Managed Care Organization Tax
Waiver of Broad-Based Authority
Medicaid statute and regulations afford states flexibility to tailor health care-related taxes within certain parameters to meet their provider community needs and align with broader state tax policies and priorities for their Medicaid programs. The Centers of Medicare and Medicaid Services (CMS) is authorized to waive the requirements that health care-related taxes be broad-based and/or uniform when applicable conditions are met. The Department of Health Care Services (DHCS) requested a waiver of the broad-based and uniformity provisions of sections 1903(w)(3)(B) and (C) of the Social Security Act (the Act), related to the State's managed care organization (MCO) tax.
Most recently, a modification to the Managed Care Organization (“MCO") tax, authorized by Assembly Bill (AB) 160 (Chapter 39, Statutes of 2024) with an effective date of January 1, 2024, through December 31, 2026, was approved by the Centers for Medicare and Medicaid Services (CMS) on December 20, 2024. As before, the tax applies to all full-service health plans, including their Medicaid and non-Medicaid (commercial) lines of business, consistent with federal law. MCO tax revenues will be used to support the Medi-Cal program, similar to the prior version of California's MCO tax.
Current Waiver & Authority
1903(w)(3)(B) and (C) MCO Tax 2023-2026 Amendment
SB-136 Medi-Cal: Managed Care Organization Provider Tax
AB-160 Medi-Cal Managed Care Organization Provider Tax
1903(w)(3)(B) and (C) MCO Tax (2023-2026)
Bill Text - AB-119 Medi-Cal: managed care organization provider tax.
Tax Obligation and Collections
Managed Care Organization Annual Tax Obligation
Managed Care Organization Tax Collection Schedule
Additional Resources
May 2023 DHCS MCO Tax Update
CA MCO Tax Waiver Approval and Companion Letter.pdf
CA MCO Tax Request (2023-2026)
Social Security Act 1903
CMCS Informational Bulletin- Health Care-Related Taxes and Hold Harmless Arrangements Involving the Redistribution of Medicaid Payments
Expired Waivers