WASHINGTON, Feb. 12, 2014 /PRNewswire-USNewswire/ -- A report from actuarial firm Milliman, Inc. and commissioned by Medicaid Health Plans of America (MHPA) shows a provision of the Affordable Care Act (ACA) intended to tax risk-based managed care insurance companies to help fund health reform will drain $797 million from Medi-Cal, California's Medicaid program.
The report, "ACA Health Insurer Fee: Estimated Impact on State Medicaid Programs and Medicaid Health Plans," an update of Milliman's 2012 study that takes into account new state Medicaid expansion decisions, shows that the health insurer fee (a.k.a. the health insurance tax), along with additional taxes paid due to the non-deductibility of the fee, will cost states about $13.6 billion over the ten-year period 2014-2023, according to a moderate growth scenario. Medi-Cal's share of $797 million will hinder the state's ability to care for millions of disadvantaged Californians.
States and the federal government end up paying for the tax due to actuarial soundness requirements. As an important consumer protection, the Balanced Budget Act of 1997 and implementing regulations require Medicaid managed care payment rates to be actuarially sound, inclusive of medical costs, administrative costs, taxes and fees. So according to federal law, the insurance tax must be paid by the state and federal governments through higher payments provided to plans, and results in the federal government taxing states and itself.
It is important to note that the ACA includes a provision that specifically exempts Medicaid managed care plans from paying the insurance tax. Unfortunately, Congress limited the exemption to those entities with a tax status of "non-profit." Even though both non-profit and for-profit plans offer exceptional services to the poorest patients in a state, only the non-profit plans are exempt. This results in the tax not being uniformly applied, affecting Medicaid beneficiaries and the states in an uneven fashion.
"It is apparent now more than ever: the health insurance tax is an ill-conceived method to finance the ACA and, in part, it will be on the shoulders of California's sickest and poorest" noted Jeff Myers, MHPA's president and CEO. "It will drive up costs for commercial consumers, it will burden California's Medicaid budget, and it will create a dynamic that limits options for California's Medicaid beneficiaries via reduced access to services and benefits. Myers added, "Medicaid health plans in California provide capitated risk-based health coverage for poor children, pregnant women, the elderly, and the disabled, so the $797 million cost of this tax will be at the expense of those who need it the most."
Medicaid Health Plans of America (MHPA) is the leading national trade association solely focused on representing the universe of Medicaid health plans. Working on the behalf of over 135 for-profit and non-profit member health plans that serve over 15 million lives, MHPA provides advocacy, research, and organized forums to support policies that enhance the delivery of quality health care to Americans in need. For more information, visit http://www.mhpa.org.
Contact: Joe Reblando
SOURCE Medicaid Health Plans of America