AB 119: Medi-Cal: managed care organization provider tax.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2023-06-29
Current Status:
Passed
(2023-06-29: Chaptered by Secretary of State - Chapter 13, Statutes of 2023.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
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. 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Existing law, inoperative on January 1, 2023, and to be repealed on January 1, 2024, imposed a managed care organization (MCO) provider tax, administered and assessed by the department, on licensed health care service plans and managed care plans contracted with the department to provide full-scope Medi-Cal services. Those provisions set forth taxing tiers and corresponding per enrollee tax amounts for the 201920, 202021, and 202122 fiscal years, and the first 6 months of the 202223 fiscal year. Under those provisions, all revenues, less refunds, derived from the tax were deposited into the State Treasury to the credit of the Health Care Services Special Fund, and continuously appropriated to the department for purposes of funding the nonfederal share of Medi-Cal managed care rates, as specified.
Those inoperative provisions authorized the department, subject to certain conditions, to modify or make adjustments to any methodology, tax amount, taxing tier, or other provision relating to the MCO provider tax to the extent the department deemed necessary to meet federal requirements, to obtain or maintain federal approval, or to ensure federal financial participation was available or was not otherwise jeopardized. Those provisions required the department to request approval from the federal Centers for Medicare and Medicaid Services (CMS) as was necessary to implement those provisions.
This bill would repeal those inoperative provisions. The bill would restructure the MCO provider tax, with certain modifications to the above-described provisions, including changes to the taxing tiers and tax amounts, for purposes of the tax periods of April 1, 2023, through December 31, 2023, and the 2024, 2025, and 2026 calendar years. The bill would create the Managed Care Enrollment Fund to replace the Health Care Services Special Fund. Under the bill, moneys deposited into the fund would, upon appropriation, be available to the department for the purpose of funding the following subcomponents to support the Medi-Cal program: (1) the nonfederal share of increased capitation payments to Medi-Cal managed care plans; (2) the nonfederal share of Medi-Cal managed care rates for health care services; and (3) transfers to the Medi-Cal Provider Payment Reserve Fund, as established pursuant to specified provisions.
The bill would make these provisions operative on the effective date, certified in writing by the Director of Health Care Services, of the federal approval necessary for receipt of federal financial participation, as specified. The bill would make these provisions, except for the provision relating to the Managed Care Enrollment Fund, inoperative on January 1, 2027, or as otherwise specified, and would repeal them on January 1, 2028.
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.
This bill would declare that it is to take effect immediately as an urgency statute.
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. 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, inoperative on January 1, 2023, and to be repealed on January 1, 2024, imposed a managed care organization (MCO) provider tax, administered and assessed by the department, on licensed health care service plans and managed care plans contracted with the department to provide full-scope Medi-Cal services. Those provisions set forth taxing tiers and corresponding per enrollee tax amounts for the 201920, 202021, and 202122 fiscal years, and the first 6 months of the 202223 fiscal year. Under those provisions, all revenues, less refunds, derived from the tax were deposited into the State Treasury to the credit of the Health Care Services Special Fund, and continuously appropriated to the department for purposes of funding the nonfederal share of Medi-Cal managed care rates, as specified.
Those inoperative provisions authorized the department, subject to certain conditions, to modify or make adjustments to any methodology, tax amount, taxing tier, or other provision relating to the MCO provider tax to the extent the department deemed necessary to meet federal requirements, to obtain or maintain federal approval, or to ensure federal financial participation was available or was not otherwise jeopardized. Those provisions required the department to request approval from the federal Centers for Medicare and Medicaid Services (CMS) as was necessary to implement those provisions.
This bill would repeal those inoperative provisions. The bill would restructure the MCO provider tax, with certain modifications to the above-described provisions, including changes to the taxing tiers and tax amounts, for purposes of the tax periods of April 1, 2023, through December 31, 2023, and the 2024, 2025, and 2026 calendar years. The bill would create the Managed Care Enrollment Fund to replace the Health Care Services Special Fund. Under the bill, moneys deposited into the fund would, upon appropriation, be available to the department for the purpose of funding the following subcomponents to support the Medi-Cal program: (1) the nonfederal share of increased capitation payments to Medi-Cal managed care plans; (2) the nonfederal share of Medi-Cal managed care rates for health care services; and (3) transfers to the Medi-Cal Provider Payment Reserve Fund, as established pursuant to specified provisions.
The bill would make these provisions operative on the effective date, certified in writing by the Director of Health Care Services, of the federal approval necessary for receipt of federal financial participation, as specified. The bill would make these provisions, except for the provision relating to the Managed Care Enrollment Fund, inoperative on January 1, 2027, or as otherwise specified, and would repeal them on January 1, 2028.
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.
This bill would declare that it is to take effect immediately as an urgency statute.
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. 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, inoperative on January 1, 2023, and to be repealed on January 1, 2024, imposed a managed care organization (MCO) provider tax, administered and assessed by the department, on licensed health care service plans and managed care plans contracted with the department to provide full-scope Medi-Cal services. Those provisions set forth taxing tiers and corresponding per enrollee tax amounts for the 201920, 202021, and 202122 fiscal years, and the first 6 months of the 202223 fiscal year. Under those provisions, all revenues, less refunds, derived from the tax were deposited into the State Treasury to the credit of the Health Care Services Special Fund, and continuously appropriated to the department for purposes of funding the nonfederal share of Medi-Cal managed care rates, as specified.
Those inoperative provisions authorized the department, subject to certain conditions, to modify or make adjustments to any methodology, tax amount, taxing tier, or other provision relating to the MCO provider tax to the extent the department deemed necessary to meet federal requirements, to obtain or maintain federal approval, or to ensure federal financial participation was available or was not otherwise jeopardized. Those provisions required the department to request approval from the federal Centers for Medicare and Medicaid Services (CMS) as was necessary to implement those provisions.
This bill would repeal those inoperative provisions. The bill would restructure the MCO provider tax, with certain modifications to the above-described provisions, including changes to the taxing tiers and tax amounts, for purposes of the tax periods of April 1, 2023, through December 31, 2023, and the 2024, 2025, and 2026 calendar years. The bill would create the Managed Care Enrollment Fund to replace the Health Care Services Special Fund. Under the bill, moneys deposited into the fund would, upon appropriation, be available to the department for the purpose of funding the following subcomponents to support the Medi-Cal program: (1) the nonfederal share of increased capitation payments to Medi-Cal managed care plans; (2) the nonfederal share of Medi-Cal managed care rates for health care services; and (3) transfers to the Medi-Cal Provider Payment Reserve Fund, as established pursuant to specified provisions.
The bill would make these provisions operative on the effective date, certified in writing by the Director of Health Care Services, of the federal approval necessary for receipt of federal financial participation, as specified. The bill would make these provisions, except for the provision relating to the Managed Care Enrollment Fund, inoperative on January 1, 2027, or as otherwise specified, and would repeal them on January 1, 2028.
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.
This bill would declare that it is to take effect immediately as an urgency statute.
This bill would express the intent of the Legislature to enact statutory changes, relating to the Budget Act of 2023.This bill would express the intent of the Legislature to enact statutory changes changes, relating to the Budget Act of 2023.
This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2023.
The Legislature finds and declares all of the following:
(a)The Legislature continues to recognize that an enrollment-based managed care organization provider tax is an essential and necessary source of nonfederal funding for maintaining and improving access to care and reimbursement levels under, and maximizing federal financial participation for, the Medi-Cal program.
(b)The Legislature recognizes how the previous iterations of the managed care organization provider tax, in effect nearly continuously from July 1, 2016, enabled the state to provide ongoing funding for health care and prevention, while minimizing the need for any new reductions to the Medi-Cal program during the time periods when the tax was in effect.
