California is expanding subsidies to lower health insurance costs for people earning up to 600% of the federal poverty level (FPL). The state legislature approved a $1.45 billion budget over three years to lower premium costs for individuals and families who made too much to qualify for insurance subsidies in the past.

This is a direct effort to make insurance more affordable and accessible for middle- and lower-class individuals and families.

What is 600% of the federal poverty level?

In all other states, subsidies are capped at 400% of the poverty line (a pre-tax yearly income of roughly $50,000 for individuals, or $103,000 for a family of four). However, California is raising that cap to 600% of the federal poverty line. For an individual, being at 600% means you make roughly $75,000 a year—before taxes. For a family of 4, that number rises to around $154,000 a year—before taxes. 

How much can you expect to save?

Even though individuals making below $50,000 a year already qualify for subsidies, this demographic accounts for half of the state’s penalty payments already; in other words,  the middle class is choosing to go without insurance and are eating the penalty cost for not having it, all because they can’t afford the insurance premiums. 

California is predicting that this subsidy will save those earning between 400% and 600% of the federal poverty level an average of $100 a month on their premiums, but will it be enough? 

The chart below indicates the maximum amount your premium will be in California, as a percentage of your income. For instance, a family earning over 500% of the FPL, say $135,000, would pay no more than 18% of their income, or $24,300, for the second cheapest Silver plan available in their area. If the plan costs more than $2025 a month, the state will subsidize the rest.

Income

2020 Maximum Premium

400% – 450% FPL 9.68% – 14% of income
450% – 500% FPL 14% – 16% of income
500% – 600% FPL 16% – 18% of income

Even though these subsidies may only cut your premiums by 5% or less, the state of California is still trying to force people to purchase expensive health insurance plans, plans many people still won’t be able to afford. , Starting in 2020, California is reinstating a tax penalty for not having insurance; those who go uninsured with pay $695 or 2.5% of their household income, whichever is higher. 

If you don’t receive a subsidy or are only getting a small amount discounted from your premium, a health sharing plan may be a better option. Because the costs can still be so high, many Californians have been switching to health cost sharing programs. Members of qualified health cost sharing programs are exempt from these penalties, and the monthly cost is often less than half that of health insurance in California.

We can help you figure out which route will be best for you. Sign up for a date on my calendar starting October 15!