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California Health Coverage Mandate: Here’s What That Means
Slobodyany Insurance Agency
Source: San Francisco Chronicle, by Catherine Ho
In a significant new change, California will require people to buy health insurance next year or pay a tax penalty.
State-level mandates for health coverage already exist in Massachusetts, New Jersey and Washington, D.C., which have sought to make sure all residents have insurance. In addition to California, Rhode Island and Vermont will implement health mandates next year.
California will be providing financial help for middle-income earners, who make up to about $75,000 a year, so they can pay insurance premiums. Most of the aid money is expected to come from penalties collected from those who decide not to get insurance.
Californians have until the end of Sunday to sign up for coverage that takes effect in January.
Massachusetts pioneered the idea of a state-level health mandate in 2007, when it required residents to buy insurance and provided state subsidies to help them do so. Massachusetts’ mandate and subsidies helped make the state’s uninsured rate the lowest in the nation, around 3%, though they were implemented at the same time a state employer mandate also went into effect - making it difficult to determine whether the individual mandate alone is responsible for getting more people insured, said Laurel Lucia, director of the health care program at the UC Berkeley Labor Center.
New Jersey and Washington, D.C., both instituted mandates in January. It’s too early to say whether they led to lower rates of uninsured or how many people will be paying the penalty. More information will be available when residents file their taxes in April.
President Barack Obama helped push through a federal health-insurance mandate in 2010, when he signed the Affordable Care Act into law. But Congress repealed the mandate in late 2017, as part of a broader tax bill, by removing the tax penalty. The Affordable Care Act’s employer mandate remains in place, requiring companies with at least 50 full-time workers to provide health insurance or pay a penalty.
A lot of Californians aren’t aware of the new state mandate or subsidies, said Mulugeta Mahray, an insurance broker in Oakland. He said he’ll be texting his clients, most of whom are on plans from Covered California or other individual markets, to make sure they know about the changes.
Officials with Covered California, the state insurance exchange, are encouraging people to check to see if they qualify for subsidies before signing up or forgoing insurance. Covered California said Thursday that about 486,000 people have signed up for plans and will receive state subsidies to help pay for the premiums. Most of them will receive a combination of federal and state assistance; about 23,000 people have signed up to get the state subsidies alone because they are in the new, higher income bracket eligible for state assistance.
About 133,000 new consumers have signed up for Covered California plans through Dec. 7, a 16% increase over the same period last year, according to the agency.
One of them is San Francisco resident Tyler Breisacher. Breisacher, 32, left his job over the summer and has since been covered under COBRA - the federal law that allows workers who lose their jobs to keep the same employer-provided health insurance for up to 18 months, though workers typically have to pay the full premiums themselves.
He decided to enroll in a Covered California plan for 2020 because he recently went back to school, studying journalism at City College, instead of going to another job. COBRA is expensive, costing him nearly $600 a month. The new plan will be about $400 a month.
Breisacher said he didn’t seriously consider going without insurance “because you never know what will happen.”
Here’s what Californians need to know about the new changes:
Whom do the new state mandate and subsidies affect?
The new state requirement will affect a relatively small slice of California’s population.
Currently, about 1.1 million residents buy plans through the individual market (either through Covered California, the state insurance marketplace, or directly from health insurers) because they don’t get insurance through work or through Medi-Cal, the public health insurance program for the poor. About 3 million Californians are currently uninsured, though some will qualify for exemptions.
Who is eligible for subsidies?
Some people will get federal subsidies only, some will get federal and state subsidies and some will get state subsidies only.
People who earn between between 138% and 400% of the federal poverty level (between about $17,000 and $50,000 a year) are eligible for a federal subsidy.
People who earn between 200% and 400% of the federal poverty level (between about $25,000 and $50,000) are eligible for federal and state subsidies.
People who earn between 400% and 600% of the federal poverty level ($50,000 to $75,000) are eligible for state subsidies.
When do I need to sign up for insurance?
The deadline is Dec. 15, end of the day, for your coverage to take effect Jan. 1. The deadline is Jan. 31 for your plan to take effect Feb. 1. You will not be charged a tax penalty if you lack coverage for one month.
Are there any exceptions?
Yes. The exemptions allowed by the state are roughly the same as those allowed by the federal government under the Affordable Care Act, before the federal mandate was repealed. You can see the full list of California exemptions on Covered California’s website or the Franchise Tax Board website. Most can be claimed on a state income tax return when filing your taxes. Some additional exemptions will be offered through Covered California; for those, individuals will need to fill out a form and submit it to Covered California. The forms will be available in January.
Some of the most common exemptions under the Affordable Care Act were if your income is too low to file taxes, if you are living abroad, or if you are uninsured for less than three consecutive months.
How much is the California penalty?
$695 per adult, $347.50 for each child under 18, or 2.5% of your annual income, whichever is higher - same as the federal penalty.
In tax year 2017, the last year for which data is available, about 553,000 tax filers in California paid the federal penalty, according to the IRS.
How much will subsidies cost the state?
The state subsidies will cost an estimated $429 million in 2020. Most of that amount, $317 million, is expected to come from penalties paid by people who don’t get insurance.
The rest will come out of the state general fund. The state has committed to helping pay the subsidies for three years.
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