Transcription
In your state matters. The California Senate and Assembly reached their budget deal for the 2026-2027, setting the stage for final negotiations later this month with the governor. Despite strong pushback from healthcare organizations, a tax increase is moving forward for now. ABC 10 state matters political reporter Jenny Hu explains.
"We're trying to make people aware that this is a real affordability problem." Charles Balke of the California Association of Health Plans opposes Governor Newsom's proposed changes to the state's Managed Care Organization, or MCO tax. It's a tax on Medi-Cal and commercial health plans. The tax rate is historically higher for Medi-Cal as those funds are matched nearly 1 to 1 by the federal government.
"99% of that of the revenue really came from the tax on Medi-Cal enrollment, and that tax. Medi-Cal enrollment really results in more federal funding to the state." At the current rate, California brings in some $8 billion annually, according to the nonpartisan Legislative Analysts Office. Most of that goes to Medi-Cal as required by state law, but the current MCO tax expires at the end of the year. Newsom's renewal proposal is in the hot seat.
The MCO tax also requires federal approval to go into effect. There are new rules. Under HR 1, that the tax has to be applied equally to public and private healthcare plans. Opponents argue that means the financial burden is shifted onto consumers. Newsom says the new rate would generate $2.3 billion, 2/3 of that from private insurers.
"This results in a lower tax rate on Medi-Cal and so less federal funding and a higher tax rate on private enrollment, so a higher, higher cost to." On the private health plan side, estimates show monthly premiums could increase to an average of $9 a month per member regardless of their plan. Currently, it's about $2 per member depending on their tier.
"You can't do that in a way that doesn't impact people's ability to pay for their healthcare coverage. It's not off the table that direct cost to health plans could be cost to consumers as well in the form of increased premium premiums. It's probable that at least some of the cost could be shifted to consumers. How much of that cost is uncertain."
Newsom's Department of Finance says the tax will bring in additional revenue for Medi-Cal that ultimately saves California money since it won't have to pull from the state's general fund. State Senate and Assembly Democrats upheld the tax in their budget deal released Thursday.
"We think on a policy level. These are possible things to do, and then we will ground through some of the concerns in the three party discussions." Jenny Ha, ABC TED.