This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2019.

(Without Reference to File)

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 115

Author:(Committee on Budget)

As Amended Ver:August 29, 2019

2/3 vote. Budget Bill Appropriation Takes Effect Immediately

SUMMARY:

This is a health Budget Trailer Bill for 2019-20. It contains necessary changes related to the Budget Act of 2019. This bill would implement a managed care organization (MCO) provider tax, effective July 1, 2019, contingent upon federal approval, to be effective for 3.5 fiscal years: 2019-20, 2020-21, 2021-22, and the first half of 2022-23.

The Senate Amendments:

1. Establishes the intent of the Legislature that the Department of Health Care Services (DHCS) implement a managed care organization provider tax effective July 1, 2019 to provide ongoing funding for health care and prevention and meet the following goals:
   1. Generate an amount of nonfederal funds for the Medi-Cal program equivalent to the funds generated by the prior MCO tax; and
   2. Comply with applicable federal Medicaid requirements.
2. Requires the tax to be applied to all full-service health plans licensed by the Department of Managed Health Care (DMHC) and/or plans contracted with DHCS to provide services to Medi-Cal beneficiaries.
3. Requires the tax to be assessed on a per enrollee basis for each month of enrollment on all enrollees in plans in the base year with the exception of:
   1. Individuals enrolled in a plan for Medicare services;
   2. Plan-to-plan enrollees (individuals enrolled in a managed care plan who are enrolled through a subcontract from another managed care plan); and
   3. Individuals enrolled in a Federal Employees Health Benefit Plan.
4. Requires the tax to be assessed based on cumulative enrollment for the base year (January 1, 2018, through December 31, 2018), collected on a quarterly basis, and be determined by specified taxing tiers and amounts.
5. Requires cumulative enrollment to be based on quarterly health plan data reported to DMHC retrieved by DHCS as of March 1, 2019, adjusted as necessary by DHCS and supplemented by Medi-Cal enrollment data for the base year as maintained by DHCS.
6. Requires the assumption of the MCO tax liability in the event of a merger, acquisition or establishment of a health plan.
7. Establishes interest and penalties for overdue tax amounts, and provides the Director of DHCS the discretion to waive any interest/penalties and/or develop an alternative payment schedule as determined appropriate to prevent significant harm to the plan or impact on services.
8. Establishes the Health Care Services Special Fund to receive all revenues, less refunds, derived from the tax, and requires the Fund to be continuously appropriated, without regard to fiscal year, to DHCS for purposes of funding the nonfederal share of Medi-Cal managed care rates for health care services in Medi-Cal.
9. Requires DHCS to provide an annual report to all health plans accounting for the funds deposited in and expended from the Health Care Services Special Fund, including the taxes imposed on each health plan, and an itemized accounting of expenditures from the fund.
10. Makes the provisions of the bill inoperative on January 1, 2023, and repealed as of January 1, 2024.
11. Requires federal approval of the tax and associated revenue.
12. Establishes that this is a budget trailer bill and makes an appropriation.

COMMENTS:

This bill is a budget trailer bill within the overall 2019-20 budget package to implement actions taken affecting the Departments of Health Care Services and Managed Health Care.

According to the Author:

Arguments in Support:

None on file.

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

This bill is estimated to result in General Fund savings of: $1.7 billion in 2019-20, $1.9 billion in 2020-21, $2.1 billion in 2021-22, and $1.2 billion in the first half of 2022-23.

VOTES:

ASSEMBLY FLOOR: 54-13-13

YES: Aguiar-Curry, Bauer-Kahan, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chu, Cooper, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Limón, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NO: Bigelow, Brough, Dahle, Flora, Fong, Gallagher, Kiley, Mathis, Melendez, Obernolte, Patterson, Voepel, Waldron

ABS, ABST OR NV: Arambula, Berman, Chen, Chiu, Choi, Cooley, Cunningham, Diep, Eduardo Garcia, Lackey, Levine, Low, Mayes

UPDATED:

VERSION: August 29, 2019

CONSULTANT: Andrea Margolis / BUDGET / (916) 319-2099 FN: 0002425

 THIRD READING  

Bill No: AB 115

Author: Committee on Budget

Amended: 8/29/19 in Senate

Vote: 27

SENATE BUDGET & FISCAL REVIEW COMMITTEE: 12-4, 9/10/19

AYES: Mitchell, Beall, Caballero, Hurtado, Leyva, Monning, Pan, Roth, Skinner, Stern, Umberg, Wieckowski

NOES: Nielsen, Dahle, Jones, Stone

NO VOTE RECORDED: McGuire, Moorlach

ASSEMBLY FLOOR: Not relevant

SUBJECT: Medi-Cal: managed care organization provider tax

SOURCE: Author

DIGEST:

This bill is a health trailer bill, and assesses a tax on managed care organizations necessary to implement the 2019-20 Budget.

ANALYSIS: Federal Medicaid regulations allow states to impose provider-related taxes on health care service providers as long as certain conditions are met. The revenue from these taxes may serve as the non-federal share of spending for health care services in a state’s Medicaid program, which allows the state to draw down additional federal funding for those services. State Medicaid programs may receive federal financial participation for expenditures using health care-related taxes, as long as the taxes are broad-based, uniformly imposed, and contain no hold-harmless provisions.

