Larry Levitt Answers 3 Questions on Calif. Governor’s Proposed Individual Mandate, Expanded Subsidies
California’s newly sworn-in Governor Gavin Newsom announced a proposal for broad changes to the state’s health care system almost immediately after taking the oath of office this week. Those announcements ranged from state plans to negotiate drug prices for Medi-Cal (California’s Medicaid) patients and other state programs and private purchasers to expanding Medi-Cal’s coverage of undocumented immigrants to pursuing greater flexibility from the federal government to implement a single payer system. But plans to increase coverage through an individual mandate in the state and expanding Affordable Care Act (ACA) subsidies to higher incomes build most directly upon the law’s foundation.
1) Gov. Newsom plans to expand ACA Marketplace subsidies to incomes between 400 and 600% of the federal poverty level to help more individuals afford insurance on California’s state-based insurance exchange. Why is this population being targeted?
Levitt: Middle-class people with incomes greater than 400% of the poverty level — $48,560 for a single person and $100,400 for a family of four — are not eligible for any help paying their premiums under the Affordable Care Act (ACA). This group has borne the brunt of recent premium increases, and some have dropped coverage as a result. In California, people with incomes at or above 400% of the federal poverty level represent 21% of the state’s uninsured. There’s widespread agreement that non-group insurance has been increasingly priced out of reach for the middle-class, but little agreement over what to do about that. Conservatives have advocated loosening up on regulation to bring premiums down. For example, short-term plans expanded by the Trump administration have lower premiums because they don’t cover pre-existing conditions and provide skimpier benefits than ACA plans. Liberals have advocated expanding subsidies to make coverage more affordable, like Gov. Newsom’s proposal.
2) Enacting a state-level individual mandate, Gov. Newsom says, will pay for these expanded subsidies. How would that financing work?
Levitt: A state-level individual mandate – replacing the federal penalty that was repealed beginning this year — would have several effects. First, people who are uninsured would pay a penalty, and those revenues could be used by the state to pay for expanded premium subsidies. Second, it would encourage more people to get insurance. As more people sign up for individual insurance through the ACA marketplace — known as Covered California in the state — the federal cost of premium subsidies will rise. More people might also sign up for Medicaid (known as Medi-Cal in California) and employer coverage. Third, it’s likely that the additional people who sign up for insurance would be healthier than average, which would lead to lower premiums in the state. Insurers reported that they boosted individual market premiums by 6% in 2019 to account for repeal of the federal individual mandate penalty and expansion of short-term plans, both of which are expected to reduce the number of healthy enrollees in the market.
3) How could California’s plan affect the national debate about health reform?
Levitt: Gov. Newsom has proposed expanding coverage to young undocumented adults, increasing ACA subsidies, restoring the individual mandate penalty, and has also called for the federal government to give the state flexibility to move towards a single payer system. This positions him as strong counterpoint to President Trump on health care while covering a proportion of the 7% of Californians who remain uninsured. Interestingly, there may be more agreement on the need to address high prescription drug prices, though maybe not on the specific steps to do that. California is one of several states moving ahead with health reform initiatives as we enter a period of expected gridlock in DC. It’s often the case that states serve as models for each other, and as templates for later national reforms.