Iowa Republican Gov. Kim Reynolds signed a bill March 25, originally introduced March 13, that would tax HMOs 0.95% on money flowing through the plan to build out a healthcare fund.
The tax will encompass HMOs, including Medicaid managed care organizations. Instead of the tax just being levied on HMO premiums, this bill would apply the tax to taxable funds — but not funds from the U.S. HHS secretary — more broadly.
According to March 19 reporting by the Iowa Capital Dispatch, Republican state Rep. Shannon Lundgren warned that, if the bill did not take effect, the state would have lost out on $124 million in available federal funds.
If CMS approves the tax methodology, a 3.5% tax rate would run retroactively from January until September 2026 before dropping to the lower 0.95% rate.
“What’s important to know here today is that if we don’t do this slight increase for a short, nine-month period of time, we lose federal funds,” Ms. Lundgren said. “And why should those funds go to other states when they could be supporting Iowans?”
Under the law, over $347 million will be transferred from the taxpayer relief fund to the general state fund, and $89 million from the general fund will go toward the state’s department of health and human services for Medicaid reimbursement.
This story was last updated March 30.
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