(c)Implementation of a new managed care organization provider tax at the earliest possible effective date allowable under federal law will best position the state to maintain and improve access to care, maximize federal financial participation, and minimize the need for any new reductions to the Medi-Cal program.
(d)In furtherance of subdivisions (a) to (c), inclusive, it is the intent of the Legislature that the department implement a managed care organization provider tax effective April 1, 2023, to meet all of the following goals:
(1)Generate an amount of nonfederal funds for the Medi-Cal program that is greater than the nonfederal funds generated by the tax imposed pursuant to Article 6.8 (commencing with Section 14199.60).
(2)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.
(3)Provide funding to support the health care delivery system with an emphasis on the impact to the Medi-Cal program.
(4)Minimize, to the extent possible, the need for any new reductions to the Medi-Cal program.
14199.81.The following definitions shall apply for purposes of this article:
(a)Base data source means the quarterly financial statement filings or annual enrollment data submitted by health plans to the Department of Managed Health Care retrieved by the department no later than June 30, 2023, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by the department and retrieved no later than June 30, 2023, and as modified by the department to account for known or anticipated changes that will affect Medi-Cal enrollment on or after January 1, 2024. However, if the department elects to update the base year pursuant to subdivision (b), base data source means the most recently available quarterly financial statement filings or annual enrollment data submitted by health plans to the Department of Managed Health Care for that updated base year, retrieved by the department, and supplemented by, as necessary, Medi-Cal enrollment data for the updated base year as maintained by the department, and as modified by the department to account for known or anticipated changes that will affect Medi-Cal enrollment.
(b)Base year means the 12-month period of January 1, 2022, through December 31, 2022. However, the department may elect to update the base year to the extent that it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized.
(c)Countable enrollee means an individual enrolled in a health plan, as defined in subdivision (f), 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 (m), 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.
(d)Department means the State Department of Health Care Services.
(e)Director means the Director of Health Care Services.
(f)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 full-scope Medi-Cal services.
(g)Medi-Cal enrollee means an individual enrolled in a health plan, as defined in subdivision (f), who is a Medi-Cal beneficiary for whom the department directly pays the health plan a capitated payment.
(h)Medi-Cal per enrollee tax amount means the amount of tax assessed per countable Medi-Cal enrollee within a Medi-Cal taxing tier.
(i)Medi-Cal taxing tier means a range of cumulative enrollment of countable Medi-Cal enrollees for the base year.
(j)Other enrollee means an individual enrolled in a health plan, as defined in subdivision (f), who is not a Medi-Cal beneficiary.
(k)Other per enrollee tax amount means the amount of tax assessed per countable other enrollee within an other taxing tier.
(l)Other taxing tier means a range of cumulative enrollment of countable other enrollees for the base year.
(m)Plan-to-plan enrollee means an individual who receives their health care services through a health plan pursuant to a subcontract from another health plan.
(n)Tax period means a period of not more than 12 months for which the tax authorized by this article is assessed, in accordance with the requirements described in Section 14199.84.
14199.82.(a)The Managed Care Enrollment 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 Managed Care Enrollment Fund.
(c)Notwithstanding Section 16305.7 of the Government Code, any interest and dividends earned on moneys in the Managed Care Enrollment Fund shall be retained in the fund and used solely for the purpose specified in subdivision (d).
(d)Funds deposited in the Managed Care Enrollment Fund pursuant to this article shall, upon appropriation by the Legislature, be available to the department for the purpose of funding all of the following subcomponents to support the Medi-Cal program:
(1)The nonfederal share of increased capitation payments to Medi-Cal managed care plans accounting for their projected tax obligation pursuant to this article for the applicable fiscal year or years.
(2)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 the Medi-Cal program and the Medicare Program.
(3)Transfers to the Medi-Cal Provider Payment Reserve Fund established pursuant to Section 14105.200.
(e)The department shall provide an annual report to all health plans accounting for the funds deposited in, and expended from, the Managed Care Enrollment 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.
(f)Effective December 31, 2023, the Health Care Services Special Fund in the State Treasury, created pursuant to Section 14199.62, is hereby abolished. All moneys in the fund or moneys designated to be deposited to the fund shall be transferred to the Managed Care Enrollment Fund created pursuant to subdivision (a). Any remaining balance, assets, liabilities, and encumbrances of the Health Care Services Special Fund as of December 31, 2023, shall be transferred to, and become part of, the Managed Care Enrollment Fund.
(g)Notwithstanding any other law, the Controller may use the funds in the Managed Care Enrollment Fund for cashflow loans to the General Fund as provided in Sections 16310 and 16381 of the Government Code.
14199.83.(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 other provision in this article, the director may correct any identified material or significant error in the data, including, but not limited to, the overall cumulative enrollment, Medicare cumulative enrollment, Medi-Cal cumulative enrollment, plan-to-plan cumulative enrollment, cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382), and other cumulative enrollment. The directors determination as to whether to exercise 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 14199.85.
14199.84.(a)A managed care organization provider tax shall be imposed on each health plan. The tax shall be imposed for the following tax periods:
(1)April 1, 2023, through December 31, 2023.
(2)2024 calendar year.
(3)2025 calendar year.
(4)2026 calendar year.
(b)(1)The department shall compute the annual tax for each health plan subject to the tax during each applicable calendar year pursuant to Section 14199.85.
(2)The computed tax for the tax period of April 1, 2023, through December 31, 2023, shall be equal to three-fourths of the amount that would otherwise be computed for a 12-month period, as determined by the department.
(c)The department shall collect the tax for each health plan in quarterly installments and shall determine the amount due for each installment in the applicable tax period by dividing the total tax for a tax period by the number of calendar quarters in the respective tax period.
(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.
(1)Within 10 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the director shall certify in writing that federal approval has been received, and the department shall post the certification on its internet website 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)Within 30 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the department shall send a notice to each health plan subject to the tax that shall contain the following information:
(A)The tax due for each tax period.
(B)The dates on which the installment tax payments are due for each tax period.
(3)A health plan shall pay the tax for each tax period in installments as calculated pursuant to Section 14199.85, 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 calendar 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 Managed Care Enrollment Fund created pursuant to Section 14199.82.
(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 Managed Care Enrollment Fund created pursuant to Section 14199.82.
(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 if the director determines, in their 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.
14199.85.(a)For each tax period, 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 1,250,000, inclusive.
(2)Medi-Cal taxing tier II shall consist of all countable Medi-Cal enrollees in a health plan from 1,250,001 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 tax period, 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 1,250,000, inclusive.
(2)Other taxing tier II shall consist of all countable other enrollees in a health plan from 1,250,001 to 4,000,000, inclusive.
(3)Other taxing tier III shall consist of all countable other enrollees in a health plan greater than 4,000,000.
(c)For the period of April 1, 2023, through December 31, 2023, and for the 2024 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred eighty-two dollars and fifty cents ($182.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(d)For the period of April 1, 2023, through December 31, 2023, and for the 2024 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be one dollar and seventy-five cents ($1.75).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(e)For the 2025 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred eighty-seven dollars and fifty cents ($187.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(f)For the 2025 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars ($2).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(g)For the 2026 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred ninety-two dollars and fifty cents ($192.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(h)For the 2026 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars and twenty-five cents ($2.25).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(i)(1)The department may modify or make adjustments to any methodology, tax amount, taxing tier, or other provision specified in this article to the extent that it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized, provided the modification or adjustment does not otherwise conflict with the purposes of this article, or result in an increase in the aggregate tax amounts projected to be collected under this article that the department, in its sole discretion, determines is significant.
(2)If the department identifies that modification or adjustment is necessary in accordance with paragraph (1), the department shall consult with affected health plans, to the extent practicable, to implement that modification or adjustment.
(3)In the event of a modification or adjustment made pursuant to this subdivision, the department shall notify affected health plans, the Department of Finance, 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.
