Gov. Kim Reynolds has signed into law a tax increase on some private health insurance providers that will unlock new federal funds to shore up Iowa’s Medicaid budget.
Reynolds signed the law, House File 2739, on Thursday, March 26.
The law raises the tax rate on private health insurance providers, known as health maintenance organizations or HMOs, from 0.925% to 3.5% between Jan. 1 and Sept. 30 of this year.
On Oct. 1, the tax rate will drop to 0.95%.
The temporary tax increase is intended to allow Iowa to access matching federal funds. State officials have estimated the increase will bring in more than $120 million.
That will help offset Iowa’s projected Medicaid budget gap of $167.6 million in fiscal year 2027, which begins July 1. The bill also appropriates $89 million to cover the $90.6 million Medicaid deficit for the current budget year.
The tax increase will apply to companies that offer some of Iowa’s largest private insurance plans, like Wellmark, Sanford, Wellpoint and Aetna.
The law also draws $347 million from Iowa’s Taxpayer Relief Fund to cover the impact to Iowa’s budget from the federal
Kim Reynolds signs tax increase on private health insurance providers
