California Gov. Gavin Newsom has never seen a pocket he didn’t want to pick.
And on his way out the door, Democrats want to cover his profligate spending habits via your health insurance.
The vehicle is the Managed Care Organization tax (the MCO tax), a levy the state collects from health insurance plans.
New federal rules forced California to restructure it, and Sacramento’s solution, Senate Bill 125, lands the new burden squarely on people who buy private insurance.
As the state’s legislative analyst and others have noted, California had been charging Medi-Cal plans at a higher rate than private plans.
This amounted to a quasi-shakedown of the federal government.
SB 125 lowers the tax on Medi-Cal plans while raising it on private plans to the same level.
The result, if Newsom signs it, will shift more of the cost burden onto people who buy private insurance, while likely bringing in less revenue overall.
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The plan costs working families more and the state less. That is not tax reform. That is a bailout for a governor who has spent nearly a decade growing government to a point where more Californians are leaving than coming in because the state is so unaffordable and unlivable. We keep paying five-star prices to get half-star services.
State Assemblyman Carl DeMaio, a Republican from San Diego, says it will cost the typical family $400 in higher premiums this year alone.
As political strategist Jon Fleischman observes, “at a time when Californians rank affordability as their major concern, the state government’s answer was not to cut costs or red tape or deliver real tax relief. Instead, the Democrats are advancing new taxes while continuing government growth that already grew dramatically under Newsom’s watch.”
The structure is somehow even worse than the sticker price. As my friend Katy Grimes notes at the California Globe, “even if a company lays off a worker or moves that employee out of state, the health plan can still be on the hook for the tax. Call it a ‘ghost tax.’ Insurers have every incentive to pass these costs along broadly, spreading the pain across their entire book of business rather than just their California enrollees.”
In other words, the damage does not stop at the state line, or at the people the tax nominally targets.
Naturally, Gavin Newsom is trying to put lipstick on this pig and dress it up as a rescue mission. He blames Republicans for driving up healthcare costs by letting pandemic-era premium subsidies expire.
But the math doesn’t add up.
The premium hike Demcorats are proposing could cost families more than the subsidy changes the governor is decrying. It is a weird argument, but classic Gavin logic: To protect people from premium increases, Democrats want to impose a larger one.
This is the part Sacramento would rather you not notice. One version of the measure would extend the tax on medical providers to generate roughly $2 billion a year starting next year. That money will come from premiums, from employers, and ultimately from families already overextended by the cost of living in the Golden State.
The irony is that Newsom knows perfectly well how to oppose a tax when it suits his personal agenda. He spent recent weeks fighting a ballot measure to tax California’s billionaires, even rejecting a compromise to soften it, all while rolling out a national billionaire tax of his own as part of his presidential ambitions and to get to the left of other possible contenders in 2028.
To protect himself, Newsom wants, effectively, to trap the wealthiest 200 people in the state (so they can’t vote with their feet). He just cannot find the same fortitude when the people footing the bill are middle-class families paying insurance premiums.
The MCO tax is not a response to a crisis Newsom inherited. It is a response to a crisis Democrats built, one budget at a time, and their fix is to hand the bill to the people least able to afford it.
Californians need a government that lives within its means. Until Democrats learn that lesson, every “solution” coming out of the Capitol will look a lot like this one: higher costs for the many to cover the overspending of the few, sold with a straight face as compassion.
Roxanne Hoge is the chairperson of the Los Angeles Republican Party.
The post Sacramento Democrats are raising taxes on private health insurance appeared first on New York Post.
