As you may know, New York State has enacted a new Managed Care Organization (MCO) tax, effective January 1, 2025. This state-imposed assessment applies across several markets, including Medicaid, Essential Plan, and commercial health plans issued in New York or subject to New York law.
The MCO tax is designed to help New York secure additional federal funding for its Medicaid program. While this public funding mechanism supports state health initiatives, it also introduces added costs and administrative tasks for carriers, employers, and brokers.
What’s changing?
- The tax will be embedded in a per member per month (PMPM) rate that varies by group size.
- Until the tax is embedded in the PMPM rate, premiums for impacted groups will reflect the tax — retroactively to January 1, 2025, then monthly going forward.
- The NY Department of Financial Services (DFS) has authorized a rolling window for updated rate filings.
Important notes:
- Because this is a state-mandate, all insurers operating in New York are required to comply.
- This tax cannot be passed through to Medicaid, CHPlus, or Essential Plan members directly.
- Large Group clients will see adjusted rates either at renewal or mid-year, based on timing.
- Small group and individual rate adjustments are subject to DFS approval on a prospective basis.
- This increase is not tied to medical cost trends but rather stems from a regulatory policy change.
We’ll continue to keep you informed as details evolve. If you need help explaining these regulatory changes to clients or would like additional resources, your account team is here to support you.