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September 2009 St@teside

Governor Schwarzenegger Signs Legislation to Keep Nearly 700,000 Kids Insured

On September 22, California Governor Schwarzenegger signed a bill (AB 1422) with a $196 million plan to prevent nearly 700,000 children from losing their health insurance through the decade-old Healthy Families program.1  Healthy Families is low cost insurance that provides health, dental, and vision coverage to uninsured children who do not qualify for the state’s Medicaid program, Medi-Cal.  Program enrollment has been closed in recent months as a result of deep cuts implemented by lawmakers working to balance the state budget under the strain of a fiscal crisis.  Under the budget that Schwarzenegger signed in July, up to two-thirds of the almost 1 million children covered by Healthy Families were to be dropped.2

The legislation will impose a 2.35 percent tax on insurance companies—Kaiser, Anthem Blue Cross, Blue Shield and others—to generate approximately $157 million and enable California to obtain about $97 million in federal matching funds. Another $81 million will come from the State’s First 5 Early Childhood Development program, which is funded steadily with revenue from a tobacco tax, and $18 million more will come from a shift to less expensive dental coverage by Health Families and higher premiums and co-payments for enrollees.

All the insurers involved agreed to the levy.  The insurance companies see this 2.35 percent tax as essentially taking the place of a current 5.5 percent levy set to expire in October.  Therefore, insurers will incur a minimal cost while also gaining significant business through a strengthening of the Healthy Families program.3

1Governor Schwarzenegger Signs Legislation to Keep Kids Enrolled in Healthy Families, Office of the Governor, press release, September 22, 2003.

2Bailey, E. and P. Mcgreevy.  California Senate Approves Tax on Health Insurers, The Los Angeles Times, September 3, 2009; Assembly Sends Bipartisan Solution to Protect Children's Health to Governor, Office of Assembly Speaker Karen Bass, press release, September 3, 2009.