Iowa’s insurance industry is pushing back against a proposed tax increase on HMOs that’s designed to cover a deficit in Iowa’s Medicaid program.
Iowa currently charges a tax of just under 1% on each health insurance premium. The bill would raise the tax to 3.5% and the new tax would be into effect retroactively, on January 1st. Matt McKinney, a lobbyist for the Federation of Iowa Insurers, said he did the math and it’s a 238% tax hike.
“It’s a significant problem, particularly as there are conversations going on about, ‘What are we going to do about affordability?’ A 238% increase is not a step in the right direction.”
Brandon Geib, a lobbyist for Wellmark Blue Cross Blue Shield, said Wellmark expected to pay $11.5 million in taxes to the state for the 442,000 members in its HMO. “Under this bill, given the look back we now believe they will be around $61 million,” Geib said. “…This is probably the single largest tax increase on an individual Iowa-based company maybe in legislative history.”
During a Senate subcommittee hearing early this afternoon, Geib told lawmakers taxes are passed along to customers. “We oppose this bill because we constantly hear up here that insurance is really expensive, that rates are going up and it is exactly because of bills like this that put these costs back on our members,” Geib said.
State officials say the proposed tax increase is temporarily allowed under the “One Big Beautiful Bill” President Trump signed last July and the tax hike would be repealed this fall. The state faces a March 31 deadline to enact the tax hike and qualify for tens of millions in additional federal funding.
Two Republican senators who’ve voted to advance the bill out of a subcommittee say they hope to figure out a way to soften the impact of the tax hike.
