FISCAL NOTE
Date Requested: January 15, 2019
Time Requested: 02:27 PM |
| Agency: |
Health and Human Resources, WV Department of |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2029 |
Introduced |
HB2405 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
5090 - Medicaid State Share Fund
Sources of Revenue:
Special Fund
Legislation creates:
Increases Revenue From Existing Sources
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The 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 department estimates impact under the proposed tier system, based upon estimated gross receipts of $1,688,339,679, would be $222,996,276.
As written, the amount collected would violate the safe harbor provision which states "An indirect guarantee will be determined to exist under a two prong “guarantee” test. If the health care-related tax or taxes on each health care class are applied at a rate that produces revenues less than or equal to 6 percent of the revenues received by the taxpayer, the tax or taxes are permissible under this test. The phrase “revenues received by the taxpayer” refers to the net patient revenue attributable to the assessed permissible class of health care items or services."
See memorandum section of this fiscal note for further clarification.
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 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
222,996,276 |
222,996,276 |
Explanation of above estimates (including long-range effect):
Estimated gross receipts to establish a baseline for tier development were based upon calendar 2016 receipts for commercial carriers and projected state fiscal year 2018 capitation for the Managed Care Organizations. The calculation for the tax is based upon the number of Medicaid member months separated into five tiers: a) <250,000 @ $59 per member ($59,000,000), b) 250,000-500,000 @ $49 per member($49,000,000), c) >500,000 @ $37 per member ($114,950,416), d) Tier IV @ $0.25 for each non-Medicaid member month of 150,000 or less ($41,829), and e) Tier V @ $0.10 for each non-Medicaid members month of 150,000 or more ($4,031).
Memorandum
DHHR has identified an error in its initial calculations originally submitted to the Legislature during the 2018 Legislative session that has a material impact on the tiers used in the bill which needs to be amended. As written, the amount collected would violate the safe harbor provision which states "An indirect guarantee will be determined to exist under a two prong “guarantee” test. If the health care-related tax or taxes on each health care class are applied at a rate that produces revenues less than or equal to 6 percent of the revenues received by the taxpayer, the tax or taxes are permissible under this test. The phrase “revenues received by the taxpayer” refers to the net patient revenue attributable to the assessed permissible class of health care items or services."
DHHR proposes to amend the language in section §11-27-10a. Imposition of tax on managed care organizations, lines 8-12 with the following tiers:
a) Tier 1 - $17.00 for each Medicaid Member Month Under 250,000
b) Tier II - $15.00 for each Medicaid Member Month Between 250,000 and 500,000
c) Tier III - $7.00 for each Medicaid Member Month Greater Than 500,000
d) Tier IV - $0.25 for each Non-Medicaid Member Month Under 150,000
e) Tier V - $0.10 for each Non-Medicaid Member Month Greater Than 150,000
Person submitting Fiscal Note: Bill J. Crouch
Email Address: Bill.J.Crouch@wv.gov