CA Legislature Sends Bill to Lower Out-of-Pocket Costs in Covered California to Governor’s Desk

  • The signing of the Inflation Reduction Act extended federal funding to ensure affordable premiums in Covered California, saving California from having to backfill that investment with state dollars. 
  • In light of this federal action, today the California Legislature passed SB 944 (Pan) that re-commits California to use already allocated $304 million in state investments to lower out-of-pocket costs for those in Covered California.
  • State action can zero out deductibles. If not, silver plan deductibles could rise over $1,000 to $4,750 per person next year.

SACRAMENTO, CA – Hundreds of thousands of Californians with Covered California health plans could see their deductibles eliminated and co-pays substantially reduced next year, thanks to current subsidies and pending actions. Today the California State Legislature passed SB 944 by Senator Pan which was recently amended to enact a budget commitment to lower cost-sharing in Covered California, now that Congress has passed federal premium subsidy assistance. SB 944 fills key affordability gaps in Covered California, lowering cost-sharing and eliminating deductibles for many of the over 1.5 million Californians getting coverage through the state marketplace. The bill now awaits action by Governor Newsom.

SB 944, sponsored by Health Access California, removes financial barriers to care for hundreds of thousands of patients, and encourages even more Californians to sign up for coverage, getting California closer to its goal of universal health care. This move is made possible by Congress passing and President Biden signing the Inflation Reduction Act which guaranteed financial help for Covered California enrollees, capping premium costs at no more than 8.5% of income. Without that law, California enrollees would have seen major premium spikes, and the state would have partially backfilled the loss of federal assistance with $304 million in state subsides. But, with the Inflation Reduction Act in place, California can now enact the plan adopted by Covered California to use that money to instead reduce out-of-pocket health care costs in Covered California. SB 944, along with AB 1878 by Assemblymember Wood were introduced earlier this year with the intent to take this step in California this year.

Without this cost-sharing help, low- and middle-income Californians face significant out-of-pocket costs that are major financial barriers to care. High out-of-pocket costs, especially deductibles, lead people who have coverage to avoid needed care, or face debt for seeking care, and keeps some people from purchasing care at all. If no action is taken, middle-income enrollees will see deductibles rise over $1,000, to $4,750, and pay $45 for a single primary care visit in a Silver-level plan.

“California’s goal of universal coverage is within reach, but not if people are still priced out of care due to high deductibles and co-pays for office visits,” said Diana Douglas, Director of Policy and Advocacy at Health Access California. “Californians who pay the penalty for not having health care coverage often do so because they can’t afford the coverage. SB 944 ensures that at least the same amount of money raised from the penalty goes right back into lowering the cost of care, helping more people get covered in the first place. We urge Governor Newsom to sign this bill and help California lead the way yet again and truly make health care coverage a reality for all.”

“I am proud of the investments my colleagues and I have led in California to expand health care coverage since the initial passage of the Affordable Care Act. Health insurance is only beneficial if people are able to use it to access primary, preventive, specialty, and acute care, when needed. That’s why SB 944 is so critically needed. With Governor Newsom’s signature, California can continue to lead by offsetting copayments and eliminating deductibles so Californians can get the care that they need without the worry of prohibitive cost sharing that creates barriers and delays to accessing quality health care,” said Senator Dr. Richard Pan, Senator (D-Sacramento).

“We have been very grateful for the continuing support Governor Newsom and his Administration has provided to improve health care coverage and affordability for California families,” said Assemblymember Jim Wood (D-Healdsburg). “With the federal Inflation Reduction Act and funding we approved in June’s state budget, the Governor’s signature would make sure that Covered California removes the burden of copays and deductibles as we envisioned. People will actually be able to get care, instead of fearing the burden of copays and deductibles that often prevents them from seeking the care they need.”

Using funds raised from the individual mandate penalty, SB 944 would invest in zeroing out deductibles and reducing co-pays to help more people afford coverage. Specifically, the bill would:

  • Zero deductibles for every consumer who selects a silver plan, eliminating deductibles of as much as $4,750 for many middle-income enrollees, $800 for low-income enrollees, and $75 for the lowest income who have federal cost sharing reductions.
  • Lower copays for many services for the standard silver plan:
    • $30 for a primary care visit instead of $45
    • $10 for generic drugs instead of $16
    • $40 for preferred brand name drugs instead of $55

Covered California is expected to finalize health plan design in their September 15th meeting. Governor Newsom has until September 31 to act on this bill.