Some Iowa health insurance plans will see a tax hike under a bill headed to Gov. Kim Reynolds to be signed into law.

House File 2739 raises taxes on health insurance providers known as health maintenance organizations, or HMOs, to bring in millions of dollars to fill a shortfall in the state’s Medicaid budget.

That group includes companies that offer some of the state’s largest private insurance plans, like Wellmark, Sanford, Wellpoint and Aetna.

Fourteen Republicans across both chambers broke from their party to join Democrats and oppose the proposal, which put the GOP majority in the rare position of being at odds with business groups lobbying against tax hikes. But Republicans in each chamber had enough votes to pass the measure.

How much will health insurance taxes increase?

The taxes will increase from the current rate of 0.925% up to 3.5% between Jan. 1 and Sept. 30, 2026. Beginning Oct. 1, 2026, the tax would drop to 0.95%.

The tax increase would allow the state to access federal matching funds and is expected to bring in $123 million to shore up Iowa’s growing Medicaid budget deficit, which is expected to climb to $167.6 million in fiscal year 2027.

The bill also appropriates $89 million to cover the state’s current-year Medicaid budget deficit of $90.6 million.

Democrats warned Iowans will face higher insurance costs as a result of the bill.

Scott Sundstrom, a lobbyist for Wellmark, said at a March 18 public hearing that Wellmark estimates that its customers who are covered by the company’s plan will see a $115 tax increase per person. The company expects to pay $24.2 million more in taxes this year because of the increase.

Why are Iowa Republicans raising taxes?

Republicans have pointed to insurance companies’ profit margins and said health insurers — who have been highly critical of the bill — do not need to raise premiums to cover the cost of the tax increase.

GOP legislative leaders have said there’s a limited window to bring in matching federal funds because of Republicans’ sprawling tax and spending package dubbed the “One Big, Beautiful Bill.”

“This bill will bring investments that benefit our neighbors on Medicaid and those providing the services to them,” said Sen. Mark Costello, R-Imogene.

More: Iowa House OKs tax hike on private health insurance to fund Medicaid

Here’s how every Iowa lawmaker voted.

How every Iowa House lawmaker voted on health care tax increase

The Iowa House voted 53-40 to pass the measure on March 19.

Ten Republicans joined every Democrat in voting against the bill: Reps. David Blom, R-Marshalltown; Mark Cisneros, R-Muscatine; Bill Gustoff, R-Des Moines; Thomas Jeneary, R-Le Mars; Judd Lawler, R-Oxford; Norlin Mommsen, R-De Witt; Jennifer Smith, R-Dubuque; Ray Sorensen, R-Greenfield; Ryan Weldon, R-Ankeny; and David Young, R-Van Meter.