FISCAL NOTE

Date Requested: January 16, 2019
Time Requested: 11:39 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2029 Introduced HB2405
CBD Subject: Taxation


FUND(S):

State Medicaid Fund

Sources of Revenue:

Other Fund State Medicaid Fund

Legislation creates:

Creates New Revenue, Creates New Expense, Creates New Program



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The stated purpose of this bill is to impose a tiered tax on HMOs in a manner that will permit the maximization of federal matching dollars for use in the State Medicaid program.
    
    Based upon our interpretation, passage of the bill will result in a tiered tax on health maintenance organizations. The tiered tax rate will be based upon the following structure:
    
    • Tier 1 - $59.00 per each Medicaid member month under 250,000
    • Tier II - $49.00 per each Medicaid member month between 250,000 to 500,000
    • Tier III - $37.00 per each Medicaid member month greater than 500,000
    • Tier IV - $0.25 per each non-Medicaid member month under 150,000. and
    • Tier V - $0.10 per each non-Medicaid member month 150,000 or more.
    
    “Medicare member months” means the number of Medicaid members in a taxable health plan in each month or part of a month over the course of a tax year. “Non-Medicaid member months” means the number of non-Medicaid enrollees in a taxable health care plan in each month of part of the month over a tax year, but does not include persons enrolled in either a health plan issued by the West Virginia Public Employees Insurance Agency or a plan issued pursuant to the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) to the extent the imposition of the tax under this section is preempted pursuant to Section 8909(f) of Title 5 of the United States Code.
    
    The West Virginia Department of Health and Human Resources (DHHR) provided information that there was 8 HMOs who had a total of 5,106,768 Medicaid Member Months and a total of 207,621 Non-Medicaid Member Months for a calendar year. The totals of the Medicaid and Non-Medicaid Member Months was segregated into the following tax tiers with its associated revenue:
    
    • Tier 1 (< 250,000 ) Medicaid Member Months Revenue = $15.0 million
    • Tier II ( 250,000 to 500,000) Medicaid Member Month Revenue = $10.0 million
    • Tier III (> 500,000 ) Medicaid Member Month Revenue = $18.6 million
    • Tier IV (> 150,000 ) Non-Medicaid Member Month Revenue = $41,800
    • Tier V (< 150,000 ) Non-Medicaid Member Month Revenue = $4,000
    • The Total Tax Revenue for Federal Matching Funds = $43.7 million.
    
    The proposed bill would result in calculated annual revenue for State Medicaid Fund of roughly $43.7 million. Even though the proposed statutory effective date is July 1, 2019, the actual effective date would be one month following receipt of approval of a necessary waiver from the Federal Center for Medicare and Medicaid Services (CMS) to allow such a tax under federal rules. Absent such approval, there is no tax. Given uncertainty over such a decision and the timing of such a decision by CMS, we are unable to estimate actual tax collections for any fiscal year.
    
    The West Virginia DHHR expects the number of Medicaid and Non-Medicaid Member Months to decrease by 5% over the next few years due to in-state residents moving out of state and due to the removal of the mandatory insurance requirement in the Patient Protection & Affordable Health Care Act with passage of the Tax Cuts & Jobs Act of 2017.
    
    Additional administrative costs to the Tax Department would be $50,000 in FY2020 and $5,000 in FY2021.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 50,000 5,000
Personal Services 0 0 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 50,000 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


    Based upon our interpretation, passage of the bill will result in a tiered tax on health maintenance organizations. The tiered tax rate will be based upon the following structure:
    
    • Tier 1 - $59.00 per each Medicaid member month under 250,000
    • Tier II - $49.00 per each Medicaid member month between 250,000 to 500,000
    • Tier III - $37.00 per each Medicaid member month greater than 500,000
    • Tier IV – $0.25 per each non-Medicaid member month under 150,000. and
    • Tier V - $0.10 per each non-Medicaid member month 150,000 or more.
    
    “Medicare member months” means the number of Medicaid members in a taxable health plan in each month or part of a month over the course of a tax year. “Non-Medicaid member months” means the number of non-Medicaid enrollees in a taxable health care plan in each month of part of the month over a tax year, but does not include persons enrolled in either a health plan issued by the West Virginia Public Employees Insurance Agency or a plan issued pursuant to the Federal Employees Health Benefits Act of 1959 (Public Law 86-382) to the extent the imposition of the tax under this section is preempted pursuant to Section 8909(f) of Title 5 of the United States Code.
    
    The West Virginia Department of Health and Human Resources (DHHR) provided information that there was 8 HMOs who had a total of 5,106,768 Medicaid Member Months and a total of 207,621 Non-Medicaid Member Month for a calendar year. The totals of the Medicaid and Non-Medicaid Member Months was segregated into the following tax tiers with its associated revenue:
    
    • Tier 1 (< 250,000) Medicaid Member Months Revenue = $15.0 million
    • Tier II ( 250,000 to 500,000) Medicaid Member Month Revenue = $10.0 million
    • Tier III (> 500,000) Medicaid Member Month Revenue = $18.6 Million
    • Tier IV (> 150,000) Non-Medicaid Member Month Revenue = $41,800
    • Tier V (< 150,000) Non-Medicaid Member Month Revenue = $4,000
    • The Total Tax Revenue for Federal Matching Funds = $43.7 million.
    
    The proposed bill would result in calculated annual revenue for State Medicaid Fund of roughly $43.7 million. Even though the proposed statutory effective date is July 1, 2019, the actual effective date would be one month following receipt of approval of a necessary waiver from the Federal Center for Medicare and Medicaid Services (CMS) to allow such a tax under federal rules. Absent such approval, there is no tax. Given uncertainty over such a decision and the timing of such a decision by CMS, we are unable to estimate actual tax collections for any fiscal year.
    
    The West Virginia DHHR expects the number of Medicaid and Non-Medicaid Member Months to decrease by 5% over the next few years due to in-state residents moving out of state and due to the removal of the mandatory insurance requirement in the Patient Protection & Affordable Health Care Act with passage of the Tax Cuts & Jobs Act of 2017.
    
    Additional administrative costs to the Tax Department would be $50,000 in FY2020 and $5,000 in FY2021.



Memorandum


    The stated purpose of this bill is to impose a tiered tax on HMOs in a manner that will permit the maximization of federal matching dollars for use in the State Medicaid program.
    
    The tax revenue, associated with this bill, is dependent on approval of the Centers for Medicare and Medicaid Services. If the Centers for Medicare and Medicaid Services determines that this tax is not a permissible heath care related tax that is eligible for federal financial participation, the law becomes void.
    
    The bill contains language that makes it effective for three fiscal years before it is repealed. The bill states an effective date of July 1, 2019 and a repeal date of June 30, 2021. The referenced effective and repeal dates only give this bill a life two fiscal years.
    



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov