By Samantha
Young and Ana B. Ibarra
JUNE 4, 2019
Claire
Haas and her husband are at a health insurance crossroads.
If they
were single, each would qualify for a federal tax credit to help reduce the
cost of their health insurance premiums. As a married couple, they get zip.
“We
talk about getting divorced every time we get our health care bills,” said
Haas, 34, of Oakland, Calif. She has been married to her husband, Andrew
Snyder, 33, for two years.
“We
kind of feel like we messed up. We shouldn’t have gotten married.”
The
couple pays about $900 in monthly premiums — which adds up to about 14% of
their annual income, said Haas, a self-employed leadership coach and
consultant. Snyder is an adjunct professor of ethnomusicology.
Under
a proposal by Gov.
Gavin Newsom, an estimated 850,000 Californians could get help paying their
premiums, including people like Haas and Snyder, who together make too much to
qualify for federal financial aid but still have trouble affording coverage.
To pay
for the health insurance tax credits, the Democratic governor is proposing a
tax penalty on Californians who don’t have health insurance — similar to the
unpopular federal penalty the
Republican-controlled Congress eliminated, effective this year.
If
Newsom’s $295 million plan is enacted, California would be the first state to
offer financial aid to middle-class families who have shouldered the full cost
of premiums themselves, often well over $1,000 a month.
“This
is a gap in the Affordable Care Act, but there’s been no action at the federal
level,” said Matthew Fiedler, a fellow with the USC-Brookings Schaeffer
Initiative for Health Policy.
Democrats
in Congress introduced legislation this year to expand
the federal subsidy to more people, but those efforts have stalled in the past
in the face of Republican opposition.
In
California, legislators are debating Newsom’s penalty and tax credit proposals
as part of budget negotiations, which must be wrapped up by June 15. Democrats
control the legislature, but Republicans and taxpayer groups are opposed to the
proposed penalty, saying people should have a choice about whether to buy
insurance.
“It’s a
very costly and regressive tax on young people who can’t afford it,” said David
Wolfe, legislative director of the Howard Jarvis Taxpayers Association. “They
likely aren’t going to get sick, and they want to take that chance.”
Three
other states — Massachusetts, New Jersey and Vermont — and the District of
Columbia already have adopted state health insurance requirements. Health
experts say these mandates encourage young, healthy people to buy coverage
alongside older, sicker — and more expensive — enrollees.
If
lawmakers approve a state tax penalty, modeled after the now-defunct ACA
mandate, some Californians could owe thousands of dollars if
they fail to buy insurance.
“Without
the mandate, everybody’s premiums go up,” Newsom said at an event in Sacramento
in early May. “Every single person in this state will experience an increase in
their costs if we don’t have a diversified risk pool.”
Massachusetts
and Vermont provide state financial aid to low-income people who qualify for
federal aid under the ACA, according to the
USC-Brookings Schaeffer Initiative for Health Policy. Newsom wants to go a step
further and give financial help to middle-income earners — which could include
families of four earning up to about $154,500.
Under
his proposal, 75% of the financial aid would go to about 190,000 of these
middle-income people who make between 400% and 600% of the federal poverty
level. That’s between about $50,000 and $75,000 a year for an individual and
between about $103,000 and $154,500 for a family of four.
The
average household tax credit in this category would be $144 per month,
according to Covered California.
The
remaining money would go toward tax credits for about 660,000 people who earn
between 200% and 400% of the federal poverty level, or roughly between $25,000
and $50,000 for an individual and $51,500 and $103,000 for a family of four.
The average household tax credit in this category would be $13 a month, Covered
California estimated.
Exactly
how much Californians could receive would vary depending on where they live,
their ages, incomes and family size, said Peter Lee, Covered California’s
executive director.
For
example, a couple, both 62, living in the San Francisco Bay Area making $72,000
a year doesn’t qualify for federal tax credits. They now pay a $2,414 monthly
premium — or about 40% of their income.
That
couple could qualify for a $1,613 state tax credit under Newsom’s proposal,
lowering the cost of health insurance to about 13% of their income, according
to a Covered California analysis.
By
comparison, the ACA defines an affordable
employer-sponsored health plan as one that costs about 9.5% or less of an
employee’s household income.
California’s
high premium costs are among the biggest concerns middle-income customers raise
with Kevin Knauss, an insurance agent in the Sacramento region.
“I have
clients, especially those who are self-employed, who have literally discussed
the possibility of not working for two or three months or stepping back from
projects” so they can earn less and qualify for federal tax credits, Knauss
said.
Other
insurance agents said they’ve met middle-income families who are willing to
forgo insurance for one family member — often the breadwinner — to bring down
costs.
Alma
Beltran, a small-business owner in Chula Vista, Calif., doesn’t have health insurance,
and neither do her husband and 17-year-old daughter.
Beltran
knows it’s a risk but said the premiums this year were simply unaffordable:
$1,260 a month for a plan with a whopping $13,000 deductible.
“I
decided to let my business grow at the expense of my health insurance,” said
Beltran, 53, who manufactures labels for the beer and wine industry. “This is
the first year ever that I haven’t had health insurance.”
Such
stories are why some lawmakers think Newsom’s proposal doesn’t go far enough.
For instance, some households wouldn’t qualify for a state tax credit until
they spent a quarter of their income on premiums.
“We’re
still talking about a substantial portion of someone’s income,” said state Sen.
Richard Pan (D-Sacramento). “I appreciate the governor’s leadership, but I
think that we do need to more.”
The
state Senate wants the governor to double the funding
to about $600 million, not only by relying on the penalty revenue but by
dipping into the state general fund. California is projected to have a $21.5
billion budget surplus for budget year 2019-20.
While
Newsom said he supports giving consumers larger subsidies, he said his plan is
fiscally responsible because it has a dedicated revenue source from the
proposed health insurance penalty.
“Perfect’s
not on the menu, but better than any other state in America is,” Newsom said.
This KHN story first published on California
Healthline, a service of the California Health Care Foundation.
Samantha
Young: syoung@kff.org,
@youngsamantha
Ana B. Ibarra: aibarra@kff.org, @ab_ibarra
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