Capitol Alert

Plan to prop up Obamacare emerges as key budget debate for California Democrats

As the Democrats who run California government hash out the final details of the state budget, some lawmakers and advocates are raising doubts about Gov. Gavin Newsom’s plan to shore up Obamacare with a tax penalty on people who don’t buy insurance.

Newsom’s office argues fining people without insurance, a plan known as the individual mandate, will stabilize the state’s health insurance market and generate money to subsidize insurance for middle-income people. But others say the money it will generate isn’t enough to make health insurance truly affordable, as the governor’s office is planning.

“That’s one of the big debates in the budget this year,” said Anthony Wright of Health Access California.

The individual mandate would have affordability exemptions for people who are in the lowest income brackets, but “for some, it’s just not enough, especially in our high cost of living state,” he said.

Newsom proposed reinstating the individual mandate, a key part of the federal health care law that Republicans controlling the federal government have rolled back, to pressure healthy people to buy coverage. Insurance markets rely on those healthy people paying into the system to offset losses from others who require expensive care.

Uncovered California: What's Next for Millions of Uninsured

Republicans who voted to roll back the mandate in 2017 argued it was unfair to penalize people who chose not to buy insurance. But without a mandate, Newsom says insurance prices will go up for everyone.

“Without a mandate, you will see an increase in your premiums,” Newsom said during a news conference about his budget plan last month. “I’d like to avoid that.”

Researchers at UC Berkeley and UCLA predict that by 2020 as many as 450,000 more Californians will be uninsured than if the individual mandate were left in place.

There’s general agreement about reinstating the individual mandate both the Senate and Assembly have endorsed plans to do so - but there’s not agreement about whether it needs to also include additional money to make health insurance more affordable.

The Assembly signed on to the governor’s proposal, but the Senate’s budget plan calls for an additional $300 million to subsidize premiums.

Revenue from the mandate would help subsidize insurance for about 840,000 people and result in about 178,000 more people being insured, according to testimony from the governor’s office to a budget subcommittee last month.

The premium assistance will vary based on where they live, how many people are in their household and their income. Generally, though, the governor’s office says people below 400 percent of the federal poverty level will receive $10 per month on top of federal subsidies they already qualify for.

After that, subsidies will be aimed at preventing health care costs from eating up too much of a family’s income. People at about 400 percent of the poverty level could be expected to pay nearly 10 percent of their income on health care. People at 600 percent - about $150,000 for a family of four - could be expected to spend a quarter of their income.

When the governor’s office presented its plan to the Senate budget subcommittee on health, Sen. Richard Pan said it didn’t go far enough.

“It’s not sufficient, the level of subsidy. We should consider more,” the Sacramento Democrat said. “We still talking about a substantial portion of someone’s income.”

The nonpartisan Legislative Analyst’s Office has also suggested that the individual mandate alone might not be the best way to fund the subsidies the Newsom administration wants. The analyst cautioned that if the mandates succeeds in getting more Californians signed up for insurance, fewer people will pay it and it will generate less money.

Since Newsom first announced the plan in January, the expected revenue from the penalty has decreased. Then, the administration predicted fining people who don’t buy insurance would bring in $1.5 billion over three years, based on how much the penalty generated when it was in place at the federal level.

Newsom’s team now estimates the penalty will generate just $1 billion because California has a higher tax filing threshold than the federal government, meaning fewer people must file state taxes and therefore pay the penalty.

New taxes require approval by two-thirds of lawmakers and are a heavy lift in the Legislature, where moderate Democrats may fear repercussions for voting to tax constituents. But Newsom’s office says reimposing fines rolled back at the federal level requires only majority approval.

Lawmakers must craft a budget deal by early next week to meet a June 15 deadline.

This project results from an innovative reporting venture – the USC Center for Health Journalism News Collaborative – which involves print and broadcast outlets across California, all reporting together on the state’s uninsured. Outlets include newspapers from McClatchy, Gannett Co., Southern California News Group, and La Opinion, as well as broadcasters at Univision and Capital Public Radio.
Sophia Bollag covers California politics and government. Before joining The Bee, she reported in Sacramento for the Associated Press and the Los Angeles Times. She grew up in California and is a graduate of Northwestern University.
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