California Proposition 35, Managed Care Organization Tax Authorization Initiative (2024)

California Proposition 35
Election date November 5, 2024
Topic Healthcare
Status a Approved
Type State statute	Origin Citizens

California Proposition 35, the Managed Care Organization Tax Authorization Initiative, was on the ballot in California as an initiated state statute on November 5, 2024. The ballot measure was approved.

A "yes" vote supported permanently authorizing a tax on managed care organizations based on monthly enrollees, which is set to expire in 2026, and requiring revenues to be used for increased Medi-Cal programs.

A "no" vote opposed permanently authorizing a tax on managed care organizations based on monthly enrollees, thereby allowing it to expire in 2026.

Election results

California Proposition 35
Result		Votes	Percentage
Yes		10,124,174	67.91%
No		4,783,434	32.09%

Results are officially certified.

Source

Overview

How did the initiative change the managed care organization tax?

See also: Measure design

The initiative permanently established the tax on managed care organizations (MCOs). The tax is a charge based on the number of monthly enrollees of an MCO. An MCO is a type of organization that offers health insurance coverage to consumers at fixed monthly costs. The MCO tax first took effect in 2009 and has been renewed and adjusted over the years, with each renewal subject to federal approval. The existing MCO tax was set to expire in 2026. In 2024, the tax for each monthly Medi-Cal enrollee was $182.50, and $1.75 for each commercial enrollee. The initiative prohibited the department from charging more than $2.50 for each monthly commercial enrollee and limited the total annual revenue from the commercial portion of the tax to $36 million, adjusted for inflation annually.

How was the tax revenue to be allocated?

The initiative required the proceeds of the MCO tax to cover a portion of the cost of the tax on Medi-Cal enrollment and administrative costs. In 2025 and 2026, the remaining proceeds were to be allocated to the Medi-Cal program and health workforce initiatives (estimated at $2.7 billion) and to the general fund to offset Medi-Cal funding (estimated at $2 billion). Beginning in 2027, the initiative was to allocate the remaining proceeds to the Medi-Cal program, health workforce initiatives, and subsidies for drug prices.

Who supported and opposed the initiative?

See also: Support and Opposition

The Coalition to Protect Access to Care led the initiative. The California Democratic Party, Republican Party of California, SEIU California State Council, California Hospital Association, and California Medical Association endorsed the initiative. Donaldo Hernandez, M.D., president of the California Medical Association, said, "The Protect Access to Healthcare initiative will improve access to health care, reduce emergency room wait times for all Californians, make prescription drugs more affordable and expand our health care workforce. This initiative represents the most important investment in California’s health care in our state’s history and will increase access to care well into the future."

The League of Women Voters of California and California Pan-Ethnic Health Network opposed the measure. The League of Women Voters stated, "Prop 35 is a well-meaning but misguided effort to try to provide more and steady funding for Medi-Cal and potentially improve reimbursement rates for medical providers. Prop 35 would change the temporary tax that helps fund Medi-Cal to a permanent tax on Managed Care Organizations (MCOs) and require the tax proceeds to be used to support only Medi-Cal and other health programs – making that money unavailable for other priorities and making it difficult to respond to future changes to Medi-Cal that might be mandated by the federal government."

Measure design

See also: Text of measure

Click on the arrows (▼) below for summaries of the different provisions of the initiative.

Establish tax on managed care organizations (MCO): Permanently authorize MCO tax subject to federal approval

The initiative permanently established the tax on managed care organizations (MCOs). The tax was a charge based on the number of monthly enrollees of an MCO. An MCO is a type of organization that offers health insurance coverage to consumers at fixed monthly costs. In California, Medicaid, which provides healthcare services to low-income individuals, is called "Medi-Cal." Medi-Cal contracts with MCOs to deliver healthcare services to participants. The MCO tax initially took effect in 2009 and had been renewed and adjusted over the years, with each renewal subject to federal approval. The existing MCO tax was set to expire in 2026. In 2024, the tax for each monthly Medi-Cal enrollee was $182.50, and $1.75 for each commercial enrollee. Medi-Cal, using federal funds, covered the portion of the tax charged for Medi-Cal enrollees.

