Senate Study Bill 3182 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON APPROPRIATIONS BILL BY CHAIRPERSON KRAAYENBRINK) A BILL FOR An Act relating to state finances by modifying the taxes 1 imposed on health maintenance organizations, making 2 transfers from the taxpayer relief fund, making and 3 supplementing appropriations to the department of health and 4 human services, and including effective date, contingent 5 effective date, and retroactive applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 6086XC (10) 91 jm/jh

S.F. _____ DIVISION I 1 HEALTH MAINTENANCE ORGANIZATION TAXATION 2 Section 1. Section 249A.13, subsection 1, Code 2026, is 3 amended to read as follows: 4 1. A Medicaid managed care organization premiums health 5 care tax fund is created in the state treasury under the 6 authority of the department of health and human services. 7 Moneys collected by the director of the department of revenue 8 as taxes on premiums pursuant to section 432.1B 432B.2 shall be 9 deposited in the fund. 10 Sec. 2. Section 432.1, unnumbered paragraph 1, Code 2026, 11 is amended to read as follows: 12 Every insurance company or association of whatever kind or 13 character, not including fraternal beneficiary associations, 14 health maintenance organizations, and nonprofit hospital and 15 medical service corporations, shall, as required by law, pay to 16 the director of the department of revenue, or to a depository 17 designated by the director, as taxes, an amount equal to the 18 following, except that the premium tax applicable to county 19 mutual insurance associations shall be governed by section 20 518.18 : 21 Sec. 3. Section 432.1, subsection 2, unnumbered paragraph 22 1, Code 2026, is amended to read as follows: 23 The “applicable percent” for purposes of subsection 1 of this 24 section , section 432.1B , and section 432.2 is the following: 25 Sec. 4. NEW SECTION . 432B.1 Definitions. 26 As used in this chapter: 27 1. “Commissioner” means the commissioner of insurance. 28 2. “Health maintenance organization” means the same as 29 defined in section 514B.1. “Health maintenance organization” 30 includes a health maintenance organization contracting with 31 the department of health and human services to administer the 32 medical assistance program under chapter 249A. 33 3. a. “Taxable funds” means all of the following: 34 (1) Payments received by the health maintenance 35 -1- LSB 6086XC (10) 91 jm/jh 1/ 11

S.F. _____ organization for health care services, insurance, indemnity, 1 or other benefits to which an enrollee is entitled through a 2 health maintenance organization. 3 (2) Payments made by the health maintenance organization 4 to providers for health care services, to insurers, or to 5 corporations authorized under chapter 514 for insurance, 6 indemnity, or other authorized service benefits, except 7 a payment made by a health maintenance organization that 8 qualifies both as a payment received under subparagraph (1) and 9 a payment made under this subparagraph, shall be considered 10 taxable funds under subparagraph (1). 11 b. “Taxable funds” does not include payments made to a 12 health maintenance organization by the United States secretary 13 of health and human services under a contract issued under 14 section 1833 or 1876 of the federal Social Security Act, or 15 under section 4015 of the federal Omnibus Budget Reconciliation 16 Act of 1987. 17 Sec. 5. NEW SECTION . 432B.2 Imposition of health 18 care-related tax. 19 1. Each health maintenance organization transacting 20 business in the state shall be subject to a health care-related 21 tax payable to the director of revenue in an amount equal to 22 the following applicable percentage of taxable funds: 23 a. For the period in calendar year 2026 beginning January 24 1, 2026, and ending September 30, 2026, three and one-half 25 percent. For the period in calendar year 2026 beginning 26 on or after October 1, 2026, and ending December 31, 2026, 27 ninety-five hundredths of one percent. 28 b. For the 2027 calendar year and subsequent calendar years, 29 ninety-five hundredths of one percent. 30 2. The amounts received by the director of revenue from the 31 imposition of the tax shall be deposited in the health care tax 32 fund created in section 249A.13. 33 Sec. 6. NEW SECTION . 432B.3 Date tax due —— method of 34 payment —— statute of limitations. 35 -2- LSB 6086XC (10) 91 jm/jh 2/ 11

