A tax penalty intended to assist Californians without health insurance, known as the individual mandate, will be enacted four years after Gov. Gavin Newsom (D-CA) approved the measure in 2019.
Those who have insurance through Covered California may experience lower healthcare costs, which will include striking some patients’ hospital deductibles up to $5,400. Insurees could see their copay for primary care visits drop and cost decreases for generic drugs. Out-of-pocket spending will be maxed at $6,100, a decrease from the previous $7,500 cap.
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Under Newsom’s administration, California collected hundreds of millions of dollars a year in tax penalties from uninsured residents after adopting a health insurance requirement in 2019, which was originally required by the federal Affordable Care Act, but the Republican-led Congress eliminated the measure in 2017.
In exchange for mandating this tax penalty, the state agreed to use the funds collected for subsidies for low- and middle-income Californians who are covered through Covered California. However, the money has not been used to lower costs, and instead the $333.4 million sits in the general fund.
Earlier this year, Senate Democrats pressed Newsom to deliver on his Covered California promise, with members proposing to use the funds to strike deductibles and copays for around 900,000 Covered California enrollees next year in their April budget.
The new fiscal year began on July 1, and state leaders reached a budget agreement at the end of June. The budget includes a commitment of $82.5 million to lower health insurance costs over the next year and $165 million annually in subsequent years.
In June, Newsom agreed to spend some of the funds on subsidies. The Covered California board members approved the new plan last week to lower healthcare costs starting next year.
“The new state budget highlights California’s continued leadership to lower costs for consumers and increase access to health care. We are excited to be able to provide additional financial help to Covered California consumers in 2024 and beyond,” Covered California Executive Director Jessica Altman said in a statement.
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On Tuesday, Covered California announced health insurance premiums will increase by an average of 9.6% next year. However, many insurees won’t be affected by the rates because taxpayer dollars will assist with some coverage. Hospital deductibles will be eliminated for more than 600,000 consumers who use the Silver plan.
“Despite this year’s increases, because of the extension of enhanced federal subsidies through the Inflation Reduction Act and new financial support from the state, Californians will have more help paying for their plan than ever,” Altman said.