(j)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 federal law or regulation necessary to implement this article.
(k)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 any further regulatory action. The department shall provide notification to the Department of Finance, 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 after the above-described action is taken.
14199.86.(a)The tax assessed under this article shall become effective and operative on April 1, 2023, or the effective date, certified in writing by the director, of the federal approval necessary for receipt of federal financial participation, whichever occurs later. The director shall post the certification of federal approval on the departments internet website 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.
(b)This article, except for Section 14199.82 to the extent not in conflict with federal law, shall cease to be operative the first day of the calendar year beginning on or after the date the director, in consultation with the Director of Finance, determines that the taxes have not met the intent as outlined in Section 14199.80, or the department has not obtained the federal approval necessary for receipt of federal financial participation. The director shall post the determination on the departments internet website 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.
(c)This article, except for Section 14199.82 to the extent not in conflict with federal law, shall cease to be operative for any affected tax period or periods upon a final judicial determination made by any court of appellate jurisdiction or a final determination by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services that the tax assessed pursuant to this article cannot be implemented for the affected tax period or periods, and any amount of the tax paid under this article with respect to the affected tax period or periods shall be refunded. The director shall post a notification of that final judicial or federal administrative determination on the departments internet website 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.
(d)Notwithstanding this section, any tax and any applicable interest and penalties imposed under this article shall continue to be due and payable to the department until the tax and any applicable interest and penalties are fully paid.
(e)Upon execution of the declaration described in subdivision (b) or (c), the director shall implement a plan, in consultation with the Department of Finance, to end the program consistent with the purpose of the article, including the recoupment of payments made under this article if required by a final judicial determination made by any court of appellate jurisdiction or a final determination made by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services.
14199.87.(a)This article shall become operative on the effective date, certified in writing by the director, of the federal approval necessary for receipt of federal financial participation, as described in subdivision (a) of Section 14199.86 for purposes of assessing the tax under this article.
(b)(1)All sections in this article, except for Section 14199.82 to the extent not in conflict with federal law, shall become inoperative on January 1, 2027, or on a date as specified in subdivision (b) or (c) of Section 14199.86, whichever occurs first. All sections in this article, except for Section 14199.82, are repealed on January 1, 2028.
(2)Notwithstanding paragraph (1), any tax and any applicable interest and penalties imposed under this article shall continue to be due and payable to the department until the tax and any applicable interest and penalties are fully paid.
SEC. 3.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to implement a new managed care organization provider tax at the earliest possible effective date allowable under federal law, to best position the state to maintain and improve access to care, maximize federal financial participation, and minimize the need for any new reductions to the Medi-Cal program, it is necessary that this act take effect immediately.
The Legislature finds and declares all of the following:
(a)The Legislature continues to recognize that an enrollment-based managed care organization provider tax is an essential and necessary source of nonfederal funding for maintaining and improving access to care and reimbursement levels under, and maximizing federal financial participation for, the Medi-Cal program.
(b)The Legislature recognizes how the previous iterations of the managed care organization provider tax, in effect nearly continuously from July 1, 2016, enabled the state to provide ongoing funding for health care and prevention, while minimizing the need for any new reductions to the Medi-Cal program during the time periods when the tax was in effect.
(c)Implementation of a new managed care organization provider tax at the earliest possible effective date allowable under federal law will best position the state to maintain and improve access to care, maximize federal financial participation, and minimize the need for any new reductions to the Medi-Cal program.
(d)In furtherance of subdivisions (a) to (c), inclusive, it is the intent of the Legislature that the department implement a managed care organization provider tax effective April 1, 2023, to meet all of the following goals:
(1)Generate an amount of nonfederal funds for the Medi-Cal program that is greater than the nonfederal funds generated by the tax imposed pursuant to Article 6.8 (commencing with Section 14199.60).
(2)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.
(3)Provide funding to support the health care delivery system with an emphasis on the impact to the Medi-Cal program.
(4)Minimize, to the extent possible, the need for any new reductions to the Medi-Cal program.
14199.81.The following definitions shall apply for purposes of this article:
(a)Base data source means the quarterly financial statement filings or annual enrollment data submitted by health plans to the Department of Managed Health Care retrieved by the department no later than June 30, 2023, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by the department and retrieved no later than June 30, 2023, and as modified by the department to account for known or anticipated changes that will affect Medi-Cal enrollment on or after January 1, 2024. However, if the department elects to update the base year pursuant to subdivision (b), base data source means the most recently available quarterly financial statement filings or annual enrollment data submitted by health plans to the Department of Managed Health Care for that updated base year, retrieved by the department, and supplemented by, as necessary, Medi-Cal enrollment data for the updated base year as maintained by the department, and as modified by the department to account for known or anticipated changes that will affect Medi-Cal enrollment.
(b)Base year means the 12-month period of January 1, 2022, through December 31, 2022. However, the department may elect to update the base year to the extent that it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized.
(c)Countable enrollee means an individual enrolled in a health plan, as defined in subdivision (f), 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 (m), 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.
(d)Department means the State Department of Health Care Services.
(e)Director means the Director of Health Care Services.
(f)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 full-scope Medi-Cal services.
(g)Medi-Cal enrollee means an individual enrolled in a health plan, as defined in subdivision (f), who is a Medi-Cal beneficiary for whom the department directly pays the health plan a capitated payment.
(h)Medi-Cal per enrollee tax amount means the amount of tax assessed per countable Medi-Cal enrollee within a Medi-Cal taxing tier.
(i)Medi-Cal taxing tier means a range of cumulative enrollment of countable Medi-Cal enrollees for the base year.
(j)Other enrollee means an individual enrolled in a health plan, as defined in subdivision (f), who is not a Medi-Cal beneficiary.
(k)Other per enrollee tax amount means the amount of tax assessed per countable other enrollee within an other taxing tier.
(l)Other taxing tier means a range of cumulative enrollment of countable other enrollees for the base year.
(m)Plan-to-plan enrollee means an individual who receives their health care services through a health plan pursuant to a subcontract from another health plan.
(n)Tax period means a period of not more than 12 months for which the tax authorized by this article is assessed, in accordance with the requirements described in Section 14199.84.
14199.82.(a)The Managed Care Enrollment 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 Managed Care Enrollment Fund.
(c)Notwithstanding Section 16305.7 of the Government Code, any interest and dividends earned on moneys in the Managed Care Enrollment Fund shall be retained in the fund and used solely for the purpose specified in subdivision (d).
(d)Funds deposited in the Managed Care Enrollment Fund pursuant to this article shall, upon appropriation by the Legislature, be available to the department for the purpose of funding all of the following subcomponents to support the Medi-Cal program:
(1)The nonfederal share of increased capitation payments to Medi-Cal managed care plans accounting for their projected tax obligation pursuant to this article for the applicable fiscal year or years.
(2)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 the Medi-Cal program and the Medicare Program.
(3)Transfers to the Medi-Cal Provider Payment Reserve Fund established pursuant to Section 14105.200.
(e)The department shall provide an annual report to all health plans accounting for the funds deposited in, and expended from, the Managed Care Enrollment 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.
(f)Effective December 31, 2023, the Health Care Services Special Fund in the State Treasury, created pursuant to Section 14199.62, is hereby abolished. All moneys in the fund or moneys designated to be deposited to the fund shall be transferred to the Managed Care Enrollment Fund created pursuant to subdivision (a). Any remaining balance, assets, liabilities, and encumbrances of the Health Care Services Special Fund as of December 31, 2023, shall be transferred to, and become part of, the Managed Care Enrollment Fund.
(g)Notwithstanding any other law, the Controller may use the funds in the Managed Care Enrollment Fund for cashflow loans to the General Fund as provided in Sections 16310 and 16381 of the Government Code.