The initiative required the Department of Health Care Services (DHCS) to structure the permanently authorized tax according to the most recent version of the tax renewed in 2023. The department was authorized to modify the tax to receive federal approval, but the initiative set parameters. It prohibited the department from charging more than $2.50 for each monthly commercial enrollee and limited the total annual revenue from the commercial portion of the tax to $36 million, adjusted for inflation annually.

MCO tax revenue: Short-term and long-term uses

The initiative required the proceeds of the MCO tax to cover a portion of the cost of the tax on Medi-Cal enrollment and administrative costs. In 2025 and 2026, the remaining proceeds were to be allocated to the Medi-Cal program and health workforce initiatives (estimated at $2.7 billion) and to the general fund to offset Medi-Cal funding (estimated at $2 billion).

Beginning in 2027, the initiative was to allocate the remaining proceeds as follows:

• $4.3 billion to the Medi-Cal program and health workforce initiatives and to the general fund to offset Medi-Cal funding, with 92% allocated to the Medi-Cal program and 8% to the general fund;
• $226 million to subsidize drug affordability, community health workers, and Medi-Cal and health workforce programs; and
• the remaining funds are divided between the general fund offset to support Medi-Cal (75%) and increases to Medi-Cal and health workforce initiatives (25%).

Administration of tax, auditing, and other provisions: Funding administration and auditing responsibilities

The initiative tasked the Department of Health Care Services with the responsibility of administering the MCO tax and spending the proceeds. It also authorized the department to allocate up to $4 million to cover the administrative costs of the tax.

The California State Controller was responsible for auditing the MCO tax and its fund accounts, with authorization to use up to $750,000 of the proceeds to cover the cost of each audit.

The initiative also required the department to consult with a new stakeholder committee to determine how to allocate increased proceeds. This committee was to be composed of 10 members representing physicians, hospitals, family planning and reproductive health providers, commercial non-governmental Medi-Cal managed care plans, public nonprofit Medi-Cal managed care plans, dentists, organized labor, and ambulance transport providers. The members were appointed by the governor, Speaker of the Assembly, and Senate President pro Tempore.

The initiative further required a three-fourths vote from each chamber of the state legislature to alter the statute.

Text of measure

Ballot title

The ballot title was as follows:

“

Provides permanent funding for Medi-Cal Health Care Services. Initiative statute.

”

Ballot summary

The ballot summary was as follows:

“

Makes permanent the existing tax on managed health care insurance plans, currently set to expire in 2026, which the state uses to pay for health care services for low-income families with children, seniors, people with disabilities, and other groups covered by the Medi-Cal program. Requires revenues to be used only for specified Medi-Cal services, including primary and specialty care, emergency care, family planning, mental health, and prescription drugs. Prohibits revenues from being used to replace other existing Medi-Cal funding. Caps administrative expenses and requires independent audits of programs receiving funding.

”

Fiscal impact

The fiscal impact statement was as follows:

“

Uncertain overall impact on state revenues and spending, including reduced legislative flexibility over the use of MCO tax funds. The extent of this impact depends on whether the measure would result in different state decisions around imposing, structuring, and spending proceeds from the managed care organization tax than in the absence of the measure.

”

Full text

The full text of the ballot measure is below:

Readability score

See also: Ballot measure readability scores, 2024

Using the Flesch-Kincaid Grade Level (FKGL) and Flesch Reading Ease (FRE) formulas, Ballotpedia scored the readability of the ballot title and summary for this measure. Readability scores are designed to indicate the reading difficulty of text. The Flesch-Kincaid formulas account for the number of words, syllables, and sentences in a text; they do not account for the difficulty of the ideas in the text. The attorney general wrote the ballot language for this measure.

The FKGL for the ballot title is grade level 10, and the FRE is 32. The word count for the ballot title is 11.

The FKGL for the ballot summary is grade level 15, and the FRE is 28. The word count for the ballot summary is 93.

Support

The Coalition to Protect Access to Care led the initiative.

