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California House Republicans are asking the Trump administration to prevent Democratic state leaders from implementing a new tax on health insurers.
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Six House members, including Reps. Kevin Kiley, I-Rocklin, and James Gallagher, R-Yuba City, sent a letter Friday to U.S. Department of Health and Human Services Secretary Robert F. Kennedy, Jr. and Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz to ask that the federal government deny approval of the state’s managed care organization tax.
Gov. Gavin Newsom, after approval from the Democratic supermajority in the Legislature, signed the tax into law last month, though it requires federal approval. Democrats have argued tax on managed care organizations — the insurers responsible for most commercial health plans — is necessary to help steady the finances of the Medi-Cal program and will reduce the potential for future budget cuts.
“Californians are already shouldered with the highest cost of living in the United States,” the California House Republicans said in the letter. “This proposal will only make things worse.”
State leaders have previously told The Sacramento Bee that the tax is a result of a Republican-led federal rule change. Under the new rules, California had to either levy a higher tax on commercial plans or end the taxes on the state plans and lose federal funding.
The new tax is estimated to lead to an annual $400 increase for a family of four. Friday’s request follows a letter sent to HHS earlier this month from more than a dozen Assembly Republicans.
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California Department of Finance spokesperson HD Palmer said in a written statement Monday said the tax allows “the state to continue to support the Medi-Cal program and maintain targeted rate increases for Medi-Cal providers.”
“It was crafted to comply with the federal law changes that Congress passed and the president signed last year — which is why we anticipate and expect that it will meet with their approval,” Palmer said in a statement.
Money generated from the increase will help pay for Medi-Cal, the state’s version of Medicaid, which has become more expensive in recent years due to eligibility expansion. The state is also generally facing looming budget deficits in the coming years due to high spending.
Kiley, in a written statement, called the proposed tax increase “unacceptable.” He, Gallagher, and Reps. Vince Fong, Ken Calvert, Young Kim and Jay Obernolte signed Friday’s letter.
“Policymakers on both sides of the aisle, at both the state and federal level, need to be focused on making healthcare more affordable,” Kiley said.
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HHS did not immediately respond to a request for comment.