S.F. _____ 1. Except as provided in subsection 2, the tax imposed 1 under this chapter shall be paid on or before March 1 of the 2 year following the calendar year for which the tax is due. The 3 commissioner may suspend or revoke the license of a health 4 maintenance organization subject to the health care-related tax 5 in this chapter that fails to pay the health care-related tax 6 on or before the due date. 7 2. a. Each health maintenance organization transacting 8 business in this state that is subject to the tax in section 9 432B.2 shall remit on or before June 1, on a prepayment basis, 10 an amount equal to one-half of the product of the current rate 11 in effect in section 432B.2 and the taxable funds in the prior 12 calendar year. 13 b. In addition to the prepayment amount in paragraph “a” , 14 each health maintenance organization subject to the tax in this 15 chapter shall remit on or before August 15, on a prepayment 16 basis, an additional amount equal to one-half of the product of 17 the current rate in effect in section 432B.2 and the taxable 18 funds in the prior calendar year. 19 c. (1) The sums prepaid by a health maintenance 20 organization under paragraphs “a” and “b” shall be allowed 21 as credits against the health maintenance organization’s 22 health care-related tax liability for the calendar year during 23 which the payments are made. If a prepayment made under this 24 subsection exceeds the health maintenance organization’s annual 25 health care-related tax liability, the excess shall be allowed 26 as a credit against the health maintenance organization’s 27 subsequent prepayment or tax liabilities under this chapter. 28 The commissioner shall authorize the department of revenue 29 to make a cash refund to a health maintenance organization, 30 in lieu of a credit against subsequent prepayment or tax 31 liabilities under this section, if the health maintenance 32 organization demonstrates the inability to recoup the funds 33 paid via a credit. 34 (2) The commissioner shall adopt rules establishing a 35 -3- LSB 6086XC (10) 91 jm/jh 3/ 11

S.F. _____ health maintenance organization’s eligibility for a cash 1 refund, and the process for the department of revenue to make a 2 cash refund to an eligible health maintenance organization from 3 the Medicaid managed care organization health care tax fund 4 created in section 249A.13. The commissioner may suspend or 5 revoke the license of a health maintenance organization that 6 fails to make a prepayment on or before the due date under this 7 subsection. 8 3. The commissioner shall determine whether or not the tax 9 remitted is correct. If the tax remitted is not sufficient, 10 the commissioner shall notify the delinquent company of the 11 amount of such delinquency and certify the amount to the 12 department of revenue which shall proceed to collect the 13 delinquency. 14 4. Within five years after the tax return is filed or within 15 five years after the tax return became due, whichever is later, 16 the commissioner shall examine the return and determine the 17 tax. An assessment or a claim for credit must be made within 18 five calendar years after the annual tax filing is made. For 19 a five-year period preceding the current calendar year, a 20 company may apply for a credit, or the commissioner may make 21 an assessment, as appropriate. The period of examination and 22 determination of the correct amount of tax is unlimited in the 23 case of a false or fraudulent return made with the intent to 24 evade tax or in the case of a failure to file a return. 25 Sec. 7. Section 508C.19, Code 2026, is amended to read as 26 follows: 27 508C.19 Credits for assessments paid. 28 1. An insurer may offset an assessment made pursuant to 29 section 508C.9 against its premium tax liability pursuant to 30 chapter 432 or health care-related tax liability pursuant to 31 chapter 432B to the extent of twenty percent of the amount of 32 the assessment for each of the five calendar years following 33 the year in which the assessment was paid. If an insurer 34 ceases doing business, all uncredited assessments may be 35 -4- LSB 6086XC (10) 91 jm/jh 4/ 11