Supporters

Officials

• State Sen. Toni Atkins (D)
• State Asm. Tina McKinnor (D)
• State Superintendent of Public Instruction Tony Thurmond (D)

Former Officials

• Los Angeles Mayor Antonio Villaraigosa (D)

Political Parties

• California Democratic Party
• Republican Party of California

Organizations

• California Dental Association
• California Hospital Association
• California Medical Association
• California Primary Care Association
• Planned Parenthood Affiliates of California

Arguments

• Jodi Hicks, president and CEO of Planned Parenthood Affiliates of California: "It’s important to ensure that Californians have access to health care which is exactly what this ballot measure will help ensure. This measure will help Planned Parenthood health centers, and other community health centers, invest in workforce, expand services, and ultimately be able to serve more parents. Funding for Medi-Cal is critical for the millions of Californians who rely on the program for essential reproductive health care."
• Donaldo Hernandez, M.D., president of the California Medical Association: "The Protect Access to Healthcare initiative will improve access to health care, reduce emergency room wait times for all Californians, make prescription drugs more affordable and expand our health care workforce. This initiative represents the most important investment in California’s health care in our state’s history and will increase access to care well into the future."

Opposition

Ballotpedia did not locate a campaign in opposition to the ballot measure.

Opponents

Former Officials

• Former State Controller Betty Yee (D)

Organizations

• California Alliance for Retired Americans
• California Pan-Ethnic Health Network
• League of Women Voters of California

Arguments

• League of Women Voters of California: "Prop 35 is a well-meaning but misguided effort to try to provide more and steady funding for Medi-Cal and potentially improve reimbursement rates for medical providers. Prop 35 would change the temporary tax that helps fund Medi-Cal to a permanent tax on Managed Care Organizations (MCOs) and require the tax proceeds to be used to support only Medi-Cal and other health programs – making that money unavailable for other priorities and making it difficult to respond to future changes to Medi-Cal that might be mandated by the federal government."
• Kiran Savage-Sangwan, executive director of California Pan-Ethnic Health Network: "As advocates for communities of color who are disproportionately harmed by health inequities, CPEHN must warn voters against Prop. 35. While we strongly support boosting access to health care providers serving our communities, Prop. 35 throws away the hard work communities have done to make health care more equitable. Care for people served by Medi-Cal now could be cut by billions of dollars, and California’s progress in expanding health care to all would be stalled or reversed. We say vote NO."

Campaign finance

See also: Campaign finance requirements for California ballot measures

The campaign finance information on this page reflects the most recent scheduled reports that Ballotpedia has processed, which covered through December 31, 2024.

Ballotpedia identified two committees registered in support of the initiative and none opposed.

	Cash Contributions	In-Kind Contributions	Total Contributions	Cash Expenditures	Total Expenditures
Support	$53,646,004.06	$795,631.53	$54,441,635.59	$53,841,887.49	$54,637,519.02
Oppose	$0.00	$0.00	$0.00	$0.00	$0.00
Total	$53,646,004.06	$795,631.53	$54,441,635.59	$53,841,887.49	$54,637,519.02

Support

The following table includes contribution and expenditure totals for the committees in support of the measure.

Committees in support of Proposition 35
Committee	Cash Contributions	In-Kind Contributions	Total Contributions	Cash Expenditures	Total Expenditures
Yes on 35 - Protect our Healthcare	$52,731,461.00	$795,181.53	$53,526,642.53	$52,651,972.42	$53,447,153.95
California Primary Care Association Advocates Patient Access to Care Fund, Support Yes on Prop 35	$914,543.06	$450.00	$914,993.06	$1,189,915.07	$1,190,365.07
Total	$53,646,004.06	$795,631.53	$54,441,635.59	$53,841,887.49	$54,637,519.02

Donors

The following were the top donors who contributed to the support committees.

Donor	Cash Contributions	In-Kind Contributions	Total Contributions
California Hospitals Commee on Issues	$15,800,000.00	$0.00	$15,800,000.00
Global Medical Response, Inc.	$13,900,000.00	$0.00	$13,900,000.00
California Medical Association	$10,800,000.00	$600,991.60	$11,400,991.60
California Primary Care Association	$2,000,000.00	$26,588.88	$2,026,588.88
California Dental Association	$1,100,000.00	$0.00	$1,100,000.00

Media editorials

See also: 2024 ballot measure media endorsements

Support

The following media editorial boards published an editorial supporting the ballot measure:

• Bay Area Reporter Editorial Board: "Proponents state that Prop 35 will not raise taxes, since it's an extension of a current tax. And it prevents the state from redirecting the tax funds to other purposes. Reliable revenue for Medi-Cal is important for the health care of many people. Vote YES on Prop 35."

