With ACA Subsidy Stoppage, What’s Next for California Healthcare?

By Jonathan Palisoc

Although recent efforts to repeal and replace Obamacare seem to have stalled, the Trump administration’s announcement to immediately stop payouts of Affordable Care Act (ACA) subsidies raised new questions about the law’s future. This order, which involves over $7 billion dollars a year, sent a shock throughout the healthcare industry, causing health insurance stocks to plummet. If these payments are stopped indefinitely, insurance companies selling plans on state exchanges will likely to either drop out or raise premiums significantly. However, many states and health insurance teams are planning to sue the administration and force it to continue making payments. Whether or not these attempts will be successful is unknown.

This move by Trump is seen as not-so-subtle criticism of Congress’ inability to pass healthcare reform. Majority Leader Mitch McConnell’s repeal and replace plans have stalled numerous times due to intraparty disagreements and withheld votes from Senators Murkowski, Collins, McCain, and others. Trump recently bragged on Twitter about the health insurance company stock drops and has previously indicated that he was willing to take executive action to push the exchanges to fail. Alongside his recent executive order to allow cross-state selling of bare-bones plans, Trump seems well on his way to unilaterally dismantling the ACA.

At the state level, this upheaval has rippled into California policy waters as well. Recent progressive efforts in California have stalled: Proposition 61, a widely publicized measure aiming to reduce the cost of prescription drugs by tying them to prices paid the Department of Veterans’ Affairs, failed to pass; SB 562’s single-payer proposal, “Healthy California,” was also shelved recently over concerns about the cost and program structure. These recent federal changes are likely, however, to reignite progressive health legislation in California once again. As noted in our previous blog post, California has seen an enormous expansion of coverage under the ACA; the state’s residents also strongly approve of Covered California and the Medi-Cal expansion.

With Senators Kamala Harris, Bernie Sanders, and gubernatorial candidate Gavin Newsom all likely to wield their political clout in favor of universal care, 2018 promises to become yet another battleground for healthcare. In the more-immediate future, California Assembly members and senators will convene the first meetings of the Special Committee on Health Reform on October 23th and 24th. While the legislative group will look at all policy options, it is likely that assembly members who previously sponsored SB 562 will push for a revised universal care bill. However, like the last time, there will be a tough path to approval; current federal landscape, Governor Brown’s likelihood to veto, and the health insurance lobbying machine’s claims of increased cost and bureaucracy make universal health care a hard sell to the Californian populace.

Jonathan Palisoc is a Master of Public Policy candidate at the Goldman School of Public Policy.