California: Subsidy Program
Upshot
S.B. 944 aims to increase health care affordability assistance and eliminate deductibles for individuals with incomes up to 600 percent FPL who purchase health care coverage on the state’s Marketplace. The proposal was based on a report done by the Marketplace in 2021, Bringing Health Care Within Reach, that developed options for improving health care affordability.
The legislation passed both chambers on the last day of the legislative session but was vetoed by Gov. Gavin Newsom. In his veto letter, Gov. Newsom indicated that he intends to work with the legislature to make health care more affordable but said that he intends to reserve money that would have been spent on state subsidy until after the newly extended federal premium subsidies expire in 2025.
Background
California runs its own state-based Marketplace with twelve carriers. Approximately 1.8 million people enrolled in Marketplace plans during the 2022 open enrollment period. Rates in the market are stable and have only increased by about one percent over each of the last three years. Currently, state-based premium assistance for coverage purchased on the Marketplace is available to individuals with incomes up to 400 percent FPL. California law authorizes but does not require affordability assistance for individuals with incomes up to 600 percent FPL. The affordability assistance eliminates deductibles and is intended to reduce OOP costs for individuals enrolled in the state's health insurance Marketplace.
In 2021, in response to a health omnibus package, Covered California conducted a study to develop options for providing health care affordability assistance. One of the options the report recommended was a subsidy program that would provide additional assistance on top of existing federal subsidies. Gov. Newsom later said that, in light of IRA’s extension of the enriched ACA tax credits through 2025, it would no longer be cost effective for California to expand its own subsidies and subsequently vetoed the legislation.
Summary
The primary intention behind this legislation would be to require California’s health insurance Marketplace, Covered California, to implement options for health care affordability assistance. The financial assistance would reduce cost sharing – including copays, coinsurance, and maximum OOP costs – by establishing the Health Care Affordability Reserve Fund within the state’s Treasury. The bill would establish a program of financial assistance for California residents with incomes up to 600 percent FPL, eliminate deductibles, and require “other appropriate subsidies” to increase the affordability of health care. The program would be funded through annual appropriations.
The Marketplace would be responsible for carrying out the affordability assistance program. However, the text did not specify any additional details.