The state approved money to lower the cost of Covered California insurance. Now pressure is mounting to make sure it happens
The adage “get it in writing” applies to politics as much as anything else, and it would seem the California Legislature could learn a lesson or two.
Legislators and advocates have been pushing Gov. Gavin Newsom since last year to make good on a longtime promise to funnel money from a controversial tax penalty into the Covered California marketplace, making health insurance cheaper for nearly 1 million enrollees. The problem — or at least the argument Newsom has always made — is that state statute doesn’t require the penalty money to be used on health care. It goes directly into the general fund — where it has stayed for most of the past four years.
But legislators say that’s not what they intended when they voted on the measure in 2019. Senate leadership signaled its intent last week to ensure in writing that the money will “further lower the costs of health coverage for lower- and middle-income Californians” moving forward. The Senate budget proposal rejects Newsom’s plan to temporarily move $333.4 million in penalty money from an affordability reserve to the general fund, calling it a “rip-off” of Covered California funds.
“Our plan protects important advancements that California has made that has moved us towards a more equitable and sustainable economy,” Senate Budget Chairperson Nancy Skinner said during a press briefing last week.
In 2019, Newsom proposed and the Legislature passed a polarizing tax penalty on Californians without health insurance, known as the individual mandate, with verbal assurances that it would be used to lower health care costs for those who have insurance through Covered California, the state version of the Affordable Care Act marketplace. Though more than $1 billion has been collected in the past four years, the money has only been used once to lower costs for enrollees, about $355 million in 2020.
The Senate Democrats’ budget proposal, which relies on corporate tax hikes that Newsom swiftly rejected to avoid a variety of cuts, sets the stage for an intense period of negotiation between the Legislature and governor as they hash out a state spending plan in the face of diminishing tax revenue. The Senate’s counter proposal would mandate using the money to eliminate deductibles and copays for roughly 900,000 Covered California enrollees next year. It’s one of several health care funding battles heating up amid a bleak budget year, including a fight to infuse emergency cash into hospitals on the brink of closure.
Newsom is expected to disclose later this month an even more dismal financial picture for the state than the $22.5 billion deficit he projected in his January budget proposal.
In a statement, Brandon Richards, a spokesperson for Newsom, said the governor will “continue to work with the California Legislature to develop the final budget package” in the coming months.
This is just one step in a long budget negotiation that will stretch to June. If the Senate’s counter proposal makes it into the state’s final budget come summer, leadership intends to end the diversion of penalty money permanently. Notably, Democratic leaders from the Assembly have not endorsed the Senate’s spending plan nor put forth their own proposal, but John Casey, communications director for Assembly Speaker Anthony Rendon, said both houses are interested in the issue.
“We’ll see what the May revision includes and the two houses will advance their priorities as best they can in negotiations afterward,” Casey said.
“A bitter pill”
In recent committee hearings, Assembly and Senate legislators have lambasted this particular proposal in Newsom’s budget.
“I’m trying to make sure that those dollars stay in this area to address affordability, and I’m not hearing from the administration that same commitment,” said Assemblymember Joaquin Arambula, a Fresno Democrat and chairperson of the Assembly budget subcommittee on health.
Sen. Caroline Menjivar, a newly elected Democrat from Van Nuys and chairperson of the Senate budget subcommittee on health, criticized the governor’s plan for saving money “on the backs of our low-income communities.”
On his first day in office, Newsom proposed reinstating a tax on people without health insurance to fund increased subsidies for people who have Covered California insurance. A previous federal version of the tax had been repealed by the Trump administration the year prior, which contributed to a 24% drop in enrollment in Covered California plans.
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