Consumer Federation of California

California’s four largest health plans may be on the hook for $10 billion in state back taxes – and at least $1 billion every year going forward – if a closely watched legal case does not break their way.

Should that happen, insurance industry critics say, it would end one of the biggest tax code abuses in state history – one that for decades has allowed Kaiser Permanente, Anthem Blue Cross, Blue Shield of California and Health Net to avoid paying a state tax on health insurance premiums. The health plans, however, say they aren’t insurers and thus shouldn’t be subject to the tax.

If they lose in court, it could mean a huge windfall for the state’s coffers, potentially pouring much-needed funds into the state’s overwhelmed Medi-Cal program – and perhaps an El Niño-like deluge into Gov. Jerry Brown’s Rainy Day Fund.

Yet some worry that such a defeat for the four plans – which control almost 70 percent of California’s health insurance market – means consumers will end up footing their behemoth tax bills through higher premiums.

“This is clearly a monumental case for California and Californians,” said state Sen. Bill Monning, D-Monterey, a member of the Senate Health Committee.

Continue reading on the San Jose Mercury News website »

Tags: California Department of Insurance, Insurance, Medical Issues, Taxes