California is getting ready to increase a health insurance tax — will it affect your premium?

June 22, 2026 - 02:32

California legislators this week gave the green light to a health insurance tax increase designed to secure billions in federal dollars for the state's Medicaid program, known as Medi-Cal. The bill, which passed with bipartisan support, raises a tax on health plans that insurers have long warned could trickle down to consumers in the form of higher premiums.

The tax, often called a "managed care organization" or MCO tax, is not new. California has used this mechanism for years to draw down matching funds from the federal government. Without the renewal, state officials warned that Medi-Cal, which covers nearly 15 million low-income residents, would face a severe funding gap. The new version of the tax is expected to generate roughly $4.5 billion annually, with most of that money going back into the state's healthcare system.

But the question on many people's minds is whether they will see their monthly insurance costs go up. Insurers argue that the tax is a cost of doing business, and like any other expense, it often gets passed along to customers. However, state regulators have some oversight. The bill includes provisions that require health plans to justify any rate increases tied to the tax. Consumer advocates remain skeptical, pointing out that similar taxes in other states have led to higher premiums despite promises of oversight.

Supporters of the bill say the trade-off is worth it. They argue that without the tax, the state would lose billions in federal funding, which would force cuts to doctor payments, hospital services, and coverage for the most vulnerable Californians. The governor is expected to sign the measure into law in the coming days, setting the stage for a new round of debate over who ultimately pays for the state's expanding healthcare safety net.