Govt. Gavin Newsom and the Legislature need to reexamine what’s happening to money generated through penalties on Californians who don’t buy health insurance. The penalties have produced an estimated $1.3 billion so far, but none of it is going to its intended recipients — residents who need relief from the high cost of insurance and medical care.
Three years ago, Newsom and Democratic lawmakers successfully pushed for reinstatement of a penalty on the uninsured at the state level after Republicans in Congress had eliminated it at the federal level. Backers of the state measure promised that the money would help more low-income residents buy plans through the state’s insurance marketplace, Covered California.
That promise has gone unrealized. Some of the money has been routed to a special fund designated “for future use for health affordability programs,” but most of it is headed to the general fund, where lawmakers can use it for any purpose.
One reason there’s a surplus is that the federal government has been helping people afford insurance, so state assistance has been less necessary. President Joe Biden and the Democratic-controlled Congress increased federal subsidies during the pandemic for Americans who buy plans through Obamacare exchanges like Covered California. The increases were later extended.
So why continue with state penalties at all? According to officials with the Newsom administration, the money might be needed in the future if a Republican president or Republican-Congress reduces or eliminates subsidies.
“The recent downturn in state tax revenues highlights the importance of having those funds set aside,” Newsom spokesperson Alex Stack told California Healthline, an online news site.
Fair enough. It’s always important to have extra money in reserves to deal with economic downturns and other emergency needs. The case would be even more compelling if the state were using the money to help people now. The reality is that the federal subsidies do not reach every Californian who struggles to pay for health insurance.
Next year, the average increase in premiums for Covered California plans will be 5.6%, and medical deductibles — already close to $4,000 annually for a mid-tier plan — are going up as well. As state Sen. Richard Pan points out, it isn’t helpful to enable people to buy insurance if they can’t hope to cover the cost of the deductible. “People still can’t afford to go to the doctor,” the Sacramento Democrat said.
In the first year after the state penalty went into effect, roughly 337,000 Californians were forced to pay. About two-thirds of them had incomes at or below 400% of the federal poverty level — $49,960 for a single person and $85,320 for a family of three.
Last year, Pan sponsored a bill that would have required the state to use the penalty funds to help lower deductibles for those people, but Newsom vetoed it. Pan, a pediatrician who also led the effort to institute a state penalty three years ago, is leaving office because of term limits.
Someone else should reintroduce his bill. It’s time to revive discussions about what constitutes affordable health care today. California has made tremendous strides toward achieving universal health care already, and spending at least some of that $1.3 billion on reduced premiums or deductibles would further that progress.
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