Gov. Kim Reynolds has signed a bill into law that raises the tax on HMO health insurance plans, going back to Jan. 1, 2026. The tax paid by some insurance companies is going from less than 1% to 3.5% through September of this year.
Reynolds said Iowa is facing growing Medicaid budget deficits. She said she looked at several options to help cover the gap, including her failed proposal to raise the tobacco tax.
“This, right now, looks like probably the most feasible way that we can do that without starting to hurt, maybe, some of the individuals that are receiving the services, because that would mean taking some of them away,” Reynolds said.
Democrats opposed the tax increase, saying it will cause Iowans’ health insurance premiums to increase when people are already struggling to afford health care. Reynolds said the new law is a temporary tax hike, and insurance companies don’t have to pass the cost on to Iowans.