California Republicans ask for Trump administration’s help to stop new tax

California Republicans are turning to the Trump administration to do what they couldn’t in the Legislature: defeat a new tax on health insurers recently approved by Democrats.

More than a dozen Assembly Republicans sent a letter Monday to U.S. Department of Health and Human Services Secretary Robert F. Kennedy, Jr. and Centers for Medicare & Medicaid Services Administrator Dr. Mehmet Oz to ask the leaders to reject the tax for so-called managed care organizations. Gov. Gavin Newsom last month signed it into law, but it needs federal approval.

“While state officials describe this proposal as a healthcare financing mechanism, its practical effect is a new tax on health plans that will ultimately be passed on to employers, workers, retirees, and families through higher health insurance premiums,” the letter said. “At a time when Californians already face some of the highest healthcare costs in the nation, this proposal will further increase the financial burden on those who purchase private coverage.”

The Governor’s Office and the California Department of Finance declined to comment on the letter.

California has generally taxed managed care organizations that offer certain health plans since 2009. But new healthcare rules pushed by President Donald Trump and congressional Republicans now require states to tax Medicaid programs and commercial programs proportionately.

Voters two years ago approved a proposition that made the state’s existing tax plan permanent starting in 2027 and changes to how the revenue could be used in both the short and long term.

The new tax is expected to generate several billion dollars a year less than what the state is currently receiving, but more than what the Governor’s Office originally anticipated due to federal and state changes. It would be applied to health insurance plans, though it is likely that insurers that provide the plans would pass at least some of those costs onto customers.

California Association of Health Plans spokesperson Mary Ellen Grant did not deny that would be the case, saying in a statement that the tax will lead to a $400 increase for a family of four. The organization urged legislators to not approve the tax.

“At a time when Californians are already stretched thin by the rising costs of housing, groceries, childcare, and transportation, adding hundreds of dollars in new health insurance costs is the wrong choice and should be rejected,” Grant said.

Money from the tax is used to pay for costs related to Medi-Cal, the state’s version of Medicaid, which has become more expensive in recent years in part due to the expansion of benefits for undocumented Californians pushed by Newsom and Democratic legislators. Overall, the state is also facing the threat of large budget deficits in the future due to high spending even though it has received a rush of tax revenue from large stock market gains. Republicans, in the letter, called the tax “a backdoor solution to state budget problems.”

“Rather than addressing the underlying causes of these escalating costs, California is seeking to shift the burden onto privately insured families while leveraging additional federal taxpayer dollars to sustain spending commitments that have proven financially unsustainable,” they said in the letter.

Senate budget chairman John Laird, D-Santa Cruz, acknowledged that people could pay higher costs, but told senators last month it would help stabilize the finances of the Medi-Cal program and reduce the need for future budget cuts. He blamed the Trump administration for the state needing a new tax in the first place.

Representatives for the federal health agencies did not respond to requests for comment before Monday evening.

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