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Brown Nearing MCO Tax Deal With Health Plans

Andrew Nixon / Capital Public Radio

Gov. Jerry Brown proposed a restructured tax on health plans when he released his 2016 budget plan in January.

Andrew Nixon / Capital Public Radio

Update at 4:00pm: The California Legislature unveiled a bill imposing a new tax on health insurance plans to help pay for Medi-Cal Monday.

The bill would prevent a $1.1 billion hole in California's health care budget. But it first needs bipartisan support in the Assembly and Senate to achieve the supermajority required of tax increases.

The California Association of Health Plans says it has not yet taken a position on the bill.

Gov. Jerry Brown's administration has worked for months to negotiate a compromise that could win support from insurers.

The new tax replaces a tax that applied only to Medi-Cal managed care organizations. The new tax would be offset by a cut in existing health insurance taxes.

The bill could begin moving through legislative committees as soon as this week.

Draft bill language for the MCO tax is now in print.

The Associated Press contributed to this story.

Original story: California lawmakers could vote this week on a proposal to restructure a tax on health care plans in order to avert a potential $1 billion state budget hole.

This “managed care organization” (MCO) tax brings in federal funds for Medi-Cal, California’s health care program for the poor. The federal government say the state’s current structure is no longer acceptable – and must be fixed by the end of June for the state to keep getting the money.

So Gov. Jerry Brown and health plans have been negotiating for months – and now talks are in the final stages.

Any deal would require Republican votes to pass the Legislature. There are signs that the votes could be there for the right deal as long as it's “revenue neutral“ – that is, the federal funds offset any tax liability to the health plans so the insurance companies don’t pass costs on to the rest of us.

A deal would also likely include funding increases for in-home care for the elderly and disabled (known as in-home supportive services or IHSS), and programs that benefit people with developmental disabilities.