmental disabilities; and
WHEREAS the state’s General Fund cannot afford to permanently maintain a restoration of seven percent of hours in the In–Home Supportive Services program; and
WHEREAS these extraordinary circumstances require the Legislature of the State of California to be convened in a special session.
NOW, THEREFORE, I, EDMUND G. BROWN JR., Governor of the State of California, in accordance with Section 3(b) of Article IV of the Constitution of the State of California, hereby convene the Legislature of the State of California to assemble in extraordinary session in Sacramento, California, on the 19th day of June, 2015, at a time to be determined, for the following purposes:
To consider and act upon legislation necessary to enact permanent and sustainable funding from a new managed care organization tax and/or alternative fund sources to provide:
At least $1.1 billion annually to stabilize the General Fund’s costs for Medi–Cal; and
Sufficient funding to continue the 7 percent restoration of In–Home Supportive Services hours beyond 2015–16; and
Sufficient funding to provide additional rate increases for providers of Medi–Cal and developmental disability services.
To consider and act upon legislation necessary to:
Establish mechanisms so that that any additional rate increases expand access to services; and
Increase oversight and the effective management of services provided to consumers with developmental disabilities through the regional center system; and
Improve the efficiency and efficacy of the health care system, reduce the cost of providing health care services, and improve the health of Californians.
I FURTHER DIRECT that as soon as hereafter possible, this Proclamation be filed in the Office of the Secretary of State and that widespread publicity and notice be given of this Proclamation.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 16th day of June 2015.
EDMUND G. BROWN JR. Governor of California
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
None received
None received
ASSEMBLY FLOOR: 53-1, 9/9/15
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Patterson, Perea, Quirk, Rendon, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins
NOES: Gatto
NO VOTE RECORDED: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Dahle, Beth Gaines, Gallagher, Hadley, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Ridley-Thomas, Steinorth, Wagner, Waldron, Wilk
Prepared by: Melanie Moreno / HEALTH /
9/9/15 19:36:17
**** END ****
SB 2 X2
Page 2
SENATE THIRD READING
SB 2 X2
(Hernandez)
As Amended September 4, 2015
Majority vote
SENATE VOTE: 25-13
SUMMARY: States it is the intent of the Legislature to enact legislation that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
COMMENTS: According to the author, this bill is a vehicle for specific legislation that responds to the Governor's call for a special session.
BACKGROUND: On June 19, 2015, the 2nd Extraordinary Session of the California State Legislature was convened pursuant to a proclamation by Governor Brown, which read:
WHEREAS the state's recent expansion of health care coverage has resulted in more than four million additional Californians receiving coverage through Medi– Cal; and
WHEREAS to date, the managed care organization tax has provided a stable source of funding to help pay for the costs of the health care expansion; and
WHEREAS the federal government has issued guidance to the state that it cannot extend the managed care organization tax in its current format; and
WHEREAS the state will be forced to make more than $1 billion in program cuts beginning next year if the managed care organization tax is not extended; and
WHEREAS the state's General Fund cannot afford to provide additional rate increases for providers of services for Medi–Cal recipients and consumers with developmental disabilities; and
WHEREAS the state's General Fund cannot afford to permanently maintain a restoration of seven percent of hours in the In–Home Supportive Services program; and
WHEREAS these extraordinary circumstances require the Legislature of the State of California to be convened in a special session.
NOW, THEREFORE, I, EDMUND G. BROWN JR., Governor of the State of California, in accordance with Section 3(b) of Article IV of the Constitution of the State of California, hereby convene the Legislature of the State of California to assemble in extraordinary session in Sacramento, California, on the 19th day of June, 2015, at a time to be determined, for the following purposes:
To consider and act upon legislation necessary to enact permanent and sustainable funding from a new managed care organization tax and/or alternative fund sources to provide:
At least $1.1 billion annually to stabilize the General Fund's costs for Medi–Cal; and,
Sufficient funding to continue the 7 percent restoration of In–Home Supportive Services hours beyond 2015–16; and,
Sufficient funding to provide additional rate increases for providers of Medi–Cal and developmental disability services.
To consider and act upon legislation necessary to:
Establish mechanisms so that that any additional rate increases expand access to services; and,
Increase oversight and the effective management of services provided to consumers with developmental disabilities through the regional center system; and,
Improve the efficiency and efficacy of the health care system, reduce the cost of providing health care services, and improve the health of Californians.
I FURTHER DIRECT that as soon as hereafter possible, this Proclamation be filed in the Office of the Secretary of State and that widespread publicity and notice be given of this Proclamation.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 16th day of June 2015.
EDMUND G. BROWN JR. Governor of California.
Analysis Prepared by: Patty Rodgers / HEALTH / (916) 319-2097 FN: 0002203
SBX2 2
Page 3
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Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
THIRD READING
Bill No: SBX2 2
Introduced: 7/6/15
SUBJECT: Medi-Cal: developmental services: provider rate increases
DIGEST: This bill states it is the intent of the Legislature to enact legislation that would stabilize funding for the Medi-Cal program and provide rate increases for providers of Medi-Cal and developmental services.
ANALYSIS: On June 19, 2015, the 2nd Extraordinary Session of the California State Legislature was convened pursuant to a proclamation by Governor Brown, which read:
WHEREAS the state’s recent expansion of health care coverage has resulted in more than four million additional Californians receiving coverage through Medi– Cal; and
WHEREAS to date, the managed care organization tax has provided a stable source of funding to help pay for the costs of the health care expansion; and
WHEREAS the federal government has issued guidance to the state that it cannot extend the managed care organization tax in its current format; and
WHEREAS the state will be forced to make more than $1 billion in program cuts beginning next year if the managed care organization tax is not extended; and
WHEREAS the state’s General Fund cannot afford to provide additional rate increases for providers of services for Medi–Cal recipients and consumers with developmental disabilities; and
WHEREAS the state’s General Fund cannot afford to permanently maintain a restoration of seven percent of hours in the In–Home Supportive Services program; and
WHEREAS these extraordinary circumstances require the Legislature of the State of California to be convened in a special session.
NOW, THEREFORE, I, EDMUND G. BROWN JR., Governor of the State of California, in accordance with Section 3(b) of Article IV of the Constitution of the State of California, hereby convene the Legislature of the State of California to assemble in extraordinary session in Sacramento, California, on the 19th day of June, 2015, at a time to be determined, for the following purposes:
To consider and act upon legislation necessary to enact permanent and sustainable funding from a new managed care organization tax and/or alternative fund sources to provide:
At least $1.1 billion annually to stabilize the General Fund’s costs for Medi–Cal; and
Sufficient funding to continue the 7 percent restoration of In–Home Supportive Services hours beyond 2015–16; and
Sufficient funding to provide additional rate increases for providers of Medi–Cal and developmental disability services.
To consider and act upon legislation necessary to:
Establish mechanisms so that that any additional rate increases expand access to services; and
Increase oversight and the effective management of services provided to consumers with developmental disabilities through the regional center system; and
Improve the efficiency and efficacy of the health care system, reduce the cost of providing health care services, and improve the health of Californians.
I FURTHER DIRECT that as soon as hereafter possible, this Proclamation be filed in the Office of the Secretary of State and that widespread publicity and notice be given of this Proclamation.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 16th day of June 2015.
EDMUND G. BROWN JR. Governor of California
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
None received
None received
Prepared by: Melanie Moreno / HEALTH /
7/8/15 15:46:34
**** END ****
Bill Author
