California is getting ready to increase a health insurance tax. Will it affect your premium?
This was written by staff at the nonprofit newsroom CalMatters. It was republished by The Mendocino Voice in partnership with CalMatters to bring relevant nonpartisan news to
New federal rules are forcing the state to restructure its managed care organization tax, or MCO tax, which the state collects from health insurance plans that coordinate care for their members.
"We have as a
As part of the tax and spending law
The plan does not directly raise health insurance premiums. Instead it imposes a higher tax on private plans, which have said they'd pass the cost down to consumers.
The proposal would require all health plans, both public and private, to pay a monthly rate of
Affordability is key concern
The
Of that total,
Some legislators continued to raise concerns late into the week. Sen.
Bacchi's organization, along with physician groups and the
"What makes this vote especially disappointing is that
Industry leaders also argued that the tax measure conflicts with Proposition 35, which voters passed in 2024 and which limits the taxes charged to private health plans. Prop. 35 also requires that much of the revenue be used to expand
"Raising health insurance premiums to help balance the state budget is simply robbing Peter to pay Paul," said Dr.
New federal rules prompt tax redesign
The Trump administration argues states "exploit" this funding mechanism by effectively pushing their share of Medicaid costs onto the federal government. Critics of the tax describe its "net effect" this way: Insurers remain financially whole, federal Medicaid spending increases, and states reduce their own costs.
To close what federal officials call a "loophole," the
Consumer advocates say that maintaining strong revenues from the MCO tax is key to keeping the
"What we don't find acceptable is to have individual healthcare consumers pay increased premiums to support the MCO tax, and then just have that money backfill the general fund," said
Because the Legislature's plan resembles the governor's proposal, budget experts expect Newsom to sign it as part of the larger budget package. One major hurdle remains, however: federal approval. The Trump administration must approve the state's revised tax plan for
The job of lawmakers is to put together a proposal that is compliant with new federal rules, said
But, she added, "it's not a guarantee that the federal government will approve our new MCO tax proposal."


Japan Pension Fund Allocates Bitcoin as Dollar Hedge Amid Regulatory Shift
Trump changes pregnancy-prevention program to promote childbearing
Advisor News
- Majority of Americans concerned recent market highs are unsustainable
- GLP-1 users choose between medication and retirement saving
- Gen X and millennials seek new retirement model
- Are families ready for the costs of aging at home?
- When a client moves, their insurance plan needs to move, too
More Advisor NewsAnnuity News
- A client remarried: Does their annuity still fit?
- Gen X and millennials seek new retirement model
- Global Atlantic names Dan Farrelly head of IMO and IBD channels
- A rising retirement challenge: The license to spend
- What lower interest rates mean to annuity payouts
More Annuity NewsHealth/Employee Benefits News
Life Insurance News