14199.83.(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 other provision in this article, the director may correct any identified material or significant error in the data, including, but not limited to, the overall cumulative enrollment, Medicare cumulative enrollment, Medi-Cal cumulative enrollment, plan-to-plan cumulative enrollment, cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382), and other cumulative enrollment. The directors determination as to whether to exercise 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 14199.85.
14199.84.(a)A managed care organization provider tax shall be imposed on each health plan. The tax shall be imposed for the following tax periods:
(1)April 1, 2023, through December 31, 2023.
(2)2024 calendar year.
(3)2025 calendar year.
(4)2026 calendar year.
(b)(1)The department shall compute the annual tax for each health plan subject to the tax during each applicable calendar year pursuant to Section 14199.85.
(2)The computed tax for the tax period of April 1, 2023, through December 31, 2023, shall be equal to three-fourths of the amount that would otherwise be computed for a 12-month period, as determined by the department.
(c)The department shall collect the tax for each health plan in quarterly installments and shall determine the amount due for each installment in the applicable tax period by dividing the total tax for a tax period by the number of calendar quarters in the respective tax period.
(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.
(1)Within 10 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the director shall certify in writing that federal approval has been received, and the department shall post the certification on its internet website 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)Within 30 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the department shall send a notice to each health plan subject to the tax that shall contain the following information:
(A)The tax due for each tax period.
(B)The dates on which the installment tax payments are due for each tax period.
(3)A health plan shall pay the tax for each tax period in installments as calculated pursuant to Section 14199.85, 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 calendar 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 Managed Care Enrollment Fund created pursuant to Section 14199.82.
(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 Managed Care Enrollment Fund created pursuant to Section 14199.82.
(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 if the director determines, in their 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.
14199.85.(a)For each tax period, 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 1,250,000, inclusive.
(2)Medi-Cal taxing tier II shall consist of all countable Medi-Cal enrollees in a health plan from 1,250,001 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 tax period, 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 1,250,000, inclusive.
(2)Other taxing tier II shall consist of all countable other enrollees in a health plan from 1,250,001 to 4,000,000, inclusive.
(3)Other taxing tier III shall consist of all countable other enrollees in a health plan greater than 4,000,000.
(c)For the period of April 1, 2023, through December 31, 2023, and for the 2024 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred eighty-two dollars and fifty cents ($182.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(d)For the period of April 1, 2023, through December 31, 2023, and for the 2024 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be one dollar and seventy-five cents ($1.75).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(e)For the 2025 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred eighty-seven dollars and fifty cents ($187.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(f)For the 2025 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars ($2).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(g)For the 2026 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred ninety-two dollars and fifty cents ($192.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(h)For the 2026 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars and twenty-five cents ($2.25).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(i)(1)The department may modify or make adjustments to any methodology, tax amount, taxing tier, or other provision specified in this article to the extent that it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized, provided the modification or adjustment does not otherwise conflict with the purposes of this article, or result in an increase in the aggregate tax amounts projected to be collected under this article that the department, in its sole discretion, determines is significant.
(2)If the department identifies that modification or adjustment is necessary in accordance with paragraph (1), the department shall consult with affected health plans, to the extent practicable, to implement that modification or adjustment.
(3)In the event of a modification or adjustment made pursuant to this subdivision, the department shall notify affected health plans, the Department of Finance, 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.
(j)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 federal law or regulation necessary to implement this article.
(k)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 any further regulatory action. The department shall provide notification to the Department of Finance, 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 after the above-described action is taken.
14199.86.(a)The tax assessed under this article shall become effective and operative on April 1, 2023, or the effective date, certified in writing by the director, of the federal approval necessary for receipt of federal financial participation, whichever occurs later. The director shall post the certification of federal approval on the departments internet website 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.
(b)This article, except for Section 14199.82 to the extent not in conflict with federal law, shall cease to be operative the first day of the calendar year beginning on or after the date the director, in consultation with the Director of Finance, determines that the taxes have not met the intent as outlined in Section 14199.80, or the department has not obtained the federal approval necessary for receipt of federal financial participation. The director shall post the determination on the departments internet website 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.
(c)This article, except for Section 14199.82 to the extent not in conflict with federal law, shall cease to be operative for any affected tax period or periods upon a final judicial determination made by any court of appellate jurisdiction or a final determination by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services that the tax assessed pursuant to this article cannot be implemented for the affected tax period or periods, and any amount of the tax paid under this article with respect to the affected tax period or periods shall be refunded. The director shall post a notification of that final judicial or federal administrative determination on the departments internet website 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.
(d)Notwithstanding this section, any tax and any applicable interest and penalties imposed under this article shall continue to be due and payable to the department until the tax and any applicable interest and penalties are fully paid.
(e)Upon execution of the declaration described in subdivision (b) or (c), the director shall implement a plan, in consultation with the Department of Finance, to end the program consistent with the purpose of the article, including the recoupment of payments made under this article if required by a final judicial determination made by any court of appellate jurisdiction or a final determination made by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services.
14199.87.(a)This article shall become operative on the effective date, certified in writing by the director, of the federal approval necessary for receipt of federal financial participation, as described in subdivision (a) of Section 14199.86 for purposes of assessing the tax under this article.
(b)(1)All sections in this article, except for Section 14199.82 to the extent not in conflict with federal law, shall become inoperative on January 1, 2027, or on a date as specified in subdivision (b) or (c) of Section 14199.86, whichever occurs first. All sections in this article, except for Section 14199.82, are repealed on January 1, 2028.
(2)Notwithstanding paragraph (1), any tax and any applicable interest and penalties imposed under this article shall continue to be due and payable to the department until the tax and any applicable interest and penalties are fully paid.
SEC. 3.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to implement a new managed care organization provider tax at the earliest possible effective date allowable under federal law, to best position the state to maintain and improve access to care, maximize federal financial participation, and minimize the need for any new reductions to the Medi-Cal program, it is necessary that this act take effect immediately.
The Legislature finds and declares all of the following:
(a)The Legislature continues to recognize that an enrollment-based managed care organization provider tax is an essential and necessary source of nonfederal funding for maintaining and improving access to care and reimbursement levels under, and maximizing federal financial participation for, the Medi-Cal program.
(b)The Legislature recognizes how the previous iterations of the managed care organization provider tax, in effect nearly continuously from July 1, 2016, enabled the state to provide ongoing funding for health care and prevention, while minimizing the need for any new reductions to the Medi-Cal program during the time periods when the tax was in effect.
(c)Implementation of a new managed care organization provider tax at the earliest possible effective date allowable under federal law will best position the state to maintain and improve access to care, maximize federal financial participation, and minimize the need for any new reductions to the Medi-Cal program.
(d)In furtherance of subdivisions (a) to (c), inclusive, it is the intent of the Legislature that the department implement a managed care organization provider tax effective April 1, 2023, to meet all of the following goals:
(1)Generate an amount of nonfederal funds for the Medi-Cal program that is greater than the nonfederal funds generated by the tax imposed pursuant to Article 6.8 (commencing with Section 14199.60).
(2)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.
(3)Provide funding to support the health care delivery system with an emphasis on the impact to the Medi-Cal program.
(4)Minimize, to the extent possible, the need for any new reductions to the Medi-Cal program.
14199.81.The following definitions shall apply for purposes of this article:
(a)Base data source means the quarterly financial statement filings or annual enrollment data submitted by health plans to the Department of Managed Health Care retrieved by the department no later than June 30, 2023, and supplemented by, as necessary, Medi-Cal enrollment data for the base year as maintained by the department and retrieved no later than June 30, 2023, and as modified by the department to account for known or anticipated changes that will affect Medi-Cal enrollment on or after January 1, 2024. However, if the department elects to update the base year pursuant to subdivision (b), base data source means the most recently available quarterly financial statement filings or annual enrollment data submitted by health plans to the Department of Managed Health Care for that updated base year, retrieved by the department, and supplemented by, as necessary, Medi-Cal enrollment data for the updated base year as maintained by the department, and as modified by the department to account for known or anticipated changes that will affect Medi-Cal enrollment.