S.F. _____ credited against its premium or health care-related tax 1 liability for the year it ceases doing business. 2 2. Sums acquired by refund from the association which have 3 been written off by contributing insurers and offset against 4 premium taxes or health care-related taxes as provided in 5 subsection 1 and are not then needed for purposes of this 6 chapter shall be paid by the association to the commissioner. 7 The commissioner shall remit the moneys to the treasurer of 8 state to deposit in the state general fund. 9 Sec. 8. Section 514B.31, Code 2026, is amended by striking 10 the section and inserting in lieu thereof the following: 11 514B.31 Health maintenance organization health care-related 12 taxation. 13 Every health maintenance organization and including health 14 maintenance organizations contracting with the department of 15 health and human services to administer the medical assistance 16 program under chapter 249A shall be subject to taxation under 17 chapter 432B. 18 Sec. 9. Section 514E.1, subsection 3, Code 2026, is amended 19 to read as follows: 20 3. “Carrier” means an insurer providing accident and 21 sickness insurance under chapter 509 , 514 , 514A and includes a 22 health maintenance organization established under chapter 514B 23 if payments received by the health maintenance organization 24 are considered premiums pursuant to section 514B.31 and are 25 taxed under chapter 432 subject to the health care-related 26 tax under chapter 432B . “Carrier” also includes a corporation 27 which becomes a mutual insurer pursuant to section 514.23 and 28 any other person as defined in section 4.1, subsection 20 , who 29 is or may become liable for the tax imposed by chapter 432 or 30 432B . 31 Sec. 10. Section 514E.2, subsection 13, Code 2026, is 32 amended to read as follows: 33 13. An insurer may offset an assessment made pursuant to 34 this chapter against its premium tax liability pursuant to 35 -5- LSB 6086XC (10) 91 jm/jh 5/ 11

S.F. _____ chapter 432 or against its health care-related tax liability 1 pursuant to chapter 432B, as applicable, to the extent of 2 twenty percent of the amount of the assessment for each 3 of the five calendar years following the year in which the 4 assessment was paid. If an insurer ceases doing business, all 5 uncredited assessments may be credited against its premium or 6 health care-related tax liability for the year it ceases doing 7 business. 8 Sec. 11. REPEAL. Section 432.1B, Code 2026, is repealed. 9 Sec. 12. PREMIUM TAX —— HEALTH MAINTENANCE 10 ORGANIZATION. For purposes of imposing the premium tax 11 under section 432.1, beginning with calendar 2026, and 12 subsequent calendar years, a health maintenance organization 13 is not subject to the premium tax under section 432.1, if the 14 health maintenance organization is subject to the imposition 15 of the health care-related tax under chapter 432B, if enacted 16 by this division of this Act. 17 Sec. 13. PREPAYMENT OF TAXES FOR CALENDAR YEAR 18 2026. Notwithstanding section 432B.3, subsection 2, paragraphs 19 “a” and “b”, if enacted by this division of this Act, the first 20 prepayment date shall be sixty days and the second prepayment 21 date shall be one hundred thirty-five days after the effective 22 date of this division of this Act. 23 Sec. 14. CONTINGENT EFFECTIVE DATE. This division of 24 this Act takes effect upon the date the department of health 25 and human services notifies the general assembly and the Code 26 editor of the approval by the federal centers for Medicare and 27 Medicaid services of the United States department of health 28 and human services of the method of taxation upon a health 29 maintenance organization imposed pursuant to this division of 30 the Act. 31 Sec. 15. RETROACTIVE APPLICABILITY. This division of this 32 Act applies retroactively to January 1, 2026, for tax years 33 beginning on or after that date. 34 DIVISION II 35 -6- LSB 6086XC (10) 91 jm/jh 6/ 11

