The companies that manage Iowa’s Medicaid program and private companies that offer HMOs to Iowans will soon pay a higher state premium tax for nine months — and it means Iowa qualifies for more federal funding for Medicaid patients.
Senator Mark Costello, a Republican from Imogene, said it’ll bring in an additional $355 million in matching federal funds to address a deficit in Iowa’s Medicaid program. “This is a strategic bill to address health care costs in Medicaid while ensuring your tax dollars are funding the needs of this state,” Costello said.
The plan passed the House last week, it narrowly cleared the Senate Tuesday and Governor Reynolds has indicated she’ll sign it into law.
The 3.5% premium tax is temporary. It goes into effect retroactively on January 1, 2026 and, on October 1, the tax will return to less than 1%. Democrats like Senate Minority Leader Janice Weiner say insurance companies will pass this tax hike along to customers. “It makes things worse for Iowans who are just trying to afford health insurance, who want to care for their families and live their lives,” Weiner said.
Weiner suggested it will be an issue in the fall campaign. “I challenge anyone in this chamber to tell us a story of knocking on a door and being told someone welcomes their health insurance premiums going up,” Weiner said.
Costello said there’s no guarantee Wellmark and the other companies that sell HMO policies to Iowans will raise rates. “Don’t be fooled by the minority party’s rhetoric,” Costello said. “…This bill will bring investments that benefit our neighbors on Medicaid and those providing the services to them.”
The bill also calls for a $350 million withdrawal from the state’s Taxpayer Relief Fund to cover some of the state’s overall budget deficit. It passed the Senate on a 26-19 vote.