SEC. 2.
The Legislature finds and declares all of the following:(a) In 2010, the United States Congress passed the Affordable Care Act, commonly known as “Obamacare,” which mandates that individuals obtain health insurance. This mandate is known as the individual mandate.
(b) Under Obamacare, beginning in 2014, all Californians were forced to obtain health insurance.
(c) Under both federal and state tax laws, employer-paid insurance benefits are excluded from taxation and paid for with pretaxable income.
(d) According to the Kaiser Family Foundation, four
million Californians do not get their health insurance paid for by their employers and, in order to meet the federal mandate, they have had to obtain health insurance or face a penalty imposed by the IRS of up to 1 percent of their 2014 income, 2 percent of their 2015 income, and 2.5 percent for years after 2015 (26 U.S.C. Sec. 5000A(c)(2)(B)). Tax penalties for uninsured children are one-half of the penalty for an adult.
(e) Both individuals and families with an income in 2014 that was between 138 percent and 400 percent of the poverty level were able to purchase health insurance through Covered California and received a tax subsidy to offset all or part of the health insurance premium. If the individual’s or family’s income was less than these percentages, that individual or family may have qualified for Medi-Cal.
(f) The Kaiser Family Foundation estimates that 52 percent of
Americans who buy individual insurance today would not be eligible for subsidies to help offset the cost of health care. The 48 percent that do receive subsidies would receive an average of $5,548 per year, which would only cover 66 percent of the cost. Most individuals will face higher premiums and higher taxes to pay for those subsidies that others will receive.
(g) Around 1.2 million Californians do not receive employer-paid health insurance and are not eligible for Medi-Cal or other taxpayer-paid insurance programs and must purchase their health insurance directly from an insurer. Individuals and families must buy their health insurance with after-tax dollars if they are ineligible for a subsidy or the subsidy does not cover the full cost of the insurance, making their health insurance more expensive.
(h) Under existing California law, a taxpayer is able to deduct medical
expenses, including the cost of purchasing health insurance, that exceed 7.5 percent of their adjusted gross income. Any medical expense below 7.5 percent of their income is not tax deductible. Only taxpayers that itemize their deductions can take the deduction. Because that threshold is so high, many taxpayers do not get any tax benefit, thus making the cost of their insurance more expensive.
(i) Bringing the threshold from 7.5 percent down to 0 percent will level the playing field between those who receive insurance from an employer and those purchasing it in the individual market. It would also reduce the number of uninsured and, accordingly, would reduce the costs associated with providing health care to the uninsured.