Article 6 - Continuation of Managed Care Organization Provider Tax

California Welfare and Institutions Code — §§ 14199.123-14199.127

Sections (5)

Continued Imposition of Tax

(a)It is the intent of the people of the State of California to permanently continue in existence a managed care organization provider tax upon the expiration of the tax imposed by Section 14199.84.

(b)Therefore, upon the expiration of the tax imposed pursuant to Article 7.1 (commencing with Section 14199.80) of Chapter 7, a managed care organization provider tax shall hereby continue to be imposed on and after January 1, 2027, as provided in this article.

(c)The department shall implement and administer the tax as set forth in this article.

(d)To the extent permitted by federal law, the models and methodologies developed for Chapter 13 of the Statutes of 2023 shall be substantially utilized by the department in implementing the tax imposed by this article.

§ 14199.124

Implementation of Tax

(a)In implementing the tax imposed by subdivision (b) of Section 14199.123, the department shall adhere to all of the following:

(1)The tax shall not exceed the limits set forth in Section 14199.126.

(2)The models and methodologies utilized by the department shall be substantially similar to those relied upon for imposition of the tax set forth in Article 7.1 (commencing with Section 14199.80) of Chapter 7.

(3)The tax shall comply with federal Medicaid requirements applicable to permissible health care-related taxes, including, but not limited

to, Section 433.68 of Title 42 of the Code of Federal Regulations.

(4)Consistent with the limits set forth in Section 14199.126, the department shall attempt to maximize the amount of federal matching funds.

(b)(1) Except as provided in paragraph (2), if the requirements set forth in Section 433.68 of Title 42 of the Code of Federal Regulations, or any other provision of federal law with which the tax imposed by this article must comply, are replaced by amended or successor requirements, the department shall ensure the tax imposed pursuant to this article complies with those amended or successor requirements.

(2)Notwithstanding paragraph (1), the limits set forth in Section 14199.126 shall not be exceeded.

(c)(1) Commencing on the effective date of this chapter, the department shall be required to seek federal renewal and reauthorization as necessary to continue the imposition of the tax imposed by this article.

(2)The department shall request approval from the federal Centers for Medicare and Medicaid Services as is necessary to implement this article. The department shall not impose or collect the tax imposed pursuant to this article until the department receives approval from the federal Centers for Medicare and Medicaid Services that the tax is a permissible health care-related tax in accordance with Section 433.68 of Title 42 of the Code of Federal Regulations and is eligible for federal financial participation.

(d)(1) Consistent with the limits set forth in Section 14199.126, the department may, upon consultation with affected taxpayers,

modify or make minor adjustments to any methodology, tax amount, taxing tier, or other provision specified in this article to the extent it is reasonably necessary to meet the requirements of federal statute or regulations, to obtain or maintain federal approval, or to ensure federal financial participation is available or is not otherwise jeopardized.

(2)When making, or considering making, any adjustment described in paragraph (1), the department shall share with affected taxpayers and the stakeholder advisory committee relevant information, proposals, drafts, and any information affecting tax liability at least 90 calendar days in advance of seeking federal approval for the adjustment. The department shall provide notice of any final adjustment in tax liability to affected taxpayers at least 45 calendar days before the adjustment takes effect.

(e)In implementing this article,

the department may establish a specific calendar year as the base year and use the base data source to determine for each health plan each of the enrollment totals described in paragraphs (1) to (6), inclusive, of subdivision (a) of Section 14199.83, as that section read in Chapter 13 of the Statutes of 2023.

§ 14199.125

Tax Computation and Collection

(a)Before each applicable calendar year or years, the department shall compute the annual tax liability for each taxpayer subject to the tax imposed by Section 14199.123.

(b)For each tax period, the department shall establish all of the following:

(1)The Medi-Cal taxing tiers based on countable Medi-Cal enrollees in a health plan.

(2)The Medi-Cal per enrollee tax amount for each Medi-Cal taxing tier.

