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
3Ibid.