Opposition

The following media editorial boards published an editorial opposing the ballot measure:

• San Francisco Chronicle Editorial Board: "Furthermore, because Prop 35 would prevent legislators from using MCO tax money to replace existing Medi-Cal funding, it could actually widen the state’s deficit. The federal government also recently warned California — rightfully — that it may be exploiting the system and likely won’t get as much federal funding in future years. We agree with Prop 35’s supporters that MCO tax revenue should be reinvested whenever possible in the state’s health care system and that provider rates should be increased to ensure they can see more Medi-Cal patients. ... Budgeting at this level of complexity and uncertainty shouldn’t happen at the ballot box — it should happen through a fair, transparent and public process before the Legislature. Voters should reject Prop 35."
• The Mercury News/East Bay Times Editorial Boards: "No: The winners in this special-interest funding measure would include the doctors, hospitals and emergency ambulance providers bankrolling the initiative."
• Los Angeles Times Editorial Board: "But it’s also worth rejecting Proposition 35 because of what it would do. It would make permanent a temporary tax on managed healthcare insurance plans starting in 2027, and require that all of the proceeds be used on Medi-Cal services and higher reimbursement rates to specified healthcare providers. Currently, lawmakers use some of the revenue from the tax to lessen the burden of Medi-Cal program costs on the general fund. Asking voters to dictate how the state spends its revenue is ballot-box budgeting. It’s bad policy because it strips lawmakers of the ability to change state spending from year to year depending on current needs."

Polls

See also: 2024 ballot measure polls

Are you aware of a poll on this ballot measure that should be included below? You can share ballot measure polls, along with source links, with us at editor@ballotpedia.org.

California Proposition 35, Managed Care Organization Tax Authorization Initiative (2024)
Poll	Dates	Sample size	Margin of error	Support	Oppose	Undecided

Public Policy Institute of California	10/07/2024 - 10/15/2024	1,137 LV	± 3.1%	62.0%	36.0%	2.0%
	Question: "Proposition 35 is called “Provides Permanent Funding for Medi-Cal Health Care Services.” Initiative Statute. Makes permanent the existing tax on managed health care insurance plans, which, if approved by the federal government, provides revenues to pay for Medi-Cal health care services. The fiscal impact is short-term state costs between roughly $1 billion and $2 billion annually to increase funding for certain health programs. Total funding increase between roughly $2 billion and $5 billion annually. Unknown long-term fiscal effects. Supporters include Planned Parenthood Affiliates of CA; American College of Obstetricians & Gynecologists; American Academy of Pediatrics, CA. No opponents submitted. If the election were held today, would you vote yes or no?"

Public Policy Institute of California	8/29/2024 - 09/11/2024	1,071 LV	± 3.7%	63.0%	34.0%	3.0%
	Question: "Proposition 35 is called “Provides Permanent Funding for Medi-Cal Health Care Services”. Initiative Statute. Makes permanent the existing tax on managed health care insurance plans, which, if approved by the federal government, provides revenues to pay for Medi-Cal health care services. The fiscal impact is short-term state costs between roughly $1 billion and $2 billion annually to increase funding for certain health programs. Total funding increase between roughly $2 billion and $5 billion annually. Unknown long-term fiscal effects. Supporters include Planned Parenthood Affiliates of CA; American College of Obstetricians & Gynecologists; American Academy of Pediatrics, CA. No opponents submitted. If the election were held today, would you vote yes or no?"

Note: LV is likely voters, RV is registered voters, and EV is eligible voters.

Background

Medi-Cal

California's Medicaid program is called Medi-Cal. The Patient Protection and Affordable Care Act of 2010, also known as Obamacare, provided for the expansion of Medicaid to cover all individuals earning incomes up to 138% of the federal poverty level, which amounted to $​20,121 for individuals and $41,400 for a family of four in 2023 in California. As of November 2023, total enrollment in Medi-Cal is over 14.9 million individuals with about 88% receiving health care through managed care plans and 12% receiving care through a fee-for-service delivery system. Fee-for-service means the state pays providers directly for the Medi-Cal services needed by the beneficiary.

