Deductibles to Spike for Majority of Covered California Enrollees in 2023

Hundreds of thousands of Californians with Covered California health plans will see their co-pays go up and deductibles rise by over one thousand dollars next year, as a result of Governor Gavin Newsom’s veto of SB 944 by Senator Pan, and Covered California’s board action following the veto. SB 944 sought to lower cost-sharing in Covered California, including eliminating deductibles in silver plans.

In a year of rising costs, Californians are crying out for affordability help. With that in mind, the state Legislature allocated $304 million in state funds to reduce out-of-pocket health care costs for hundreds of thousands of Californians. Covered California and health plans have been ready to go to enact the cost-sharing plan. But with the Governor’s disappointing decision to veto the bill, these Californians will now see their deductibles spike by $1,000 next year, and perhaps more in the years ahead. Instead, California should have used this money for its stated purpose – to lower the costs of care for Californians.

This counterproductive veto discourages Californians from getting care and coverage and is a significant setback to the goal of getting to a universal, affordable health system.

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 and keeps some people from purchasing care at all, or face debt for seeking care. Now, those who earn just over $2,000 per month will have hospital deductibles of $800, and middle-income Covered California enrollees will have deductibles approaching $5,000 and pay $45 for a single primary care visit in a silver level plan.

California is one of the few states that requires people to purchase health plans or pay a penalty—but at the same time the Governor offered state subsidies to make such coverage more affordable. With premium subsidies now covered by the federal government, Governor Newsom should have used the funds raised from the penalty on those who are uninsured to invest in additional affordability assistance.

California should not be collecting hundreds of millions of dollars a year from the uninsured without making a similar investment in reducing the cost of coverage in order to make it easier for more Californians to be insured.

After a year of studying options with an extensive report on the ways to reduce cost sharing, in June 2022 the Covered California board had adopted a plan that if the federal government extended enhanced premium assistance, as it just did this summer under the Inflation Reduction Act, then Covered California would use state dollars to lower cost-sharing. This would have removed financial barriers to care, encourage more Californians to sign up for coverage, and bring the state closer to a system of universal, affordable coverage. With this veto from the Governor, the Covered California board reversed that plan. In a standard silver plan, a primary care visit will now be $45, a specialist visit will be $85, and the deductible for a hospital stay would be $4,750.

Under Governor Newsom in 2019, California took a leadership role in passing both an individual mandate to purchase coverage “to pay for increased financial help for families” as his press release on his first day declared, and state premium subsidies. After his budget proposal passed in July 2019, his press releases highlighted the new state subsidies to provide greater affordability assistance, “partially funded by restoration of an enforceable mandate.” When additional federal premium assistance supplanted state subsidies for 2021 and 2022, and now until 2025 through the Inflation Reduction Act, legislators and advocates have urged that the state dollars still raised from the mandate penalty go to reduce ever-increasing cost-sharing.

Governor Newsom’s veto of SB 944 closes the door on this help for Covered California consumers in 2023, despite the promises made when the individual mandate penalty was imposed on all California consumers in 2019.

Health advocates will continue to work to ensure that the money raised from the individual mandate indeed goes to make care more affordable for Californians.