(b)Base year means the 12-month period of January 1, 2022, through December 31, 2022. However, the department may elect to update the base year to the extent that it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized.
(c)Countable enrollee means an individual enrolled in a health plan, as defined in subdivision (f), 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 (m), 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.
(d)Department means the State Department of Health Care Services.
(e)Director means the Director of Health Care Services.
(f)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 full-scope Medi-Cal services.
(g)Medi-Cal enrollee means an individual enrolled in a health plan, as defined in subdivision (f), who is a Medi-Cal beneficiary for whom the department directly pays the health plan a capitated payment.
(h)Medi-Cal per enrollee tax amount means the amount of tax assessed per countable Medi-Cal enrollee within a Medi-Cal taxing tier.
(i)Medi-Cal taxing tier means a range of cumulative enrollment of countable Medi-Cal enrollees for the base year.
(j)Other enrollee means an individual enrolled in a health plan, as defined in subdivision (f), who is not a Medi-Cal beneficiary.
(k)Other per enrollee tax amount means the amount of tax assessed per countable other enrollee within an other taxing tier.
(l)Other taxing tier means a range of cumulative enrollment of countable other enrollees for the base year.
(m)Plan-to-plan enrollee means an individual who receives their health care services through a health plan pursuant to a subcontract from another health plan.
(n)Tax period means a period of not more than 12 months for which the tax authorized by this article is assessed, in accordance with the requirements described in Section 14199.84.
14199.82.(a)The Managed Care Enrollment 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 Managed Care Enrollment Fund.
(c)Notwithstanding Section 16305.7 of the Government Code, any interest and dividends earned on moneys in the Managed Care Enrollment Fund shall be retained in the fund and used solely for the purpose specified in subdivision (d).
(d)Funds deposited in the Managed Care Enrollment Fund pursuant to this article shall, upon appropriation by the Legislature, be available to the department for the purpose of funding all of the following subcomponents to support the Medi-Cal program:
(1)The nonfederal share of increased capitation payments to Medi-Cal managed care plans accounting for their projected tax obligation pursuant to this article for the applicable fiscal year or years.
(2)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 the Medi-Cal program and the Medicare Program.
(3)Transfers to the Medi-Cal Provider Payment Reserve Fund established pursuant to Section 14105.200.
(e)The department shall provide an annual report to all health plans accounting for the funds deposited in, and expended from, the Managed Care Enrollment 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.
(f)Effective December 31, 2023, the Health Care Services Special Fund in the State Treasury, created pursuant to Section 14199.62, is hereby abolished. All moneys in the fund or moneys designated to be deposited to the fund shall be transferred to the Managed Care Enrollment Fund created pursuant to subdivision (a). Any remaining balance, assets, liabilities, and encumbrances of the Health Care Services Special Fund as of December 31, 2023, shall be transferred to, and become part of, the Managed Care Enrollment Fund.
(g)Notwithstanding any other law, the Controller may use the funds in the Managed Care Enrollment Fund for cashflow loans to the General Fund as provided in Sections 16310 and 16381 of the Government Code.
14199.83.(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 other provision in this article, the director may correct any identified material or significant error in the data, including, but not limited to, the overall cumulative enrollment, Medicare cumulative enrollment, Medi-Cal cumulative enrollment, plan-to-plan cumulative enrollment, cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382), and other cumulative enrollment. The directors determination as to whether to exercise 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 14199.85.
14199.84.(a)A managed care organization provider tax shall be imposed on each health plan. The tax shall be imposed for the following tax periods:
(1)April 1, 2023, through December 31, 2023.
(2)2024 calendar year.
(3)2025 calendar year.
(4)2026 calendar year.
(b)(1)The department shall compute the annual tax for each health plan subject to the tax during each applicable calendar year pursuant to Section 14199.85.
(2)The computed tax for the tax period of April 1, 2023, through December 31, 2023, shall be equal to three-fourths of the amount that would otherwise be computed for a 12-month period, as determined by the department.
(c)The department shall collect the tax for each health plan in quarterly installments and shall determine the amount due for each installment in the applicable tax period by dividing the total tax for a tax period by the number of calendar quarters in the respective tax period.
(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.
(1)Within 10 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the director shall certify in writing that federal approval has been received, and the department shall post the certification on its internet website 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)Within 30 business days following the date the department receives all necessary federal approvals for the tax pursuant to this article, the department shall send a notice to each health plan subject to the tax that shall contain the following information:
(A)The tax due for each tax period.
(B)The dates on which the installment tax payments are due for each tax period.
(3)A health plan shall pay the tax for each tax period in installments as calculated pursuant to Section 14199.85, 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 calendar 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 Managed Care Enrollment Fund created pursuant to Section 14199.82.
(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 Managed Care Enrollment Fund created pursuant to Section 14199.82.
(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 if the director determines, in their 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.
14199.85.(a)For each tax period, 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 1,250,000, inclusive.
(2)Medi-Cal taxing tier II shall consist of all countable Medi-Cal enrollees in a health plan from 1,250,001 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 tax period, 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 1,250,000, inclusive.
(2)Other taxing tier II shall consist of all countable other enrollees in a health plan from 1,250,001 to 4,000,000, inclusive.
(3)Other taxing tier III shall consist of all countable other enrollees in a health plan greater than 4,000,000.
(c)For the period of April 1, 2023, through December 31, 2023, and for the 2024 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred eighty-two dollars and fifty cents ($182.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(d)For the period of April 1, 2023, through December 31, 2023, and for the 2024 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be one dollar and seventy-five cents ($1.75).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(e)For the 2025 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred eighty-seven dollars and fifty cents ($187.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(f)For the 2025 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars ($2).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(g)For the 2026 calendar 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 zero dollars ($0).
(2)The Medi-Cal per enrollee tax for Medi-Cal taxing tier II shall be one hundred ninety-two dollars and fifty cents ($192.50).
(3)The Medi-Cal per enrollee tax for Medi-Cal taxing tier III shall be zero dollars ($0).
(h)For the 2026 calendar 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 zero dollars ($0).
(2)The other per enrollee tax for the other taxing tier II shall be two dollars and twenty-five cents ($2.25).
(3)The other per enrollee tax for the other taxing tier III shall be zero dollars ($0).
(i)(1)The department may modify or make adjustments to any methodology, tax amount, taxing tier, or other provision specified in this article to the extent that it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized, provided the modification or adjustment does not otherwise conflict with the purposes of this article, or result in an increase in the aggregate tax amounts projected to be collected under this article that the department, in its sole discretion, determines is significant.
(2)If the department identifies that modification or adjustment is necessary in accordance with paragraph (1), the department shall consult with affected health plans, to the extent practicable, to implement that modification or adjustment.
(3)In the event of a modification or adjustment made pursuant to this subdivision, the department shall notify affected health plans, the Department of Finance, 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.
(j)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 federal law or regulation necessary to implement this article.
(k)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 any further regulatory action. The department shall provide notification to the Department of Finance, 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 after the above-described action is taken.
14199.86.(a)The tax assessed under this article shall become effective and operative on April 1, 2023, or the effective date, certified in writing by the director, of the federal approval necessary for receipt of federal financial participation, whichever occurs later. The director shall post the certification of federal approval on the departments internet website 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.
(b)This article, except for Section 14199.82 to the extent not in conflict with federal law, shall cease to be operative the first day of the calendar year beginning on or after the date the director, in consultation with the Director of Finance, determines that the taxes have not met the intent as outlined in Section 14199.80, or the department has not obtained the federal approval necessary for receipt of federal financial participation. The director shall post the determination on the departments internet website 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.
