State shouldn’t be sitting on insurance funds

Gov. Gavin Newsom and the Legislature need to rethink what happens to money generated by fines on Californians who don’t buy health insurance. The fines have generated an estimated $1.3 billion so far, but none of it goes to the intended recipients — residents who need relief from the high costs of insurance and medical care.

Three years ago, Newsom and Democratic lawmakers successfully pushed for the reinstatement of a penalty on the uninsured at the state level after Republicans in Congress eliminated it at the federal level. Supporters of the state measure promised the money would help more low-income residents buy plans through the state’s insurance marketplace, Covered California.

That promise went unfulfilled. Some of the money has been designated to a special fund designated “for future use for health affordability programs,” but most of it is headed to the general fund, where lawmakers can use it for any purpose.

One reason there is a surplus is that the federal government helped people afford insurance, so government assistance was less needed. President Joe Biden and the Democratic-controlled Congress increased federal subsidies during the pandemic for Americans who buy plans through Obamacare exchanges like Covered California. The increases were later extended.

So why continue with state fines at all? According to Newsom administration officials, the money may be needed in the future if a Republican president or Republican Congress reduces or eliminates subsidies.

“The recent downturn in state tax revenue underscores the importance of setting those funds aside,” Newsom spokesman Alex Stack told California Healthline, an online news site.

Right enough. It is always important to have extra money in reserves to deal with economic downturns and other emergency needs. The case will be even more convincing if the state uses the money to help people now. The reality is that the federal subsidies do not reach every Californian who is struggling to pay for health insurance.

Next year, the average increase in premiums for Covered California plans will be 5.6%, and medical deductibles — already nearly $4,000 annually for a mid-level plan — will also rise. As state Sen. As Richard Pan points out, it’s no use enabling people to buy insurance if they can’t hope to cover the cost of the deductible. “People still can’t afford to go to the doctor,” the Sacramento Democrat said.

In the first year after the state fine went into effect, about 337,000 Californians were forced to pay. About two-thirds of them had incomes at or below 400% of the federal poverty level — $49,960 for a single person and $85,320 for a family of three.

Pan sponsored a bill last year that would have required the state to use the penalty funds to help lower deductions for those people, but Newsom vetoed it. Pan, a pediatrician who also led the effort to impose a state fine three years ago, is leaving office because of term limits.

Someone else needs to set up their account again. It’s time to revive discussions about what constitutes affordable health care today. California has already made tremendous progress toward achieving universal health care, and spending at least some of that $1.3 billion on reduced premiums or deductibles would advance that progress.

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