California stockpiles penalties from uninsured residents instead of lowering care costs

Angela Hart

Sacramento, California — Nearly three years after California started fines for residents who don’t have health insurance, it turns out the state isn’t sharing any of the revenue it collects. .

and so far, Majority of Californians Pay Taxes According to state tax officials, it was the low- and middle-income earners who were not insured, and the money was meant to help them.

Health Access California lobbyist Diana Douglas, who supported the mandate, said: “The whole idea was to raise money from people who couldn’t afford insurance and use that income to help people get insurance and actually get care.” It’s not fair to those who don’t.”

State Treasury officials estimate that revenue collected from fines will total about $1.3 billion in the first three years from 2020 to 2022. Governor Gavin Newsom has argued that the state should keep that money in case Californians need help paying for health insurance in the future.

Newsom and Democrats Adopting state health insurance requirements in 2019almost two years later Republican-controlled Congress abolished federal penalties This is because they do not have health insurance enacted based on the Law for the Adjustment of Medical Expenses. Then-President Donald Trump said that Obamacare’s provisions were “Very unfair.”

But Newsom said that the so-called personal mandate Mandating health insurance for everyone would help California achieve universal coverage, Penalty said. used Allow residents to purchase plans through Covered California, the state Affordable Care Act insurance marketplace.

The penalty income would have helped fund state-based subsidies approved by Newsom and the state legislature that same year for low- and middle-income Californians who purchase insurance through Covered California. State grants supplement existing federal funding provided under Obamacare.

But covid-19 has changed the equation.

Biden administration and Democrat-controlled Congress to prevent people from losing insurance during pandemic Increased Federal Subsidies For Americans Purchasing Health Insurance Through The Obamacare Exchange recently extended under the Federal Inflation Reduction Act.

Newsom Administration Claimed Additional Federal Support enough to help the inhabitants California stopped providing state subsidies in May 2021. These grants were less than two years old and were funded by about $328 million in start-up funding from the state’s General Fund.

But the state continues to tax, and the Newsom administration is stockpiling some of the funds in light of fiscal projections that show California facing a crisis. uncertain economic outlooksaid H.D. Palmer, a spokesperson for the State Department of Treasury.tax revenue this year billions of dollars below forecasthe said, and fines could be necessary when additional federal financial aid expires at the end of 2025, or if Republicans take control of Congress or the White House and scrap the enhanced subsidies. be.

“The recent drop in state tax revenues highlights the importance of setting aside these funds,” said Alex Stack, a spokesman for Newsom.

In 2021, Newsom and state legislators sent $333.4 million in break-even fees. special fund Palmer said it was a one-time move “for the future use of the Health Care Coverage Program” in Covered California and won’t be used anytime soon.

California in some states Adopted health insurance requirements after federal penalties were abolished. California imposes its fines on uninsured residents when filing their annual state income taxes.

For the 2020 tax year, the first year in which the mandate was implemented, California Raised about $403 million The average penalty per person is $1,196, according to the state’s Franchise Tax Commission.

roughly 337,000 Californians punished About 225,400 people were earning income that year 400% or less of federal poverty level, or $49,960 for one person and $85,320 for a family of three.some lowest income earners exempted from penalties.

The Newsom administration expects revenue from tax penalties to increase in both 2021 and 2022, to $435 million this year.

Collecting taxes takes time to process, so the exact total amount collected so far is unknown. But the administration estimates the state will raise about $1.3 billion in his first three years of mandate. Most of that money goes to the state’s General Fund, where it can be used for whatever the governor and lawmakers choose to spend it on. did.

Meanwhile, premiums for many consumers who purchase insurance through Covered California are rising, averaging 5.6% in 2023, according to market spokesperson James Scullary.

Deductibles and other out-of-pocket costs go up for some peopleand consumer advocates fear that without more financial support, more Californians will opt out of buying coverage or abandon care altogether.

For example, a mid-tier covered California insurance plan for individuals includes: $4,750 medical deduction And up to $8,750 annual out-of-pocket in 2023 — Up from $3,700 and $8,200respectively, this year.

“There was already concern about the reinstatement of penalties for the uninsured, as it hits the poor hardest, but now low-income people have access to health care and basic necessities such as gas, food and rent. We see people making difficult choices about payments, says Linda Gui, lobbyist for the Western Center on Law and Poverty: “We can use the money we are raising to make more money. Make it affordable or eliminate delegation if you don’t use it.”

Some Democratic lawmakers, backed by Heath Access and a broad coalition of health advocates, Insurance companyand small businesses are promoting Newsom to: use a penalty To help low-income Californians who have no insurance. They argue that even with additional federal assistance, people still need help lowering their out-of-pocket costs.

“Small businesses and their employees are struggling to pay for health care,” said Bianca Blomquist, California Policy Director for the Small Business Majority Lobby. “When personal obligations were established, there was an understanding that the money would go to the General Fund but would be spent on affordable assistance in Covered California. .”

a bill of the year State Senator Richard Pan (D-Sacramento) Resignation due to term limit, tried to reduce out-of-pocket costs for some consumers by funneling state penalties into targeted California. This includes the elimination of deductibles.But Newsom rejected the billargues that money may be needed in the future to revive state-based subsidies.

Advocates vow to continue the push next year.

“If you can’t afford the deductible, there’s no point in having insurance. This is a huge barrier for people with chronic conditions where medical costs are very high,” Pang said. I can’t afford to go to the doctor.”

Republican lawmakers joined Democrats in expressing their dissatisfaction. Former state senator Jeff Stone, who was adamantly opposed to the state order and has since moved to Nevada, denounced the punishment as a “reverse Robin Hood.”

“The poor are forced to pay that fine, and it goes into the General Fund for whatever purpose,” he said. Please return it to the taxpayer.”

This story was produced by KHNto issue california health linean editorially independent service of California Health Care Foundation.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. KHN is one of his three major operational programs in the United States, along with policy analysis and polling KFFMore (Kaiser Family Foundation). KFF is a donated non-profit organization that provides information on health issues to the public.