Managed care organizations (MCO)

A managed care organization is an organization that offers health insurance coverage to consumers. Enrollees pay a fixed monthly fee for health care service providers that contract with the MCO. Kaiser Permanente, Anthem Blue Cross, Blue Shield of California, and L.A. Care Health Plan are examples of MCOs in California.

History of managed care organizations (MCO) tax

The first version of the managed care organizations (MCO) tax in California was enacted in 2005 as a fee on all premiums paid to MCOs providing coverage to Medi-Cal members. The second iteration was enacted in 2009 and was designed to expire in 2011 but was renewed in 2012. This version was a gross premium tax on the total operating revenue of Medi-Cal managed care plans. It expired in 2013. A new MCO tax was enacted in 2016 and expired in 2019 generating $1.5 billion annually. A similar version was enacted in 2019 and expired in 2022. The MCO tax set to expire in 2026 was enacted in 2023.

Gann Limit

The Gann Limit prohibits state government and local governments from spending revenue in excess of per-person government spending in fiscal year 1978-1979, with an adjustment for changes in the cost of living and population. The Gann Limit was adopted with the passage of Proposition 4 in 1979. However, Proposition 4 authorized voters to increase the limit on a temporary basis for no more than four years. The proposed initiative would increase the limit for four years beginning in 2025-2026.

Path to the ballot

See also: Laws governing the initiative process in California

The state process

In California, the number of signatures required for an initiated state statute is equal to 5 percent of the votes cast in the preceding gubernatorial election. Petitions are allowed to circulate for 180 days from the date the attorney general prepares the petition language. Signatures need to be certified at least 131 days before the general election. As the verification process can take multiple months, the secretary of state provides suggested deadlines for ballot initiatives.

The requirements to get initiated state statutes certified for the 2024 ballot:

• Signatures: 546,651 were required.
• Deadline: The deadline for signature verification was 131 days before the general election, which was around June 27, 2024. However, the process of verifying signatures can take multiple months and proponents are recommended to file signatures at least two months before the verification deadline.

Signatures are first filed with local election officials, who determine the total number of signatures submitted. If the total number is equal to at least 100 percent of the required signatures, then local election officials perform a random check of signatures submitted in their counties. If the random sample estimates that more than 110 percent of the required number of signatures are valid, the initiative is eligible for the ballot. If the random sample estimates that between 95 and 110 percent of the required number of signatures are valid, a full check of signatures is done to determine the total number of valid signatures. If less than 95 percent are estimated to be valid, the initiative does not make the ballot.

Details about this initiative

• The initiative was filed on September 7, 2023, by Christina Orr, Dustin Corcoran, and Jodi Hicks.
• The initiative was cleared for signature gathering on November 9, 2023.
• The secretary of state reported on January 12, 2023, that the initiative had collected 25% of signatures.
• According to the random sample count, 939,795 raw signatures were submitted for the initiative as of April 25, 2024.
• The initiative qualified for the ballot on June 4, 2024. The secretary of state reported at least 645,714 of the signatures submitted were valid.

Sponsors of the measure hired The Monaco Group, PCI Consultants and Inc. to collect signatures for the petition to qualify this measure for the ballot. A total of $7,431,244.35 was spent to collect the 546,651 valid signatures required to put this measure before voters, resulting in a total cost per required signature (CPRS) of $13.59.

How to cast a vote

See also: Voting in California

See below to learn more about current voter registration rules, identification requirements, and poll times in California.

How to vote in California

Poll times

All polls in California are open from 7:00 a.m. to 8:00 p.m. Pacific Time. An individual who is in line at the time polls close must be allowed to vote.

Registration

Check your voter registration status here.

To vote in California, an individual must be a U.S. citizen and California resident. A voter must be at least 18 years of age on Election Day. Pre-registration is available at 16 years of age. Pre-registered voters are automatically registered to vote when they turn 18.

Automatic registration

California automatically registers eligible individuals to vote when they complete a driver's license, identification (ID) card, or change of address transaction through the Department of Motor Vehicles. Learn more by visiting this website.

