California Health Groups Challenge New Insurance Tax

Two statewide trade groups took Gov. Gavin Newsom and the Legislature to court Friday over California’s newly approved managed care organization tax. The California Medical Association brought the case alongside the California Association of Health Plans, filing directly in the California Supreme Court. Their complaint argues that lawmakers exceeded restrictions voters established through Proposition 35 in 2024.

Lawmakers approved the higher levy on private health plans in June. Insurers expect to transfer that expense to customers, adding roughly $100 per covered person each year. For four family members, the projected added cost totals $400 annually, beyond the premium increases customers commonly experience from year to year. That makes the dispute relevant to Simi Valley households paying for private coverage.

California has used health-plan taxes for more than 20 years to support Medi-Cal, which covers low-income residents. After Congress changed federal rules governing these revenue-generating taxes last year, Newsom proposed two versions for federal review. One followed the voter-approved limits but was expected to fail federal approval; the other met federal requirements while mostly setting aside those limits. Newsom’s office rejects the lawsuit’s allegations, leaving the California Supreme Court to consider whether the tax can stand.