S.F. _____ TAXPAYER RELIEF FUND TRANSFERS —— SUPPLEMENTAL APPROPRIATIONS 1 Sec. 16. Section 8.57E, subsection 2, paragraph b, 2 subparagraph (1), Code 2026, is amended to read as follows: 3 (1) (a) For the fiscal year beginning July 1, 2024, and for 4 each fiscal year thereafter, if the actual net revenue for the 5 general fund of the state for the fiscal year is less than the 6 net general fund appropriation for the fiscal year, there is 7 transferred from the taxpayer relief fund to the general fund 8 of the state an amount equal to fifty percent of the difference 9 or the remaining balance of the taxpayer relief fund, whichever 10 is lower. 11 (b) For the fiscal year beginning July 1, 2025, if the 12 actual net revenue for the general fund of the state for the 13 fiscal year is less than the net general fund appropriation for 14 the fiscal year, there is transferred from the taxpayer relief 15 fund to the general fund of the state an amount equal to one 16 hundred percent of the difference or the remaining balance of 17 the taxpayer relief fund, whichever is lower. 18 (c) For the fiscal year beginning July 1, 2026, if the 19 actual net revenue for the general fund of the state for the 20 fiscal year is less than the net general fund appropriation 21 for the fiscal year, there is transferred from the taxpayer 22 relief fund to the general fund of the state an amount equal to 23 seventy-five percent of the difference or the remaining balance 24 of the taxpayer relief fund, whichever is lower. 25 (d) For the fiscal year beginning July 1, 2027, and for 26 each fiscal year thereafter, if the actual net revenue for the 27 general fund of the state for the fiscal year is less than the 28 net general fund appropriation for the fiscal year, there is 29 transferred from the taxpayer relief fund to the general fund 30 of the state an amount equal to fifty percent of the difference 31 or the remaining balance of the taxpayer relief fund, whichever 32 is lower. 33 Sec. 17. TRANSFER INCREASES FOR TAXPAYER RELIEF. The 34 increases in transfer percentage amounts from the taxpayer 35 -7- LSB 6086XC (10) 91 jm/jh 7/ 11

S.F. _____ relief fund set forth in the section of this division of this 1 Act amending section 8.57E are made in accordance with section 2 8.57E, subsection 2, paragraph “a”, for state tax relief based 3 on the reduction in state revenue associated with federal tax 4 law changes pursuant to section 422.3, subsection 5, paragraph 5 “b”, including but not limited to the allowance of income tax 6 deductions for qualified tips, overtime compensation, and 7 qualified passenger vehicle loan interest under the federal 8 Internal Revenue Code, as amended by Pub. L. No. 119-21, 9 commonly referred to as the One Big Beautiful Bill Act. 10 Sec. 18. DEPARTMENT OF HEALTH AND HUMAN SERVICES —— 11 SUPPLEMENTAL APPROPRIATION. There is appropriated from the 12 general fund of the state to the department of health and human 13 services for the fiscal year beginning July 1, 2025, and ending 14 June 30, 2026, the following amount, or so much thereof as is 15 necessary, to be used for the purposes designated: 16 To supplement the appropriation made for medical assistance 17 program reimbursement and associated costs in 2025 Iowa Acts, 18 chapter 169, section 9, unnumbered paragraph 2: 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,300,000 20 Notwithstanding section 8.33, moneys appropriated in this 21 section that remain unencumbered or unobligated at the close of 22 the fiscal year shall not revert but shall remain available for 23 expenditure for the purposes designated until the close of the 24 succeeding fiscal year. 25 Sec. 19. EFFECTIVE DATE. This division of this Act, being 26 deemed of immediate importance, takes effect upon enactment. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 This bill modifies the taxes imposed on health maintenance 31 organizations, makes transfers from the taxpayer relief fund, 32 and makes supplemental appropriations. 33 DIVISION I —— HEALTH MAINTENANCE ORGANIZATION TAXATION. 34 Currently, health maintenance organizations premiums (HMO) are 35 -8- LSB 6086XC (10) 91 jm/jh 8/ 11

