This bill revises the taxation framework for health maintenance organizations (HMOs) in Iowa by eliminating the existing premium tax and introducing a new health care-related tax under Code chapter 432B. The new tax will apply to payments received by HMOs for health care services and payments made to providers, with tax rates starting at 3.5% for the first three quarters of 2026 and decreasing to 0.95% in subsequent years. The bill also specifies that certain federal payments to HMOs will be exempt from this tax. Additionally, it modifies the current tax payment schedule, requiring prepayments of the health care-related tax, contingent upon federal approval from the Centers for Medicare and Medicaid Services.

Moreover, the legislation outlines provisions for transferring funds from the taxpayer relief fund to the general fund based on state revenue shortfalls, with varying percentages for different fiscal years. It increases the transfer to 100% of the difference between actual net revenue and net appropriations for FY 2025-2026 and 75% for FY 2026-2027, while ensuring these transfers do not affect the general fund expenditure limitation. The bill also appropriates $70.3 million from the general fund to the Department of Health and Human Services for medical assistance program reimbursement for FY 2025-2026 and is designed to take effect upon federal approval, with retroactive applicability to January 1, 2026.

Statutes affected:
Introduced: 249A.13, 432.1, 432.2, 508C.9, 514E.1, 514B.31, 432.1B