This bill assesses a tax on managed care organizations operating in California to provide a stable funding source for the delivery of health care services in the Medi-Cal program. Specifically, this bill:

1. Assesses an enrollment-based tax on all full-service health plans licensed by the Department of Managed Health Care or contracted with the Department of Health Care Services (DHCS) to provide services to Medi-Cal beneficiaries.
2. Assesses the tax on a per enrollee basis for each month of enrollment in a plan, based on cumulative enrollment between January 1, 2018, and December 31, 2018 (the “base year”).
3. Establishes tiered tax rates based on the level of plan enrollment, with one set of enrollment tiers applied to Medi-Cal enrollees and one set applied to all other enrollees. The tiers are as follows:

* For the first six months of 2022-23, the tax amount would be the total annual tax divided by two.

1. Implements the tax effective July 1, 2019, until January 1, 2023. The tax would be calculated based on the tiered tax rate structure and cumulative base year enrollment for the 2019-20, 2020-21, and 2021-22 fiscal years, and for the first six months of the 2022-23 fiscal year.
2. Creates the Health Care Services Special Fund, into which the revenues from the tax would be deposited. The fund would be continuously appropriated to DHCS for the purposes of funding the nonfederal share of Medi-Cal managed care rates for the delivery of health care services to beneficiaries of the Medi-Cal program.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No

According to the Senate Budget & Fiscal Review Committee, once federal approval is received, implementation of the tax would result in net revenue to the Health Care Services Special Fund of $1.7 billion in 2019-20, $1.9 billion in 2020-21, $2.1 billion in 2021-22, and $1.2 billion for the first six months of 2022-23. The Health Care Services Special Fund, created by this bill, would be continuously appropriated to DHCS to fund the nonfederal share of Medi-Cal managed care rates for the delivery of health care services to beneficiaries of the Medi-Cal program.

SUPPORT: (Verified 9/10/19)

None received

OPPOSITION: (Verified 9/10/19)

None received

Prepared by: Scott Ogus / B. & F.R. / 916-651-4103

9/11/19 20:20:38

**** END ****

SENATE COMMITTEE ON

Senator Holly Mitchell, Chair

2019 - 2020 Regular

Bill No: Hearing Date: September 10, 2019

Subject: Medi-Cal: managed care organization provider tax

Summary:

This bill is a health trailer bill, and assesses a tax on managed care organizations necessary to implement the 2019-20 budget.

Background: Federal Medicaid regulations allow states to impose provider-related taxes on health care service providers as long as certain conditions are met. The revenue from these taxes may serve as the non-federal share of spending for health care services in a state’s Medicaid program, which allows the state to draw down additional federal funding for those services. State Medicaid programs may receive federal financial participation (FFP) for expenditures using health care-related taxes, as long as the taxes are broad-based, uniformly imposed, and contain no hold-harmless provisions.

Proposed Law:

This bill would assess a tax on managed care organizations operating in California to provide a stable funding source for the delivery of health care services in the Medi-Cal program. Specifically, this bill:

1. Assesses an enrollment-based tax on all full-service health plans licensed by the Department of Managed Health Care (DMHC) or contracted with the Department of Health Care Services (DHCS) to provide services to Medi-Cal beneficiaries.
2. Assesses the tax on a per enrollee basis for each month of enrollment in a plan, based on cumulative enrollment between January 1, 2018 and December 31, 2018 (the “base year”).
3. Establishes tiered tax rates based on the level of plan enrollment, with one set of enrollment tiers applied to Medi-Cal enrollees and one set applied to all other enrollees. The tiers are as follows:

* For the first six months of 2022-23, the tax amount would be the total annual tax divided by two.

1. Implements the tax effective July 1, 2019, until January 1, 2023. The tax would be calculated based on the tiered tax rate structure and cumulative base year enrollment for the 2019-20, 2020-21, and 2021-22 fiscal years, and for the first six months of the 2022-23 fiscal year.
2. Creates the Health Care Services Special Fund, into which the revenues from the tax would be deposited. The fund would be continuously appropriated to the Department of Health Care Services for the purposes of funding the nonfederal share of Medi-Cal managed care rates for the delivery of health care services to beneficiaries of the Medi-Cal program.

Fiscal Effect:

Once federal approval is received, implementation of the tax would result in net revenue to the Health Care Services Special Fund of $1.7 billion in 2019-20, $1.9 billion in 2020-21, $2.1 billion in 2021-22, and $1.2 billion for the first six months of 2022-23. The Health Care Services Special Fund, created by this bill, would be continuously appropriated to the Department of Health Care Services to fund the nonfederal share of Medi-Cal managed care rates for the delivery of health care services to beneficiaries of the Medi-Cal program.

Support:

None on file.

Opposed:

None on file.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 115

Author:(Ting)

As Introduced Ver:December 3, 2018

Majority vote. Budget Bill Appropriation Takes Effect Immediately

SUMMARY:

This bill expresses the intent of the Legislature to enact statutory changes relating to the Budget Act of 2019.

Major Provisions

COMMENTS:

According to the Author:

Arguments in Support:

Arguments in Opposition:

FISCAL COMMENTS:

VOTES:

UPDATED:

VERSION: December 3, 2018

CONSULTANT: Christian Griffith / BUDGET / (916) 319-2099 FN: 0000158