(c)This article, except for Section 14199.82 to the extent not in conflict with federal law, shall cease to be operative for any affected tax period or periods upon a final judicial determination made by any court of appellate jurisdiction or a final determination by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services that the tax assessed pursuant to this article cannot be implemented for the affected tax period or periods, and any amount of the tax paid under this article with respect to the affected tax period or periods shall be refunded. The director shall post a notification of that final judicial or federal administrative determination on the departments internet website 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.
(d)Notwithstanding this section, any tax and any applicable interest and penalties imposed under this article shall continue to be due and payable to the department until the tax and any applicable interest and penalties are fully paid.
(e)Upon execution of the declaration described in subdivision (b) or (c), the director shall implement a plan, in consultation with the Department of Finance, to end the program consistent with the purpose of the article, including the recoupment of payments made under this article if required by a final judicial determination made by any court of appellate jurisdiction or a final determination made by the United States Department of Health and Human Services or the federal Centers for Medicare and Medicaid Services.
14199.87.(a)This article shall become operative on the effective date, certified in writing by the director, of the federal approval necessary for receipt of federal financial participation, as described in subdivision (a) of Section 14199.86 for purposes of assessing the tax under this article.
(b)(1)All sections in this article, except for Section 14199.82 to the extent not in conflict with federal law, shall become inoperative on January 1, 2027, or on a date as specified in subdivision (b) or (c) of Section 14199.86, whichever occurs first. All sections in this article, except for Section 14199.82, are repealed on January 1, 2028.
(2)Notwithstanding paragraph (1), any tax and any applicable interest and penalties imposed under this article shall continue to be due and payable to the department until the tax and any applicable interest and penalties are fully paid.
SEC. 3.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to implement a new managed care organization provider tax at the earliest possible effective date allowable under federal law, to best position the state to maintain and improve access to care, maximize federal financial participation, and minimize the need for any new reductions to the Medi-Cal program, it is necessary that this act take effect immediately.
SECTION 1.It is the intent of the Legislature to enact statutory changes, relating to the Budget Act of 2023.It is the intent of the Legislature to enact statutory changes changes, relating to the Budget Act of 2023.
It is the intent of the Legislature to enact statutory changes relating to the Budget Act of 2023.
|
Date
|
Status
|
|---|---|
| Jun 29, 2023 | Chaptered by Secretary of State - Chapter 13, Statutes of 2023. |
| Jun 29, 2023 | Approved by the Governor. |
| Jun 27, 2023 | Enrolled and presented to the Governor at 4:30 p.m. |
| Jun 27, 2023 | Urgency clause adopted. Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 68. Noes 1. Page 2417.). |
| Jun 27, 2023 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after June 29 pursuant to Assembly Rule 77. |
| Jun 27, 2023 | Assembly Rule 77 suspended. (Page 2416.) |
| Jun 27, 2023 | Assembly Rule 63 suspended. (Page 2416.) |
| Jun 27, 2023 | Senate Rules Suspended (Ayes 32. Noes 8.) |
| Jun 27, 2023 | Read third time. Urgency clause adopted. Passed. Ordered to the Assembly. (Ayes 35. Noes 0. Page 1763.). |
| Jun 27, 2023 | Read second time. Ordered to third reading. |
| Jun 26, 2023 | From committee: Do pass. (Ayes 14. Noes 0.) (June 26). |
| Jun 24, 2023 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on B. & F.R. |
| Apr 12, 2023 | Referred to Com. on B. & F.R. |
| Mar 23, 2023 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Mar 23, 2023 | Read third time. Passed. Ordered to the Senate. (Ayes 60. Noes 14. Page 838.) |
| Mar 21, 2023 | Read second time. Ordered to third reading. |
| Mar 20, 2023 | Withdrawn from committee. |
| Mar 20, 2023 | Ordered to second reading. |
| Mar 20, 2023 | Assembly Rule 96 suspended. (Ayes 61. Noes 17. Page 732.) |
| Feb 2, 2023 | Re-referred to Com. on BUDGET. |
| Feb 1, 2023 | From committee chair, with author's amendments: Amend, and re-refer to Com. on BUDGET. Read second time and amended. |
| Jan 26, 2023 | Referred to Com. on BUDGET. |
| Jan 10, 2023 | From printer. May be heard in committee February 9. |
| Jan 9, 2023 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Jun 27, 2023 | AB 119 BUDGET Concurrence - Urgency Added By TING | Assembly Floor |
Passed |
|
| Jun 27, 2023 | Assembly 2nd Reading AB119 BUDGET (Ting) By Skinner Urgency Clause | Senate Floor |
Passed |
|
| Jun 26, 2023 | Do pass | Senate Standing Committee on Budget and Fiscal Review |
Passed |
|
| Mar 23, 2023 | AB 119 Budget Assembly Third Reading By TING | Assembly 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.
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 119 |
THIRD READING
Bill No: AB 119
Author: Committee on Budget
Amended: 6/24/23 in Senate
Vote: 27 - Urgency
SENATE BUDGET & FISCAL REVIEW COMMITTEE: 14-0, 6/26/23
AYES: Skinner, Niello, Becker, Caballero, Durazo, Eggman, Laird, McGuire, Menjivar, Min, Newman, Padilla, Roth, Smallwood-Cuevas
NO VOTE RECORDED: Dahle, Grove, Ochoa Bogh, Seyarto
ASSEMBLY FLOOR: Not relevant
SUBJECT: Medi-Cal: managed care organization provider tax
SOURCE: Author
DIGEST:
This bill assesses a tax on managed care organizations to: (1) support the General Fund shortfall and achieve a balanced budget; and (2) support Medi-Cal investments to ensure access, quality and equity.
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 (FFP) 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, and support critical investments to ensure access, quality, and equity. Specifically, this bill:
- 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.
- Assesses the tax, beginning April 1, 2023, through December 31, 2026.
- Assesses the tax on a per enrollee basis for each month of enrollment in a plan, based on cumulative enrollment between January 1, 2022, and December 31, 2022 (the “base year”).
- 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:
Managed Care Organization Enrollment Tax Tiers (2023-24 through 2026-27) | ||||||
Medi-Cal Tier 1 | Medi-Cal Tier 2 | Medi-Cal Tier 3 | Other Tier 1 | Other Tier 2 | Other Tier 3 | |
Enrollment: | Less than 1,250,000 | 1,250,001- 4,000,000 | More than 4,000,001 | Less than 1,250,000 | 1,250,001- 4,000,000 | More than 4,000,001 |
2023-24 | $0.00 | $182.50 | $0.00 | $0.00 | $1.75 | $0.00 |
2024-25 | $0.00 | $182.50 | $0.00 | $0.00 | $1.75 | $0.00 |
2025-26 | $0.00 | $187.50 | $0.00 | $0.00 | $2.00 | $0.00 |
2026-27 | $0.00 | $192.50 | $0.00 | $0.00 | $2.25 | $0.00 |
- Establishes the Managed Care Enrollment Fund, into which the revenues from the tax would be deposited. The revenues deposited in the fund would be available, upon appropriation by the Legislature, to DHCS for the purposes of funding: (a) the nonfederal share of increased capitation payments to Medi-Cal managed care plans to account for their projected tax obligation, (b) the nonfederal share of Medi-Cal managed care rates for the delivery of health care services to beneficiaries of the Medi-Cal program, and (c) transfers to the Medi-Cal Provider Payment Reserve Fund to support investments in the Medi-Cal program.
- Requires DHCS to annually report to all health plans on funds deposited in, and expended from, the Managed Care Enrollment Fund, including taxes imposed on each health plan and an itemized accounting of expenditures.
