health care State stockpiles penalties from uninsured residents
And 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,” said
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 the revenue collected via the penalty in its first three years, from 2020 through 2022, will total about
Newsom and Democratic lawmakers adopted the state health insurance requirement in 2019, nearly two years after the Republican-controlled
Newsom argued, however, that a so-called “individual mandate” would help
The penalty revenue was supposed to help fund state-based subsidies for low- and middle-income Californians who purchase coverage through Covered California that Newsom and state lawmakers approved the same year. The state subsidies would supplement the existing federal financial assistance offered under Obamacare.
But COVID-19 changed the equation.
To prevent people from losing insurance during the pandemic, the Biden administration and the Democratic-controlled
The Newsom administration argued the additional federal assistance was enough to help residents afford coverage, and
But the state continued levying the tax penalty, and the Newsom administration is stockpiling some of the money given fiscal projections that show
“The recent downturn in state tax revenues highlights the importance of having those funds set aside,” Newsom spokesperson
In 2021, Newsom and state legislators transferred
For the 2020 tax year, the first year the mandate was in place,
Of the roughly 337,000 Californians penalized that year, about 225,400 had incomes at or below 400% of the federal poverty level, or
The Newsom administration projected that the revenue from the tax penalty would increase in both 2021 and 2022, including to
Because tax collections take time to process, the exact total raised to date is unclear. But the administration estimates the state will collect about
Meanwhile, premiums are rising for many consumers purchasing coverage through Covered California, with an average increase of 5.6% for 2023, according to
Deductibles and other out-of-pocket costs are also going up for some people, and consumer advocates fear that without greater financial assistance, more Californians will opt out of purchasing coverage — or forgo care altogether.
For instance, a mid-tier Covered California insurance plan for an individual will have a
“We already had concerns about reinstating the penalty on the uninsured because it hits poor people the hardest, and now we’re seeing lower-income people making tough choices about paying for health care or other basic necessities like gas, food, and rent,” said
Some Democratic lawmakers, backed by Heath Access and a broad coalition of health advocates, insurers, and small businesses, are pushing Newsom to use the penalty revenue to help uninsured and low-income Californians. They argue that even with the additional federal assistance, people still need help to lower their out-of-pocket costs.
“Small businesses and their employees are struggling to afford health care,” said
A bill this year by state Sen.
Advocates vow to continue pushing next year.
“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.”
“Impoverished people are being forced to pay that penalty, and it’s being put right into the general fund for any purpose,” he said. “If the state isn’t spending it like the governor said it would, return it to taxpayers.”
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