Few Californians Pay The Health Insurance Penalty — Those Who Do Are Usually Poor

Internal Revenue Service data paints an unsettling picture of the uninsured in California, revealing that three out of four people who paid the tax penalty earned less than $50,000.

A Sacramento Bee analysis of tax data showed that in 2016 more than 598,000 people paid a penalty to the federal government. The implications could be significant because political leaders are eyeing a new state-level penalty to replace the federal health coverage mandate.

Some studies suggest that without a penalty to compel people to buy coverage, the state-run insurance market could begin to sputter and thousands of consumers could opt out.

The data suggest, however, that to help the poor and uninsured lawmakers will be penalizing low- and middle-income earners. For the analysis, The Bee focused on ZIP codes with 1,000 or more income tax filers who paid the so-called "health care responsibility payment" in 2016.

Many were concentrated in the metro areas of Southern California.

Policy experts and consumer advocates say the data in some ways overstate the number of people paying the penalty, since everyone eligible for Medicaid is exempt. In California for the year 2015, that would include individuals making $16,243 or less or a family of four living on less than $33,465 a year.

[A tax penalty could help shore up Obamacare in California. Gavin Newsom wants to try it.]

"Low-income people are exempt from an individual mandate but we do know from this data that substantial numbers of people paid it anyway. The basic reason is the IRS instructions were not clear," said Jason Levitis, who authored a report on state-created tax penalties for the USC-Brookings Schaeffer Initiative for Health Policy.

By counting those with incomes below $50,000, the results also include people who are eligible for subsidies but are not purchasing insurance. Experts say affordability may still be an issue in the state where three out 10 residents surveyed in 2017 cited cost as the reason for not purchasing health insurance, according to the California Health Interview Survey.

That does not mean the state should not levy its own tax penalty, said Anthony Wright, executive director of insurance advocacy group Health Access California.

"Our issue is if there are people paying the penalty, especially at these income levels, the problem isn't the penalty," Wright said. "The problem is that we are not making coverage affordable enough where we need to have additional subsidies especially in our high-cost-of-living state."

___

(c)2019 The Sacramento Bee (Sacramento, Calif.)

Visit The Sacramento Bee (Sacramento, Calif.) at www.sacbee.com

Distributed by Tribune Content Agency, LLC.