FISCAL NOTE

Date Requested: January 28, 2020
Time Requested: 11:37 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2739 Introduced HB4569
CBD Subject: Taxation


FUND(S):

State Medicaid Fund

Sources of Revenue:

Special Fund

Legislation creates:

Creates New Revenue, Creates New Expense



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 - $35.00 per each Medicaid member month under 250,000 • Tier II - $20.00 per each Medicaid member month between 250,000 to 500,000 • Tier III - $1.00 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 7 HMOs who had a total of 4,648,512 Medicaid Member Months and a total of 393,384 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 = $26.25 million • Tier II ( 250,000 to 500,000) Medicaid Member Month Revenue = $15 million • Tier III (> 500,000 ) Medicaid Member Month Revenue = $3.15 million • Tier IV (> 150,000 ) Non-Medicaid Member Month Revenue = $56,245 • Tier V (< 150,000 ) Non-Medicaid Member Month Revenue = $16,841 • The Total Tax Revenue for Federal Matching Funds = $44.4 million. The proposed bill would result in annual revenue for The State Medicaid Fund of $44.4 million. As the effective date is July 1, 2020, the proposed bill would result in 11 months of collections in FY2021, or $41 million. The proposed bill is only effective until June 30, 2022. As a result, there would only be one month of collections or $3.7 million in FY2022. The receipt of revenue is contingent on approval from the federal Center for Medicare and Medicaid Services. 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 $40,000 in FY2021 and $10,000 in FY2022.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2020
Increase/Decrease
(use"-")
2021
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 40,000 10,000
Personal Services 0 10,000 10,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 30,000 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 - $35.00 per each Medicaid member month under 250,000 • Tier II - $20.00 per each Medicaid member month between 250,000 to 500,000 • Tier III - $1.00 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 7 HMOs who had a total of 4,648,512 Medicaid Member Months and a total of 393,384 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 = $26.25 million • Tier II ( 250,000 to 500,000) Medicaid Member Month Revenue = $15 million • Tier III (> 500,000 ) Medicaid Member Month Revenue = $3.15 million • Tier IV (> 150,000 ) Non-Medicaid Member Month Revenue = $56,245 • Tier V (< 150,000 ) Non-Medicaid Member Month Revenue = $16,841 • The Total Tax Revenue for Federal Matching Funds = $44.4 million. The proposed bill would result in annual revenue for The State Medicaid Fund of $44.4 million. As the effective date is July 1, 2020, the proposed bill would result in 11 months of collections in FY2021, or $41 million. The proposed bill is only effective until June 30, 2022. As a result, there would only be one month of collections or $3.7 million in FY2022. The receipt of revenue is contingent on approval from the federal Center for Medicare and Medicaid Services. 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 $40,000 in FY2021 and $10,000 in FY2022.



Memorandum






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