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Lawmakers OK revamped health insurance tax
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SACRAMENTO  (AP) — California lawmakers approved a tax package Monday that preserves $1.1 billion in federal funding for the state’s health care program for the poor and sends about $300 million in funding to provide services for the developmentally disabled.
The package of three bills approved in the state Senate and Assembly are the outcome of a special legislative session Gov. Jerry Brown called last year to adjust taxes on health insurance plans.
California has long taxed Medi-Cal providers, using the money to draw down federal matching dollars, but faced a financing cutoff from President Barack Obama’s administration this July unless its tax on managed care organizations was extended to all health insurance companies.
“With an impending loss of $1 billion in federal funding and quickly growing Medi-Cal caseload, it was critical for us to work together,” said Speaker Toni Atkins, D-San Diego.
Two Republican senators and 11 Republicans in the Assembly joined majority Democrats in passing three bills.
“This is a good deal for the state of California,” said Sen. Ed Hernandez, D-Azusa, who carried the main tax bill.
Overall, insurers are expected to pay about $100 million less in taxes, even as the state increases its revenue thanks to the federal matching dollars. But each insurer will be affected differently depending on its corporate structure and client base. Most of the state’s insurers and their lobbying group, the California Association of Health Plans, supported the arrangement.
To prevent providers from passing the price hike on to consumers, Brown agreed to eliminate other taxes paid by insurers. He is expected to quickly sign the legislation.
The Democratic governor negotiated the package with some Republican leaders but many GOP members view the package as tax increase, and a majority did not vote for it.
The two Senate Republicans who voted with Democrats were just enough to pass the main tax bill on a 28-11 vote because it needed a two-thirds majority, while the Assembly approved the measure on a 61-16 vote with support from 11 Republicans.
Sen. Bob Huff, R-San Dimas, called the bill “a win-win for California” as he supported the measure with Sen. Anthony Cannella, R-Ceres.
Senate Republicans joined Democrats in unanimously supporting two other bills in the package. That prompted a rebuke from Sen. Ricardo Lara, D-Bell Gardens, who chastised Republicans for voting for the benefits of the plan without supporting the revenue to pay for it.
But Sen. Jeff Stone, R-Temecula, said California can well afford to increase benefits to those with development disabilities from existing tax revenues that are coming in more than $1 billion above projections.
To win Republicans’ support, the deal includes more than $300 million for services for people with developmental disabilities, much of it to increase payments to care providers, who will get a 7.5 percent increase in wages and benefits.
The funding has been hailed as a lifeline to people with disabilities and their caregivers. It has also become a political touchstone this year as lawmakers from both parties argued it was one of only a few programs that have not seen funding increases following deep cuts made during the recession.
“Our spending since that time has increased over $35 billion and yet we’ve overlooked this most needy and deserving part of our population,” said Assemblyman Tom Lackey, R-Palmdale, a former special education teacher.
Lackey voted against the tax plan, but supported the disability funding and other spending provisions.
The legislation also would create a program to provide paid internships for people with developmental disabilities, in which the state would reimburse up to a third of the pay for interns, who could make up to $10,400 per year.
The tax package also includes hundreds of millions of dollars in funding for programs backed by reluctant lawmakers whose votes are needed to reach a two-thirds majority required to approve taxes:
— $173 million to repay transportation loans.
— $240 million for future retiree health care costs.
— $123 million in relief from prior rate cuts for hospitals with skilled nursing facilities.
— $105 million for fire recovery and debris removal in Lake and Calaveras counties.