California may use penalties to pay for health insurance subsidies

Health insurance subsidies - money - dollar sign

Governor Gavin Newsom has proposed a tax penalty that would cover the Californian subsidy costs.

Governor Gavin Newsom has proposed a new move to fund health insurance subsidies in the state. It would provide an estimated 850,000 Californians with assistance in paying their premiums.

The goal is to assist people who make too much to qualify for federal aid but struggle to pay premiums.

To be able to afford to provide the additional health insurance subsidies, the Democratic governor has proposed a tax penalty. This would be applied to Californians who have not purchased health plans. The strategy is not unlike the former federal penalty that had initially been implemented through the Affordable Care Act. As of this year, that penalty was eliminated by the Republican-controlled federal Congress.

Should Governor Newsom’s $295 million plan go into effect, it would make California the first state with such a strategy. It would become the first state with a system to provide middle class families with financial aid. Until now, those families have been required to pay the full brunt of their health insurance premiums. In many cases, this has cost much more than $1,000 per month.

The idea behind the new health insurance subsidies would be to close the current assistance gap.

“This is a gap in the Affordable Care Act, but there’s been no action at the federal level,” said USC-Brookings Schaeffer Initiative for Health Policy fellow Matthew Fielder, as reported by Kaiser Health News.

Congressional Democrats brought new legislation into effect this year. It was meant to widen the federal subsidy in order to include more people. However, Republican opposition put a halt to those efforts.

Californian legislators are currently debating the Newsome tax credit and penalty strategy as a component of budget negotiations. Those are required to be completed by June 15. Democrats control the legislature in California. However, this doesn’t necessarily guarantee smooth sailing for the health insurance subsidies plan. Republicans and Health insurance subsidies - money - dollar signtaxpayer groups have expressed vocal opposition to the implementation of a tax penalty of this nature. They argue that Californians are entitled to a choice regarding whether or not they will purchase health plans.

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