The Mercury News

Critics against Newsom's cost-cutting plan

They say moving money out of an affordabil­ity reserve fund would hurt middle-income people

- By Kristen Hwang CalMatters

Brian Iv works in a factory in Orange County, earning around $26 per hour. He suffers chronic pain from a lifetime of manual labor jobs and previous workplace injuries, but often treats the pain with home remedies or traditiona­l Cambodian practices. Going to the doctor is too expensive, he said.

Iv recently got a raise and was able to purchase health insurance through his company, but for a long time he had a Covered California Silver Plan, a mid-tier plan under the state's version of the federal Affordable Care Act marketplac­e. A visit to a primary care doctor cost nearly $50, and every time Iv picked up a prescripti­on it was an additional $10 to $15. It was a lot for someone living paycheck-to-paycheck with little wiggle room in the budget.

“Everything is expensive,” Iv said. “Sometimes when you get sick you avoid that (expense). You have to keep the money to pay the rent, pay the bills, pay the car.”

Mid-tier health coverage like Iv's Silver Plan is widely considered the best value for people who have insurance through Covered California. But in the past nine years, deductible­s for the Silver Plan have grown nearly 88% after adjusting for inflation, increasing out-ofpocket costs for enrollees. Last year, deductible­s grew from $3,700 for an individual and $7,400 for a family with a Silver Plan to $4,750 and $9,500, respective­ly.

That's why health care advocates are miffed that Gov. Gavin Newsom's budget proposal would sweep away $333.4 million set aside a couple of years ago for the state to defray health care costs for middleinco­me residents, transferri­ng the money to the general fund.

The proposal to move money out of the Health Care Affordabil­ity Reserve Fund is temporary, with plans to restore it in 2025 when current federal subsidies expire. But advocates say inflationa­ry pressures and rising health care costs are reasons to use that money right now to help California­ns struggling to pay the bills.

“We recognize there's not a lot of room for new spending in the current budget situation, but we don't see this as new spending. We see this as the existing commitment,” said Diana Douglas, policy director for Health Access California, which sponsored legislatio­n to create the reserve fund.

The budget transfer idea is part of Newsom's strategy to address a projected $22.5 billion deficit this year, a deficit that the nonpartisa­n Legislativ­e Analyst's Office predicts may be even worse come May when the budget will be revised based on actual state revenue.

Newsom's spokespeop­le did not respond to multiple requests for comment.

Stories like Iv's are common, said Jaquelinne Molina, a caseworker at The Cambodian Family, a social services center where Iv receives case management for health care and financial aid issues.

“It's three years after COVID, but people are still behind on their light bills, their water bills from 2020 because they weren't able to work due to COVID,” Molina said.

Health care advocates say Newsom's latest budget proposal follows a pattern of missed opportunit­ies to make insurance more affordable under Covered California.

In 2020, the Legislatur­e voted to reinstate a tax penalty on residents without health insurance in an effort to bring costs down. The economic theory goes: The penalty gives people an incentive to buy health insurance, and the more people who participat­e in the health care marketplac­e, the lower the costs.

That measure passed despite concern from advocates and legislator­s about forcing people who can't afford insurance to purchase it. Most people who forgo insurance cite high cost as the primary barrier.

On his first day in office, Newsom proposed using the money to bring down prices for people with Covered California.

Advocacy groups supported reinstatin­g the health insurance penalty, and the 2019-20 budget included more than $1.4 billion over three years to bring down out-of-pocket costs for Covered California enrollees.

So far, the state has only kept that promise once, spending approximat­ely $355 million in 2020 to enhance Covered California subsidies for middleinco­me residents. When the federal government increased health care subsidies in 2021 as part of its COVID-19 pandemic relief package, the state stopped funneling penalty money toward cost reduction.

Kaiser Health News reported in November that the state has generated roughly $1.3 billion in penalty money from uninsured state residents.

“There's an argument to be made that those fines really should be plowed back into the system, especially for people who are low-income,” said former state Sen. Richard Pan, a doctor who chaired the health committee at the time the penalty was reinstated.

Most people who purchase insurance through Covered California are low- to middle-income California­ns, meaning individual­s who earn roughly between $21,000 and $87,000 a year or families of four earning $45,000 to $180,000 per year.

At that income level, enrollees make too much money to qualify for MediCal, the state's public insurance for very low-income residents, but don't have employer-based health insurance. They may be self-employed, a gig or part-time worker, or work for a small business. They may even opt to purchase insurance independen­tly because it's cheaper than what their employer offers.

Although more stable than the national insurance marketplac­e, Covered California has not been immune to the rising health care costs that plague the industry. Health insurance premiums have grown every year.

Iv and his family rent a single room in a house in Garden Grove for $900 a month. In the past year, he said, expenses have tripled with inflation, with gas alone costing around $300 per month.

“At home, sometimes we don't know what to cook and we don't have food,” Iv said.

Molina, the case worker from The Cambodian Family, said her clients who have deductible­s and copays use their insurance less than clients with Medi-Cal, who typically don't have to pay anything out-of-pocket.

“I've known families with kids who break or sprain their fingers and feet, and they don't know for months because they can't go to the doctor,” Molina said.

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