- Authorizes DHCS to modify or make adjustments to components of the tax if necessary to meet the requirements of federal law, regulation, guidance, to obtain federal approval, or to ensure continued availability of federal financial participation for the Medi-Cal program. These modifications would only be allowed if they do not conflict with the purposes of the tax, or result in a significant increase in the aggregate tax amounts to be collected.
- Takes effect immediately as an urgency measure.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Budget and Fiscal Review Committee:
The tax assessed by this bill would result in total revenue of $8.3 billion in 2023-24, $8.5 billion in 2024-25, $8.8 billion in 2025-26, and $6.7 billion in 2026-27, for a total of $32.3 billion over the tax period. After accounting for increased Medi-Cal capitation payments, the tax results in a net General Fund benefit of $4.4 billion in 2023-24, $5.1 billion in 2024-25, $5.3 billion in 2025-26, and $4.6 billion in 2026-27, for a total of $19.4 billion over the tax period. The expected amounts of revenues, expenditures on capitation rates, net General Fund benefit, General Fund backfill, and transfer to the Medi-Cal Provider Payment Reserve Fund over the four fiscal years covering the tax period are as follows:
MCO Tax Renewal – Cash Basis by Fiscal Year | |||||
(dollars in thousands) | 2023-24 | 2024-25 | 2025-26 | 2026-27 | Total |
Total Revenue1 | $8,269,212 | $8,526,680 | $8,761,784 | $6,703,584 | $32,261,260 |
Medi-Cal Capitation Rates2 | $3,859,656 | $3,414,943 | $3,507,447 | $2,077,488 | $12,859,534 |
State’s Net Benefit3 | $4,409,556 | $5,111,737 | $5,254,337 | $4,626,096 | $19,401,726 |
General Fund Backfill4 | $3,388,600 | $1,857,914 | $2,019,341 | $1,050,027 | $8,315,882 |
Medi-Cal Provider Payment Reserve Fund5 | $1,020,956 | $3,253,823 | $3,234,996 | $3,576,069 | $11,085,844 |
1–Total Revenue is the total amount of revenue received by the state from the tax on managed care organizations.
2–Medi-Cal Capitation Rates is the amount paid to Medi-Cal managed care plans in their capitation rates to account for the amount of tax paid to the state. Federal regulations require capitation payments to be actuarially sound and include the cost of taxes.
3–State’s Net Benefit is the amount of revenue received by the state, net of capitation payments paid to managed care plans.
4–General Fund Backfill is the amount that addresses the General Fund shortfall in 2023-24 and subsequent years.
5–Medi-Cal Provider Payment Reserve Fund would receive deposits of the remaining MCO tax revenue for investments in the Medi-Cal program, including reimbursement rate increases, support for financially distressed hospitals, assistance with seismic compliance for small and rural hospitals, workforce development programs, and other investments.
In addition, according to DHCS, the total impact of the tax on non-Medi-Cal plans would be $20.2 million in calendar year 2023, $26.9 million in 2024, $30.7 million in 2025, and $34.6 million in 2026.
SUPPORT: (Verified 6/26/23)
None received
OPPOSITION: (Verified 6/26/23)
None received
Prepared by: Scott Ogus / B. & F.R. / (916) 651-4103
6/27/23 12:05:12
**** END ****
(Without Reference to File)
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 119
Author:(Committee on Budget)
As Amended Ver:June 24, 2023
Majority vote. Budget Bill Appropriation Takes Effect Immediately
SUMMARY
This is a tax bill which is necessary to implement various provisions of the Budget Act of 2023.
Senate Amendments
Authorize a new Managed Care Organization (MCO) Provider Tax, affecting the budget of the Department of Health Care Services. Specifically, Senate amendments:
- Enacts a new MCO Tax and repeals the statute that contains the past, expired MCO Provider Tax.
- Makes findings and declarations related to the value and financial benefit to the state from implementing an MCO Tax.
- Establishes Legislative intent that the Department of Health Care Services (DHCS) implement an MCO Tax effective April 1, 2023 that: a) generates more nonfederal funds than the amount generated by the last MCO Tax; b) complies with federal requirements; c) provides funding that supports the health care delivery system, and Medi-Cal in particular; and d) minimizes the need for new reductions to the Medi-Cal program.
- Defines various terms including: base data source, base year, countable enrollee, health care service plan, Medi-Cal per enrollee tax amount, Medi-Cal taxing tier, plan-to-plan enrollee, and tax period, among others.
- Establishes the Managed Care Enrollment Fund in the State Treasury, in which all MCO Tax revenues shall be deposited, and authorizes the Controller to use these funds for cashflow loans to the General Fund.
- Authorizes DHCS to use MCO Tax revenue, upon appropriation by the Legislature, for: a) the nonfederal share of increased capitation payments to Medi-Cal managed care plans, accounting for their projected tax obligation; b) the nonfederal share of Medi-Cal managed care rates for Medi-Cal services; and c) transfers of funds to the Medi-Cal Provider Payment Reserve Fund to support future improvements to the Medi-Cal program.
- Requires DHCS to provide an annual report to all health plans accounting for the funds deposited in, and expended from, the Managed Care Enrollment Fund.
- Requires DHCS to determine specified data for each health plan using the base data source, including, but not limited to, total cumulative enrollment for the base year and total Medicare, Medi-Cal, and plan-to-plan cumulative enrollment for the base year.
- Authorizes the DHCS director to correct any identified material or significant error in the data, and exempts such corrections from being subject to judicial review, with a specified exception.
- Imposes the MCO tax on each health plan from April 1, 2023 through December 31, 2026, and requires DHCS to collect the tax in quarterly installments.
- Prohibits DHCS from collecting the tax before federal government approval has been received. Requires DHCS to certify in writing that federal approval has been received within 10 business days following the date that DHCS receives all necessary federal approvals, and to post the certification on its website and send a copy of the certification to specified state entities.
- Requires DHCS, within 30 business days following the date of receipt of all federal approvals, to send a notice to each health plan (subject to the tax) containing the amount of tax due per tax period and the dates the tax is due.
- Requires health plans to pay the tax in installments, based on a schedule developed by DHCS, that are at least one month apart but no more than one quarter apart.
- Assesses interest on any health plan for any taxes that are not paid on the date due at a rate of 10% per annum. Assesses a penalty equal to the total accrued interest charge if a tax payment is more than 60 days overdue.
- Authorizes the director to waive a portion or all of either the interest or penalties assessed if the director determines that the health plan has demonstrated that the interest or penalty has a high likelihood of creating an undue financial hardship or creates a significant financial difficulty in providing services to Medi-Cal beneficiaries. Requires the health plan to agree to make payments on an alternative schedule in order to qualify for such a waiver.
- 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 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 to be responsible for paying the full tax amount.
- Establishes three taxing tiers, for each tax period, based on countable Medi-Cal and other enrollees as follows: a) tier I consisting of all enrollees from zero to 1,250,000 inclusive; b) tier II consisting of all enrollees from 1.25 million to 4 million inclusive; and c) tier III consisting of all enrollees greater than 4 million.
- Establishes the amount of tax per taxing tier, per time period of the tax, and authorizes DHCS to modify this methodology to the extent that it deems necessary to meet the requirements of federal law or regulations, to obtain or maintain federal approvals, or to ensure federal financial participation is available or not otherwise jeopardized.
- Requires DHCS, if it identifies any needed modifications to the tax methodology, to consult with affected health plans and to notify the plans, the Department of Finance, and the Legislature within 10 days of the modification being implemented.
- Requires DHCS to request approval from the federal Centers for Medicare and Medicaid Services to implement this article, and authorizes DHCS to implement this article by means of provider bulletins, all-plan letters, or other similar instructions without taking regulatory action. Requires DHCS to notify the Department of Finance and the Legislature within 10 business days of taking any action described above.
