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, a move that allows Iowa to qualify for additional federal Medicaid funding.
Sen. Mark Costello, a Republican from Imogene, says the plan is a strategic move expected to bring in an additional $355 million in matching federal funds to address a deficit in the state’s Medicaid program.
The proposal passed the House last week and narrowly cleared the Senate on Tuesday. Gov. Kim Reynolds has indicated she will sign it into law.
The 3.5% premium tax is temporary and will apply retroactively to Jan. 1. The rate will return to less than 1% on Oct. 1.
Democrats say insurance companies are likely to pass the tax increase on to customers at a time when many Iowans are already struggling to cover health insurance premiums.
