Deductibles to Spike as Governor Vetoes Legislation to Lower Out-of-Pocket Costs in Covered California

Hundreds of thousands of Californians with Covered California health plans will likely 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 yesterday of SB 944 by Senator Pan. That bill sought to lower cost-sharing in Covered California, including eliminating deductibles in silver plans.
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  • Last night, Governor Newsom vetoed SB 944 (Pan), which would have eliminated deductibles and lowered co-pays for hundreds of thousands in Covered California.
  • With the veto, Covered California is expected tomorrow to raise deductibles in silver plans over $1,000 next year, to $4,750. The cost of seeing a doctor will increase to $45, and $85 for a specialist. 
  • California’s state budget had already allocated $304 million for Covered California affordability assistance, that was to be used for premiums in the event of the loss of federal subsidies, or for other cost-sharing if those subsidies were extended. 
  • Health advocates decry this decision and urge the state to continue the commitment to invest at least the amount of money raised from the individual mandate penalty to lowering the cost of care for Californians. 

SACRAMENTO, CA – Hundreds of thousands of Californians with Covered California health plans will likely 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 yesterday of SB 944 by Senator Pan. That bill 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. There is $304 million in already-allocated state funds available to reduce out-of-pocket health care costs for hundreds of thousands of Californians, and Covered California and health plans have been ready to go. But as a result of the Governor’s veto, these Californians will now face deductibles of almost $5,000 next year, and perhaps more in the years ahead,” said Anthony Wright, executive director of Health Access California, the sponsor of SB 944.

“Governor Newsom’s disappointing veto will mean higher cost-sharing for Covered California enrollees, including a spike in deductibles of over $1,000 in silver plans. Instead, California should have used this money for its stated purpose – to lower the costs of care for Californians,” said Diana Douglas, director of policy and legislative advocacy at Health Access California. “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. Without this investment, 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 covered by the federal government, Governor Newsom should use 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,” said Douglas.

After a year of studying options with an extensive report on the ways to reduce cost sharing, in June 2022 the Covered California board 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 on Thursday is likely to reverse that plan and allow cost-sharing and deductibles to spike. In a standard silver plan, a primary care visit will 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 likely 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.