Online registration

See also: Online voter registration

California has implemented an online voter registration system. Residents can register to vote by visiting this website.

Same-day registration

California allows same-day voter registration.

Californians must be registered to vote at least 15 days before Election Day. If the registration deadline has passed for an upcoming election, voters may visit a location designated by their county elections official during the 14 days prior to, and including Election Day to conditionally register to vote and vote a provisional ballot, which are counted once county election officials have completed the voter registration verification process. The state refers to this process as Same Day Voter Registration.

Residency requirements

To register to vote in California, you must be a resident of the state. State law does not specify a length of time for which you must have been a resident to be eligible.

Verification of citizenship

See also: Laws permitting noncitizens to vote in the United States

California's constitution requires that voters be U.S. citizens. When registering to vote, proof of citizenship is not required. Individuals who become U.S. citizens less than 15 days before an election must bring proof of citizenship to their county elections office to register to vote in that election. An individual applying to register to vote must attest that they are a U.S. citizen under penalty of perjury.

As of November 2024, two jurisdictions in California had authorized noncitizen residents to vote for local board of education positions through local ballot measures. Only one of those jurisdictions, San Francisco, had implemented that law. Noncitizens voting for board of education positions must register to vote using a separate application from the state voter registration application.

All 49 states with voter registration systems require applicants to declare that they are U.S. citizens in order to register to vote in state and federal elections, under penalty of perjury or other punishment. Seven states — Alabama, Arizona, Georgia, Kansas, Louisiana, New Hampshire, and Wyoming — have laws requiring verification of citizenship at the time of voter registration, whether in effect or not. In three states — California, Maryland, and Vermont — at least one local jurisdiction allows noncitizens to vote in some local elections. Noncitizens registering to vote in those elections must complete a voter registration application provided by the local jurisdiction and are not eligible to register as state or federal voters.

Verifying your registration

The secretary of state's My Voter Status website allows residents to check their voter registration status online.

Voter ID requirements

California does not require voters to present identification before casting a ballot in most cases. However, some voters may be asked to show a form of identification when voting if they are voting for the first time after registering to vote by mail and did not provide a driver license number, California identification number, or the last four digits of their social security number. On September 29, 2024, Gov. Gavin Newsom (D) signed SB 1174 into law prohibiting any jurisdiction in the state from adopting a local law that requires voters to present ID before voting.

The following list of accepted ID was current as of October 2024. Click here for the California Secretary of State page to ensure you have the most current information.

“

Current and valid photo identification provided by a third party in the ordinary course of business that includes the name and photograph of the individual presenting it. Examples of photo identification include, but are not limited to, the following documents: driver's license or identification card of any state; passport; employee identification card; identification card provided by a commercial establishment; credit or debit card; military identification card; student identification card; health club identification card; insurance plan identification card; or public housing identification card. Any of the following documents, provided that the document includes the name and address of the individual presenting it, and is dated since the date of the last general election…: utility bill; bank statement; government check; government paycheck; document issued by a governmental agency; sample ballot or other official elections document issued by a governmental, agency dated for the election in which the individual is providing it as proof, of residency or identity; voter notification card issued by a governmental agency; public housing identification card issued by a governmental agency; lease or rental statement or agreement issued by a governmental agency; student identification card issued by a governmental agency; tuition statement or bill issued by a governmental agency; insurance plan card or drug discount card issued by a governmental agency; discharge certificates, pardons, or other official documents issued to the individual by a governmental agency in connection with the resolution of a criminal case, indictment, sentence, or other matter; public transportation authority senior citizen and disabled discount cards issued by a governmental agency; identification documents issued by governmental disability agencies; identification documents issued by government homeless shelters and other government temporary or transitional facilities; drug prescription issued by a government doctor or other governmental health care provider; (R) property tax statement issued by a governmental agency; vehicle registration issued by a governmental agency; or vehicle certificate of ownership issued by a governmental agency.

”

See also

2024 measures

• 2024 ballot measures
• Healthcare on the ballot
• 2024 petition deadlines

California

• California ballot measures
• California initiative laws

News and analysis

• Ballot measure lawsuits
• Ballot measure readability
• Ballot measure polls
• Ballot measure signature costs

External links

• Initiative and referendum status
• Full text