On December 20, 2024, the federal government approved New York's request to create a new tax aimed at generating billions of dollars in additional Medicaid reimbursement funds for the state. This “MCO Provider Tax” was originally instituted in the New York State fiscal year 2025 budget (signed April 20, 2024) as an amendment of the New York Public Health Law. Following a model already approved in California, the MCO Provider Tax would apply varying tax rates to Medicaid and non-Medicaid plans, imposed as an assessment upon insurers, health maintenance organizations, and managed care organizations in the state through 2026. The tax does not apply to Medicare policies and self-funded plans, and while it doesn’t apply directly to plan sponsors, it is anticipated that this tax could have an impact on certain commercial rates as a pass-through from the carriers.
The New York State fiscal year 2025 budget, which must be finalized by April 1, is expected to include language that finalizes the MCO tax provisions and will be reviewed by the state legislature which could decide to approve, suggest changes to, or remove the MCO tax proposal. Regardless of the state’s decision, it remains to be seen if the new presidential administration will uphold the previous CMS decision.