(3)Subject to the limits in Section 14199.126, the other taxing tiers

based on countable other enrollees in a health plan.

(4)Subject to the limits in Section 14199.126, the other per enrollee tax amount for each other taxing tier.

(c)The procedures for collection and payment of the tax, providing notices, interest charges not to exceed 10 percent per annum for late payments, penalties, refunds, and tax liability after a transfer of health plan responsibility shall be established by the department consistent with the applicable provisions of Article 7.1 (commencing with Section 14199.80) of Chapter 7 unless otherwise specified in this chapter.

(d)(1) The director may correct any identified material or significant error in the data, including, but not limited to, the overall cumulative enrollment, Medicare cumulative enrollment, Medi-Cal cumulative enrollment,

plan-to-plan cumulative enrollment, cumulative enrollment through the Federal Employees Health Benefits Act of 1959 (Public Law 86-382), and other cumulative enrollment. The director’s determination as to whether to exercise discretion under this subdivision and any determination made by the director under this subdivision shall not be subject to judicial review, except that a health plan may bring a writ of mandate under Section 1085 of the Code of Civil Procedure to rectify an abuse of discretion by the department in correcting that health plan’s data when that correction results in a greater tax amount for that health plan.

(2)The authority granted to the director by this subdivision does not permit the limits set forth in Section 14199.126 to be exceeded.

§ 14199.126

Limits on Tax Amounts

(a)Notwithstanding any other provision of this chapter or any other law, and except as provided in subdivisions (b) and (c), the tax imposed by this article shall comply with both of the following:

(1)The other per enrollee tax amount for any other taxing tier shall not exceed two dollars and fifty cents ($2.50) per month.

(2)The total aggregate tax amount imposed on, or through, all other taxing tiers shall not exceed thirty-six million dollars ($36,000,000) in a single calendar year.

(b)The dollar amounts set forth in paragraph (1) and

paragraph (2) of subdivision (a) may be increased by the department quinquennially to reflect any increase in inflation as measured by the Consumer Price Index for All Urban Consumers (CPI-U) beginning on January 1, 2030. At the request of the department, the Controller’s office shall calculate and publish the adjustments permitted by this subdivision.

(c)When seeking federal renewal and reauthorization for calendar years commencing on or after January 1, 2027, the department may exceed either of the following by not more than 10 percent if doing so is necessary to comply with federal statute or regulations, ensure federal financial participation, or otherwise obtain federal approval:

(1)The limits set forth in subdivision (a), as modified pursuant to subdivision (b).

(2)The limits set forth in subdivision (a), as

modified pursuant to subdivision (b), and including the amount of any prior adjustments made pursuant to this subdivision.

(d)Except as provided by subdivisions (b) and (c), all other changes to the limits set forth in subdivision (a) shall only be made pursuant to Section 14199.134.

§ 14199.127

Operation

(a)This article shall be inoperative during any portion of a calendar year for which the department does not obtain the necessary federal approvals for the tax imposed pursuant to Section 14199.123.

(b)This article shall cease to be operative for any affected tax period or periods upon a final determination of a court of competent jurisdiction, the United States Department of Health and Human Services, or the federal Centers for Medicare and Medicaid Services that the tax imposed pursuant to this article cannot be implemented for the affected tax period or periods.

(c)Upon a failure to obtain federal approval as

described in subdivision (a), or a final determination as described in subdivision (b), the director shall implement a plan for conducting all appropriate wind-down and closeout activities, including issuance of any refunds, in consultation with the Department of Finance and the stakeholder advisory committee.

(d)This chapter does not change, alter, or abrogate the department’s legal and fiscal responsibility under state and federal law to monitor provider participation and beneficiary access to entitled services under California’s Medicaid State Plan or federally approved waivers. The department continues to have full legal and fiscal responsibility to adjust rates, payment methodologies, and authorization processes for programs, providers, or benefits within this chapter, as well as those not specifically mentioned herein.