Brown’s state budget set to revamp tax on health plans
SACRAMENTO — In an effort to break a political and policy log jam, Gov. Jerry Brown will unveil a state budget that revamps a controversial tax on health plans to avoid jeopardizing federal healthcare dollars.
Sources who spoke on the condition that they not be identified prior to Brown’s scheduled Thursday announcement said the reworked tax plan ref lects intense behind-the-scenes negotiations with California’s biggest insurers.
And to help force agreement in the Legislature, the governor’s budget reportedly links the $1.1 billion in revenues from the tax to specific healthcare programs that otherwise would be left scrambling for funds.
A spokesman for Brown declined to comment before the governor’s news conference, scheduled for 10 a.m. Thursday.
The tax would replace California’s current tax on health plans that participate in Medi-Cal, which provides state subsidized healthcare to the poor. The Obama administration has said the tax must be overhauled to include all health plans — including those without Medi-Cal patients — or the state risks losing federal funding when the existing managed-care tax expires June 30.
Negotiations reached a crescendo last fall, when the administration unveiled a proposal to tax plans at different rates based on enrollment. It also would have offset some of the costs to insurers with tax breaks.
The new proposal includes a reworking of the tax impact to appeal to a wider array of health plans, according to sources familiar with the negotiations who requested anonymity so as not to preempt the governor’s announcement.
The debate over the managed-care tax has been a noticeable f lashpoint, in part because it relies on support from health insurers and legislative Republicans. The extension of the tax will require a supermajority vote in both houses of the Legislature, and Republicans so far have shown no appetite for going along.
The governor’s budget for the fiscal year that begins July 1 is expected to project another dose of growth in tax revenues, as recent estimates show the California economy still growing and personal income taxes — the main source of state spending — at better-than-expected levels.