Regarding HF 2739, a bill which some of you have reached out about, here is the background and facts about the bill. It is a bill in the Ways and Means Committee, but it actually deals with the Health and Human Services budget.

Iowa’s Medicaid program consumes an ever-growing amount of the state’s budget. In the 1990s, Medicaid generally took about 7 percent of the budget. Since the turn of the century, Medicaid spending has grown significantly. Last year, Medicaid accounted for 22 percent of the state’s budget.

This year, the state is also absorbing the end of extra federal Medicaid funding that was given to states due to COVID. That enhanced match ceased at the end of 2023, and the state has now exhausted those funds. So the state budget must pick up the ongoing costs that the extra federal funding had been covering.

It is projected the cost of the program will grow by over $1 billion by the end of 2031.

Why is Medicaid spending going up?

There has been significant growth in the number of people on Medicaid. In 1998, just over 200,000 Iowans were on Medicaid — one out of every 15 Iowans. Today, there are 600,000 Iowans covered by Medicaid and the Iowa Health and Wellness plan. That means one out of every five Iowans is getting their health care coverage through Medicaid. The health care needs of many of these Iowans are significant.

Why are so many Iowans covered by Medicaid?

The price of health insurance is a major driving factor in this. Many Iowans either cannot afford to purchase health care on their own or their employer can’t afford the rates insurance companies charge them. Another reason for the growth in enrollment is that many Iowans find the health insurance plans offered do not cover their health care needs.

If rates are that high, does that mean insurance companies aren’t making money?

That certainly is not the case. Just looking at Wellmark, Iowa’s largest insurance company, one can see how much money that one company is making. Over the last five years, these are the net income figures Wellmark has reported to the Iowa insurance commissioner:

2021 — $143,344,614.

2022 — $82,368,021.

2023 — $216,533,140.

2024 — $181,019,246.

2025 — $176,229,257.

Over the last five years, Wellmark has had profits totaling $799.5 million. And in 2023, the state passed a bill lowering the tax insurance companies pay. Right now, they pay a tax that equals .95 percent of the insurance premiums they collect. Needless to say, insurance companies are doing very well in Iowa.

Have the taxes on insurance companies gone up in recent years?

Actually, they have gone down. In 2023, the state legislature passed a bill lowering the tax insurance companies pay to just .95 percent of the insurance premiums they collect. Even with their tax bill going down, Wellmark still raised premiums for those on the company’s HMO plans by 14.73 percent.

Do health insurers pay any of their tax money to fund Medicaid?

Yes. The three managed care companies that administer Iowa’s Medicaid program pay what is known as a provider tax. This is a tax that is then matched by the federal government to help states fund Medicaid. Some states have abused this, and Congress last summer lowered the amounts states could collect to a tax rate of 3.5 percent. For those states whose provider tax rates were below 3.5 percent, Congress froze them where they were. Iowa’s tax rate on the managed care companies is .95 percent, the same as the health insurance premium tax.

So what is being proposed here?

Since Iowa’s tax rate is so low when compared to the other states charging the tax on managed care organizations, the federal government is allowing Iowa to raise the MCO tax until October. This allows the state to get an additional $124.3 million from Washington for Iowa’s Medicare program.

Why are the other insurance companies opposed to this?

Because the federal government said that Iowa has to tax all state regulated health insurance companies, not just the three MCOs. A provider tax must apply to all in that field, not just those providing care under the Medicaid program.

How much would these insurance companies have to pay?

The amount is expected to be $27.7 million.

Would the insurance companies be able to raise my rates to pay for this?

No. Insurance companies have already set their rates for this year and Iowa regulated plans who would be assessed the tax are not allowed to raise your insurance in the future to collect that tax from you.

I work for a larger employer. Will my insurance company have to pay a tax for my coverage?

No. States are not allowed to tax these health plans, so their rates will not be affected by this proposal.

State Rep. Ann Meyer, R-Fort Dodge, represents Fort Dodge and eastern Webster County.