Jerry Brown

Gov. Jerry Brown discusses the 2012-13 budget in 2012. (Rich Pedroncelli / Associated Press)

John Myers and Melanie Mason
January 7, 2015

In an effort to break a political and policy logjam, Gov. Jerry Brown will unveil a state budget that revamps a controversial tax on health plans to avoid jeopardizing federal healthcare dollars.

Sources who spoke on the condition that they not be identified prior to Brown’s scheduled Thursday announcement said the reworked tax plan reflects intense behind-the-scenes negotiations with California’s biggest insurance companies.

And to help force agreement in the Legislature, the governor’s budget reportedly links the $1.1 billion in revenues from the tax to specific healthcare programs which otherwise would be left scrambling for funds.

A spokesman for Brown declined to comment before the governor’s news conference, scheduled for 10 a.m. Thursday.

The tax would replace California’s current tax on health plans that participate in Medi-Cal, which provides state subsidized healthcare to the poor. The Obama administration has said the tax must be overhauled to include all health plans — including those without Medi-Cal patients — or the state risks losing federal funding when the existing managed care tax expires June 30.

Negotiations reached a crescendo last fall, when the administration unveiled a proposal to tax plans at different rates based on enrollment. It also would have offset some of the costs to insurance companies with tax breaks.

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