Stop Hoarding State Health Insurance Fines

Financial incentives — or disincentives — can clearly be a practical tool in the exercise of public policy.

Raising the tobacco tax ipso facto reduces smoking rates, for example. Getting a tax deduction for installing solar panels on your roof effectively encourages the purchase of solar panels.

But, still, there was always something odd about the condition that three years ago Sacramento began fining Californians who lacked health insurance.

Given that health insurance is expensive, in the short term it is obvious that those who choose not to get it when they would certainly prefer to have it do so because they cannot afford it. bonuses.

So hitting those same low-income people with a government fine for not having insurance is a clear case of kicking them in the gut when they’re already broke.

Yet that’s what the state of California is doing to get people to pay for health insurance rather than pay a fine and still not have insurance.

But, as long as those who still won’t buy insurance have to pay the post, you hope at least that the money they contribute to the state coffers goes to a good cause.

Instead, a new investigation by the nonprofit Kaiser Health News found, after three years, “the state hasn’t distributed any of the revenue it collected, KHN has learned – from l money to help Californians struggling to pay for coverage”.

And, as expected, the reporters report that “so far, the majority of Californians who pay the penalty tax for not having insurance are low- to middle-income earners, according to state tax officials — just the people the money was intended to help. ”

“It’s concerning,” says Diana Douglas, lobbyist at Health Access California, which advocated for the mandate. “The idea was to raise money from people who can’t afford coverage, use that revenue to help people afford it and get care. It’s not fair to those who can’t afford it. »

True that.

We’re not talking small amounts of money here either. State officials estimated that during the opening 2020-2022 period, approximately $1.3 billion in fines would have been collected.

But Gov. Gavin Newsom argues that instead of spending the money here and now, the state should save it in case Californians need help paying for their health insurance in the future.

“The recent decline in state tax revenue underscores the importance of setting these funds aside,” Newsom spokesman Alex Stack said.

Governor, Californians in need are in need right now — with inflation soaring, with health insurance costs estimated at 5.6 percent this year.

It’s kind of especially infuriating to withhold money just because an executive branch and legislature with a penchant for big spending suddenly has to tighten its belt because its reliance on the income tax of millionaires and billionaires in technology is likely to decline given the possibility of a recession and the huge hits that have been delivered to Silicon Valley stock prices, as well as layoffs throughout this sector here and in the Bay Area.

“A bill this year by State Sen. Richard Pan, D-Sacramento, who is leaving office due to term limits, sought to funnel state penalty money to covered California so reduce out-of-pocket costs for some consumers, including eliminating their deductibles. . But Newsom vetoed the bill, arguing that the money may be needed in years to come to restore state subsidies,” KHN reports.

“Having insurance means nothing if you can’t pay the deductible, and that’s a huge barrier for people with chronic conditions who have very high healthcare costs,” Pan said. “People still can’t afford to go to the doctor.”

Pan soon gone, another legislator should immediately take up the cause during the next session. There is simply no reason for these medically based fines to go into the state’s general fund when Californians need help with medical insurance costs right now. Sacramento should either make good use of the fine or get rid of it altogether.