Many Californians say they still can’t afford health insurance. Will 2020 reforms provide relief?

Correction: An earlier version of this story incorrectly stated the year Massachusetts' tax penalty started. The state began enforcing it in 2007. 

Even with access to health insurance at a historic high in the state, a growing share of uninsured Californians say they struggle to afford coverage, according to new survey results.

The new data show the share of people in the state who say cost is their main reason for being uninsured inched upward for the third consecutive year in 2018, according to UCLA’s California Health Interview Survey.

Nearly four out of every 10 uninsured residents, or 37%, said the price of insurance was the leading reason for not having coverage. The second most frequent reason, accounting for 19%, was either confusion or they were in the process of learning about and getting insurance. And 17% of people said they didn’t believe in or need it.

The findings came as no surprise to some health providers and policy experts who said the cost of health care remains an underlying challenge in California and beyond. The state’s high cost of living, which already weighs heavily on family budgets, is another factor.

However, a number of new laws aimed at shoring up the state’s health insurance exchange could provide some relief, they said.  

Gov. Gavin Newsom signed legislation this year that will allow people with incomes too high to qualify for Affordable Care Act subsidies to receive financial assistance through the state’s health insurance marketplace, as well as grant supplemental help to many who already qualify for the federal tax credits. Another law will penalize those who choose to go without insurance.

It remains to be seen if this mix of policy solutions, which do not apply to employer-provided coverage, will be enough to nudge the state’s stagnant uninsurance rate down further. 

“The state has created these new premium subsidies that are going to bring down the monthly cost of buying health insurance through Covered California,” said Scott Graves, a health care researcher at the California Budget and Policy Center. “That’s going to be a huge benefit for a lot of Californians who feel like they have been priced out of the health insurance market in recent years.”

But most Californians still access health insurance through their employers, where premiums, deductibles and out-of-pocket costs have continued to rise in recent years, far outpacing wage gains. Workers who are eligible for insurance through their employer do not qualify for the Covered California subsidies.

“The bottom line for employees is that they pay more and more,” said Niall Brennan, who runs the Health Care Cost Institute, a nonprofit think tank. “Premiums are going up every year. Deductibles are getting higher and higher.”

He added that it’s now routine for an individual or a family to have to pay thousands of dollars on their deductible for certain medical services before they can use their coverage. Brennan said it’s one of the shortcomings of the Affordable Care Act, which prioritized offering coverage over cost control.

“That’s not really insurance in the traditional sense,” he said. “It’s more like catastrophic coverage — if something really bad happens to you, then the coverage kicks in.”

After years of steady declines, the state’s uninsurance rate has stalled out at about 7%, according to the latest census data. As many as 3.5 million people younger than 65 are expected to remain uninsured by 2022, including undocumented residents, according to the latest estimates from UCLA and UC Berkeley.

“This is really affecting people who are low income and middle class, tremendously,” said Melissa Marshall, CEO of CommuniCare Health Centers based in Davis. “What it takes to provide for your family and then on top of it pay for insurance sometimes is untenable for folks.”

Marshall said the Yolo County community health center’s Medi-Cal enrollment for low-income residents has increased since the Affordable Care Act was passed, but 27% of its 7,000 patients are still uninsured.

The uninsured rate is closer to 50% at its Woodland facility, which serves more immigrants.

Many of the uninsured come from the area’s farming communities or work at small businesses, she said. Marshall said their reasons for not having insurance vary, from cost to immigration status and potential changes to the “public charge” rule that could deny green cards to immigrants who use public programs.  

“A large number of our uninsured are immigrants, so the public charge rule really impacts people’s enrollment in benefits,” Marshall said.

The new reforms, in some ways, are designed to patch weak spots.

The financial assistance from the state comes with a hefty price: More than $420 million could be spent through the new subsidies to cover 922,000 more people, according to projections by Covered California. Most of the people who could benefit earn between $50,000 and $75,000, the analysis shows.    

Although it’s not the largest group of uninsured residents, people who lose their Medi-Cal coverage after their earnings grow have always been a concern. Health providers say moving from a public program such as Medi-Cal to private insurance is a risky transition, and people can easily drop out of the health system. 

A single mother, for example, who earns $17,000 and receives a $5,000 raise after a promotion would be forced to move from largely free Medi-Cal to a more costly private plan, either through her employer or Covered California. The effort needed to understand insurance options and access care can be overwhelming, providers say. And the out-of-pocket expenses associated with private insurance can create additional hardship for those already living paycheck to paycheck. 

“We refer to it as the churn — that area around 138% of the federal poverty level where people are getting employment and picking up commercial coverage,” said Jonathan Porteus, CEO of WellSpace Health, a network of community health centers in the Sacramento region.

“They go into that category, but it’s very hard for them to find something to afford. 

Nearly 80% of WellSpace’s 70,000 patients use Medi-Cal, and 14%, including undocumented residents, receive discounted services, he said. The federal and state government reward health centers like WellSpace with more favorable reimbursement rates to help offset the cost of serving the poor.

However, undocumented residents have limited access to taxpayer-funded insurance programs. They are not eligible for Covered California plans, and, even with recently passed legislation, only those under 26 in California are generally eligible to apply for Medi-Cal.  

Health providers and policymakers hope that with the size of premium increases in Covered California plans shrinking, and in some cases premiums declining, more people will buy coverage. Exchange plans will see an average rate increase of less than 1% in 2020, projections show. 

If that doesn’t work, the state’s new tax penalty for people without insurance might motivate some holdouts. The law goes into effect in January and will cost families as much as $2,100 per year if they go without insurance.

Covered California officials said new insurance signups were already up by 16% over last year as of Dec. 7, accounting for 133,000 policies. More than 1 million consumers have also renewed their coverage.

The federal individual mandate, before it was repealed by a tax reform law passed by Congress in 2017, was supposed to be an incentive to buy insurance. But those fined were often low- to moderate-income people earning less than $50,000 annually, according to IRS data.

Will the state’s new penalty be any different?

Jason Levitis, a researcher who studied state-created tax penalties, said the evidence from other places, namely Massachusetts, suggests California’s penalty is more likely to succeed.

“What’s important to understand about the (federal health law) penalty is it was never given a chance to work because it phased in over three years,” Levitis said. “It started off really small in 2014 and 2015, and finally, in 2016, it reached its full size.”

The repeal went into effect this year.

“It’s hard to say we got any real results from the experiment with the federal individual mandate. It was never really given a chance to see what it will do,” he said.

Levitis said Massachusetts, which provides financial support above what’s offered by the federal government, has the lowest uninsured rate in the country and its marketplace insurance premiums have some of the lowest costs. The state also created its own tax penalty and began enforcing it in 2007.  

“(Massachusetts has) had really impressive outcomes,” Levitis said. “Hopefully, California ends up in the same place.”

Follow the USC Center for Health Journalism Collaborative series "Uncovered California" here.