Lawsuit Pins $10 Billion in Back Taxes on Large Health Plans

Kaiser Permanente, Anthem Blue Cross, Blue Shield of California, and Health Net are the subject of what State Senator Bill Monning called, “a monumental case for California and Californians.”

The crux of the issue is a 2.35% tax on annual premiums that insurers pay in lieu of almost all other state taxes. The health plans are accused of having managed to avoid paying that premium tax on the majority of their business.

So if the case were to go against the health plans, back taxes and future enforcement would total billions. $10 billion or so in back taxes and an estimate of roughly $1 billion annually going forward.

Making the case more interesting, Governor Brown’s administration has sided with the health plans, saying the 1968 case that the plaintiffs are using as their main weapon is being misapplied. The health plans say they offer “health care service plans” and further contend that those are different from “insurance plans.” Hooray for legalese.

The four plans being targeted make up over two-thirds of the state’s health insurance market by revenue.

More on this lawsuit can be found here.