FISCAL NOTE
Date Requested: February 12, 2026
Time Requested: 04:55 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3806 |
Introduced |
HB5459 |
|
|---|
| CBD Subject: |
Health; Taxation |
|---|
|
FUND(S):
Medicaid State Share Fund
Sources of Revenue:
Other Fund Medicaid State Share Fund
Legislation creates:
Creates New Revenue, Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.
The stated purpose of this bill is to bring the health care provider tax on healthcare managed care organizations into compliance with new federal regulations.
Per our interpretation, the bill would replace the current tiered member-month system of taxation on health maintenance organizations (HMO’s) with a two and one-half percent tax based on gross premiums written in this state during each calendar quarter. The tax would not apply to Medicare Advantage plans, 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. “Gross Premiums” are defined as the total premiums, capitation payments, or other consideration received by the certified HMO for providing or arranging health care services to enrollees in this state. Subject to federal approval, the new tax structure would become effective July 1, 2026.
According to our interpretation, the bill would increase Medicaid State Share Fund collections by up to $4 million in FY2027 and by up to $17 million in subsequent fiscal years. The current tax is based on member months which are likely to either decline or remain roughly the same barring federal or state expansion of the Medicaid program. The new structure would be based on insurance premiums which will increase on an annual basis.
Additional administrative costs incurred by the State Tax Division would be $16,500 in FY2027.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2026
Increase/Decrease
(use"-") |
2027
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
16,500 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
16,500 |
0 |
| 2. Estimated Total Revenues |
0 |
4,000,000 |
17,000,000 |
Explanation of above estimates (including long-range effect):
Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
Per our interpretation, the bill would replace the current tiered member-month system of taxation on health maintenance organizations (HMO’s) with a two and one-half percent tax based on gross premiums written in this state during each calendar quarter. The tax would not apply to Medicare Advantage plans, 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. “Gross Premiums” are defined as the total premiums, capitation payments, or other consideration received by the certified HMO for providing or arranging health care services to enrollees in this state. Subject to federal approval, the new tax structure would become effective July 1, 2026.
According to our interpretation, the bill would increase Medicaid State Share Fund collections by up to $4 million in FY2027 and by up to $17 million in subsequent fiscal years. The current tax is based on member months which are likely to either decline or remain roughly the same barring federal or state expansion of the Medicaid program. The new structure would be based on insurance premiums which will increase on an annual basis.
Additional administrative costs incurred by the State Tax Division would be $16,500 in FY2027.
Memorandum
Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.
The stated purpose of this bill is to bring the health care provider tax on healthcare managed care organizations into compliance with new federal regulations.
The transition to the gross premium method is strictly conditional. The bill states that the transition occurs subject to federal approval that the new structure is a “permissible health care-related tax” in accordance with 42 C.F.R. §433.68. If CMS (the federal Centers for Medicare and Medicaid Services) determines the tax is no longer permissible/eligible for federal financial participation, the tax imposed by the section is automatically void.
The definition of “managed care organization” is updated to mean a “certified HMO that provides health care services in the state of West Virginia” instead of providing those services to Medicaid members pursuant to an agreement or contract with the department. The term “taxable health plan” is modified similarly.
Person submitting Fiscal Note: Peter Shirley
Email Address: radfiscal@wv.gov