- Requires that this article cease to be operative: a) the first day of the calendar year after the date the director determines the taxes have not met the intent, or that federal approvals for federal financial participation have not been received; or b) for any affected tax period upon a final judicial determination made by a court of appellate jurisdiction or by the federal government that the tax cannot be implemented, and any amount of the tax paid during the affected tax period shall be refunded. Requires the director to post notification of either of these occurrences on the DHCS website and to notify various state entities and the Legislature.
- Declares this to be an urgency statute, and that it shall go into immediate effect, in order to implement a new MCO tax at the earliest possible effective date to best position the state to maintain and improve access to care, maximize federal financial participation, and minimize the need for any new reductions to the Medi-Cal program.
COMMENTS
This bill is a tax bill that implements provisions of the 2023-24 budget package affecting health-related departments. Specifically, this bill authorizes a new Managed Care Organization Provider Tax to increase General Fund revenue which is proposed to be used to help balance the budget, increase Medi-Cal provider rates, support distressed and small rural hospitals and make other improvements to the Medi-Cal program.
According to the Author
Arguments in Support
None on file.
Arguments in Opposition
None on file.
FISCAL COMMENTS
This proposed new MCO tax is expected to result in approximately $19.4 billion in new revenue to the state to help maintain and improve the Medi-Cal program.
VOTES:
ASSEMBLY FLOOR: 60-14-6
YES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner Horvath, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones- Sawyer, Kalra, Lee, Low, Lowenthal, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon
NO: Alanis, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Lackey, Jim Patterson, Joe Patterson, Sanchez, Ta
ABS, ABST OR NV: Cervantes, Chen, Maienschein, Mathis, Waldron, Wallis
UPDATED
VERSION: June 24, 2023
CONSULTANT: Andrea Margolis / BUDGET / (916) 319-2099 FN: 0001136
SENATE COMMITTEE ON
Senator Nancy Skinner, Chair
2023 - 2024 Regular
Bill No: Hearing Date: June 26, 2023
Author: | Committee on Budget | ||
Version: | Amended | ||
Urgency: | Yes | Fiscal: | Yes |
Consultant: | |||
Subject: Medi-Cal: managed care organization provider tax
Summary:
This bill assesses a tax on managed care organizations to: 1) support the General Fund shortfall and achieve a balanced budget; and 2) support Medi-Cal investments to ensure access, quality and equity.
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, and support critical investments to ensure access, quality, and equity. Specifically, this bill:
- 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.
- Assesses the tax, beginning April 1, 2023, through December 31, 2026.
- Assesses the tax on a per enrollee basis for each month of enrollment in a plan, based on cumulative enrollment between January 1, 2022 and December 31, 2022 (the “base year”).
- 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:
Managed Care Organization Enrollment Tax Tiers (2023-24 through 2026-27) | ||||||
Medi-Cal Tier 1 | Medi-Cal Tier 2 | Medi-Cal Tier 3 | Other Tier 1 | Other Tier 2 | Other Tier 3 | |
Enrollment: | Less than 1,250,000 | 1,250,001- 4,000,000 | More than 4,000,001 | Less than 1,250,000 | 1,250,001- 4,000,000 | More than 4,000,001 |
2023-24 | $0.00 | $182.50 | $0.00 | $0.00 | $1.75 | $0.00 |
2024-25 | $0.00 | $182.50 | $0.00 | $0.00 | $1.75 | $0.00 |
2025-26 | $0.00 | $187.50 | $0.00 | $0.00 | $2.00 | $0.00 |
2026-27 | $0.00 | $192.50 | $0.00 | $0.00 | $2.25 | $0.00 |
- Establishes the Managed Care Enrollment Fund, into which the revenues from the tax would be deposited. The revenues deposited in the fund would be available, upon appropriation by the Legislature, to DHCS for the purposes of funding: 1) the nonfederal share of increased capitation payments to Medi-Cal managed care plans to account for their projected tax obligation, 2) the nonfederal share of Medi-Cal managed care rates for the delivery of health care services to beneficiaries of the Medi-Cal program, and 3) transfers to the Medi-Cal Provider Payment Reserve Fund to support investments in the Medi-Cal program.
- Requires DHCS to annually report to all health plans on funds deposited in, and expended from, the Managed Care Enrollment Fund, including taxes imposed on each health plan and an itemized accounting of expenditures.
- Authorizes DHCS to modify or make adjustments to components of the tax if necessary to meet the requirements of federal law, regulation, guidance, to obtain federal approval, or to ensure continued availability of federal financial participation for the Medi-Cal program. These modifications would only be allowed if they do not conflict with the purposes of the tax, or result in a significant increase in the aggregate tax amounts to be collected.
- Would take effect immediately as an urgency measure.
Fiscal Effect:
The tax assessed by this bill would result in total revenue of $8.3 billion in 2023-24, $8.5 billion in 2024-25, $8.8 billion in 2025-26, and $6.7 billion in 2026-27, for a total of $32.3 billion over the tax period. After accounting for increased Medi-Cal capitation payments, the tax results in a net General Fund benefit of $4.4 billion in 2023-24, $5.1 billion in 2024-25, $5.3 billion in 2025-26, and $4.6 billion in 2026-27, for a total of $19.4 billion over the tax period. The expected amounts of revenues, expenditures on capitation rates, net General Fund benefit, General Fund backfill, and transfer to the Medi-Cal Provider Payment Reserve Fund over the four fiscal years covering the tax period are as follows:
MCO Tax Renewal – Cash Basis by Fiscal Year | |||||
(dollars in thousands) | 2023-24 | 2024-25 | 2025-26 | 2026-27 | Total |
Total Revenue1 | $8,269,212 | $8,526,680 | $8,761,784 | $6,703,584 | $32,261,260 |
Medi-Cal Capitation Rates2 | $3,859,656 | $3,414,943 | $3,507,447 | $2,077,488 | $12,859,534 |
State’s Net Benefit3 | $4,409,556 | $5,111,737 | $5,254,337 | $4,626,096 | $19,401,726 |
General Fund Backfill4 | $3,388,600 | $1,857,914 | $2,019,341 | $1,050,027 | $8,315,882 |
Medi-Cal Provider Payment Reserve Fund5 | $1,020,956 | $3,253,823 | $3,234,996 | $3,576,069 | $11,085,844 |
1–Total Revenue is the total amount of revenue received by the state from the tax on managed care organizations.
2–Medi-Cal Capitation Rates is the amount paid to Medi-Cal managed care plans in their capitation rates to account for the amount of tax paid to the state. Federal regulations require capitation payments to be actuarially sound and include the cost of taxes.
3–State’s Net Benefit is the amount of revenue received by the state, net of capitation payments paid to managed care plans.
4–General Fund Backfill is the amount that addresses the General Fund shortfall in 2023-24 and subsequent years.
5–Medi-Cal Provider Payment Reserve Fund would receive deposits of the remaining MCO tax revenue for investments in the Medi-Cal program, including reimbursement rate increases, support for financially distressed hospitals, assistance with seismic compliance for small and rural hospitals, workforce development programs, and other investments.
In addition, according to DHCS, the total impact of the tax on non-Medi-Cal plans would be $20.2 million in calendar year 2023, $26.9 million in 2024, $30.7 million in 2025, and $34.6 million in 2026.
Support:
None on file.
Opposed:
None on file.
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ASSEMBLY THIRD READING
ATR Bill Id:AB 119
Author:(Committee on Budget)
As Amended Ver:February 1, 2023
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 2023.
Major Provisions
COMMENTS
According to the Author
Arguments in Support
Arguments in Opposition
FISCAL COMMENTS
VOTES
UPDATED
VERSION: February 1, 2023
CONSULTANT: Christian Griffith / BUDGET / (916) 319-2099 FN: 0000053
Discussed in Hearing
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