Editorial Stop hoarding state health insurance fines

Financial incentives — or disincentives — clearly can be a practical tool in the exercise of public policy.

Hiking the tobacco tax ipso facto lowers smoking rates, for instance. Getting a tax break for installing solar panels on your roof effectively encourages buying solar panels.

But still there was always something odd about the proviso out of Sacramento that three years ago began fining Californians who don’t have health insurance.

Because health insurance is expensive, in the short run, obviously those who choose not to get it when they would certainly prefer to have it do so because they can’t afford the premiums.

So hitting these very same low-income people with a government fine for not having insurance is a clear case of kicking them in the gut when they are already down.

Yet that’s what the state of California does to incentivize people to pay for health insurance rather than paying a fine and still having no insurance.

But as long as those who still won’t buy insurance are going to have to pay the piper, you at least would hope that the monies they contribute to the state’s coffers would go to some good cause.

Instead, a new investigation by nonprofit Kaiser Health News has uncovered, after three years, “the state has not distributed any of the revenue it has collected, KHN has learned — money that was intended to help Californians struggling to pay for coverage.”

And, the journalists report, as expected, “so far, the majority of Californians paying the tax penalty for not having insurance are low- and middle-income earners, according to state tax officials — just the people the money was intended to help.”

“It’s concerning,” says Diana Douglas, a lobbyist with Health Access California, which advocated for the mandate. “The whole idea was if we’re going to collect money from people who can’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.”

True, that.

We’re not talking about small amounts of money here, either. State officials have estimated that in the 2020-2022 opening period, about $1.3 billion in fines would have been collected.

But Gov. Gavin Newsom argues that rather than spending the money in the here and now, the state should hold onto it in case Californians need help paying for health insurance in the future.

“The recent downturn in state tax revenues highlights the importance of having those funds set aside,” Newsom spokesperson Alex Stack said.

Governor, Californians in need are in need right now — with inflation skyrocketing, with health insurance costs estimated to go up 5.6% this year.

It’s somehow especially galling to hold back the monies simply because an executive branch and a Legislature with a penchant for big spending is suddenly having to tighten its belt because their reliance on income tax from tech millionaires and billionaires is likely to drop given the possibility of recession and the huge hits that have been delivered to Silicon Valley stock prices, along with the layoffs across that entire sector here and in the Bay Area.

“A bill this year by state Sen. Richard Pan, D-Sacramento, who is leaving office because of term limits, sought to funnel state penalty money into Covered California to reduce out-of-pocket costs for some consumers, including scrapping their deductibles. But Newsom vetoed the bill, arguing that the money could be needed in future years to reinstate the state-based subsidies,” KHN reports.

“Having insurance doesn’t mean anything if you can’t afford the deductible, and that’s a huge barrier for people with chronic diseases who have very high health care costs,” Pan said. “People still can’t afford to go to the doctor.”

With Pan soon gone, another legislator should immediately take up the cause during the next session. There is simply no reason to see these medically based fines going into the state’s general fund when Californians need help with medical insurance costs right now.

Sacramento should either make proper use of the fine or get rid of it entirely.