S.F. _____ subject to taxation under Code chapter 432 (insurance companies 1 tax). 2 The bill defines “HMO” to mean the same as defined in Code 3 section 514B.1, and includes an HMO contracting with the 4 department of health and human services to administer the 5 medical assistance program under Code chapter 249A. 6 The bill strikes the tax on HMO premiums and creates a health 7 care-related tax on the taxable funds of an HMO in new Code 8 chapter 432B. By striking the taxation of HMO premiums in Code 9 chapter 432 and creating the new health care-related tax in 10 Code chapter 432B, the tax credits available to an HMO in Code 11 chapter 432 are not available to an HMO in new Code chapter 12 432B. 13 The bill applies the health care-related tax on the 14 taxable funds of an HMO. The bill defines “taxable funds” to 15 mean payments received by an HMO for health care services, 16 insurance, indemnity, or other benefits to which an enrollee 17 is entitled through an HMO; and payments made by the HMO 18 to providers for health care services, to insurers, or to 19 corporations authorized under Code chapter 514 for insurance, 20 indemnity, or other authorized service benefits. The bill 21 excludes from the definition of taxable funds the payments made 22 to an HMO by the United States secretary of health and human 23 services under a contract and pursuant to federal authority. 24 If a payment qualifies as both a payment received by an HMO for 25 services provided and a payment made by the HMO to providers, 26 the bill requires the HMO to classify the payment as a payment 27 received by the HMO. 28 Currently, the tax rate on premiums in Code section 432.1(2) 29 is gradually being reduced and the current rate for calendar 30 year 2026 is .925 percent of premiums. The new tax rates on 31 the taxable funds of an HMO in the bill are as follows: for 32 the period in calendar year 2026 beginning January 1, 2026, 33 and ending September 30, 2026, 3.5 percent; for the period 34 in calendar year 2026 beginning on or after October 1, 2026, 35 -9- LSB 6086XC (10) 91 jm/jh 9/ 11

S.F. _____ and ending December 31, 2026, .95 percent; and for the 2027 1 calendar year and subsequent calendar years, the rate remains 2 at .95 percent. 3 Currently, the premium tax is due March 1 of the year 4 following the calendar year for which the tax is due; however, 5 one-half of the premium taxes are required to be prepaid on 6 June 1 and one-half on August 15. The health care-related tax 7 is also due on March 1 of the year following the calendar year 8 for which the tax is due, and the bill establishes the same 9 prepayment framework. The HMO is required to prepay one-half 10 of the health care-related tax on June 1 and one-half on August 11 15. Due to the effective date of the division being dependent 12 upon notification of federal approval, for calendar year 2026 13 the first prepayment date shall be 60 days and the second 14 prepayment date shall be 135 days after the effective date of 15 the division. 16 The division takes effect upon the date the department of 17 health and human services notifies the general assembly and the 18 Code editor of the approval by the federal centers for Medicare 19 and Medicaid services of the United States department of health 20 and human services of the method of taxation imposed pursuant 21 to the division. The division applies retroactively to tax 22 years beginning on or after January 1, 2026. 23 DIVISION II —— TAXPAYER RELIEF FUND TRANSFERS —— 24 SUPPLEMENTAL APPROPRIATIONS. Under current law, for FY 25 2024-2025 through FY 2028-2029, if the actual net revenue for 26 the general fund of the state (GF) for the fiscal year is less 27 than the net GF appropriation for the fiscal year, there is 28 transferred from the taxpayer relief fund to the GF an amount 29 equal to 50 percent of the difference. The bill provides that 30 the transfer is 100 percent of the difference for FY 2025-2026 31 and 75 percent of the difference for FY 2026-2027. Under 32 current law and the bill, the transfer does not readjust the 33 GF expenditure limitation for the associated fiscal year (Code 34 section 8.54(5)(b)). 35 -10- LSB 6086XC (10) 91 jm/jh 10/ 11