California stores fines from uninsured residents rather than reducing costs of care

SACRAMENTO, CALIFORNIA — Nearly three years after California began fining residents without health insurance, the state has not distributed any of the revenue it collected, KHN learned — money that was meant to help Californians struggling to pay for coverage.

Until now, The majority of Californians pay the tax penalty Lacking insurance, low- and middle-income earners are, according to state tax officials — just the people the money was meant to help.

“It’s troubling,” said Diana Douglas, a lobbyist for Health Access California, who has advocated for the mandate. “The whole idea was if we were going to collect money from people who couldn’t afford coverage, to use that revenue to help people afford it and actually get care. It’s not fair to people who can’t afford it.”

State finance officials have estimated that revenue collected via the fine in its first three years, from 2020 to 2022, will reach $1.3 billion. Gov. Gavin Newsom says the state should keep the money in case Californians need help paying for health insurance in the future.

Newsom and Democratic Lawmakers State health insurance requirement adopted in 2019nearly two years later The Republican-controlled Congress overturned the federal penalty Because there is no health insurance established under the Affordable Care Act. Then President Donald Trump pushed to repeal it, arguing that the Obamacare clause was “Very unfair.

Newsom argued, however, that the so-called Individual authorization It will help California achieve universal coverage by requiring everyone to have health insurance, the monetary penalty, he said you will use To help residents purchase plans via Covered California, the state’s Affordable Care Act insurance marketplace.

The proceeds from the fines were supposed to help fund state subsidies for low- and middle-income Californians who buy coverage through Covered California that Newsom and state lawmakers approved that same year. The government subsidies will supplement existing federal financial assistance provided under Obamacare.

But COVID-19 changed the equation.

To prevent people from losing insurance during the pandemic, the Biden administration and the Democratic-controlled Congress Increase federal subsidies For Americans who buy health insurance through Obamacare exchanges – and any Recently extended Under the Federal Inflation Reduction Act.

The Newsom administration has argued for additional federal aid It was enough to help the population Coverage afforded, and California stopped state subsidies in May 2021. It’s been around for less than two years and was funded with about $328 million in startup money from the state’s general fund.

But the state persisted in imposing the tax penalty, and Newsom’s administration is hoarding some cash in light of the fiscal projections California faces Uncertain economic outlookPalmer, a spokesperson for the state Department of Finance. tax revenue this year It is billions short of expectationsAnd the penalty money could be needed, he said, when the additional federal financial aid expires at the end of 2025 — if it is not extended in the meantime — or if Republicans take control of Congress or the White House and then repeal the enhanced subsidy.

“The recent decline in government tax revenue highlights the importance of putting that money aside,” Newsom spokesman Alex Stack said.

In 2021, Newsom and state lawmakers transferred $333.4 million in fines money in a special box For the future use of Covered California’s health affordability programs, Palmer said, though this was a one-time move and the money won’t be spent anytime soon.

California Among several countries That adopted health insurance requirements after the federal destruction of the penalty. California bases its penalty on uninsured residents when they file annual state income taxes.

For the 2020 tax year, it was the first year the mandate took place in California It raised about $403 million of uninsured persons, with an average penalty per capita of up to $1,196, according to the state Franchise Tax Board.

Approximately 337,000 Californians penalized That year, there was an income of about 225,400 At or less than 400% of the Federal Poverty Level, or $49,960 for a single person and $85,320 for a family of three. Some low-income people Exempt of punishment.

Newsom’s management has projected that revenue from the tax penalty will increase in both 2021 and 2022, including to $435 million this year.

Because tax collections take time to process, the exact total that has been filed so far is not clear. But the administration estimates that the state will raise about $1.3 billion during the first three years of the mandate. Most of this money will be deposited in the state’s general fund and can be used for whatever the governor and lawmakers choose to spend it on. Palmer emphasized that there was no requirement that any penalty money be spent on health care or financial assistance.

Meanwhile, premiums are rising for many consumers who buy coverage through Covered California, an average increase of 5.6% for 2023, according to James Scolari, a market spokesperson.

Withholdings and other out-of-pocket costs are, too Climbing for some peopleAnd consumer advocates fear that without greater financial assistance, more Californians will opt out of purchase coverage — or forgo care altogether.

For example, an individual’s mid-tier California covered insurance plan would have a $4,750 for the medical deductible and an annual maximum of $8,750 out of pocket in 2023 – Up from $3,700 and $8,200respectively, this year.

“We already had concerns about reintroducing the penalty for the uninsured because it hurts the poor more, and now we see low-income people making difficult choices about paying for healthcare or other basic necessities like gas, food and rent,” said Linda Ngoi, a lobbyist at Western Center for Law and Poverty “Let’s spend the money we raise to help make it affordable or rescind the mandate if we don’t spend it.”

Some Democratic lawmakers, with the support of Heath Access and a broad coalition of health advocates, Insurance companiesand small businesses, Newsom pays to Use of proceeds from fines To help the uninsured and low-income people in California. They argue that even with additional federal aid, people still need help to lower their out-of-pocket costs.

“Small businesses and their employees are struggling to afford health care,” said Bianca Bloomquist, California policy director for the Small Business Majority Lobby. “When the individual mandate was created, the concept was that although the money goes into the general fund, it will be spent on affordability assistance in Covered California. That’s a great reason we support it.”

a bill this year By Sen. Richard Bunn (D-Sacramento), which is Leaving office due to term limits, sought to transfer state penalty money to Covered California to reduce out-of-pocket costs for some consumers, including eliminating their discounts. But Newsom veto the billarguing that funds may be needed in coming years to restore government support.

The defenders pledged to continue paying next year.

“Having insurance doesn’t mean anything if you can’t afford it, and that’s a huge handicap for people with chronic illnesses who have exorbitant healthcare costs,” Ban said. “People still can’t go to the doctor.”

Republicans have joined Democratic lawmakers in expressing frustration. Former state senator Jeff Stone, who was a staunch opponent of state mandate and has since moved to Nevada, criticized the punishment as “the opposite of Robin Hood” — taking from the poor and giving to the rich.

“The poor are made to pay this penalty,” he said, “and it is put into the general fund for any purpose.” “If the state isn’t spending it like the governor said, give it back to the taxpayers.”

This story was produced by KHNthat publish California HealthlineIt is an editorially independent service California Health Care Corporation.

KHN Kaiser Health News is a national newsroom that produces in-depth journalism on health issues. Along with policy analysis and reconnaissance, KHN is one of the three major drivers in the KFF (Caesar Family Foundation). KFF is a non-profit organization that provides information on health issues to the nation.

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