SACRAMENTO
California Governor Gavin Newsom and Democratic lawmakers are backing a revised health-plan tax that would shift billions in state Medicaid costs onto privately insured residents beginning in 2027. The move comes as the state's Medi-Cal program faces unsustainable spending, with an estimated $12.4 billion spent in 2025 alone on healthcare for immigrants without legal status.
The redesigned tax requires federal approval to take effect. California's current health-plan tax structure expires in 2026 due to new federal restrictions on how states can finance Medicaid programs.
Brian Blase, president of the Paragon Health Institute, estimated the tax would increase insurance premiums for families by $400 annually. He pointed to California's expansion of Medicaid coverage to all unauthorized immigrants as a primary driver of the program's financial strain.
An unusual coalition of doctors and health insurers has united against the proposal. The California Medical Association and the California Association of Health Plans are suing to block the tax, arguing it violates Proposition 35, a voter-approved initiative that restricts how much the state can tax commercial health-plan enrollment and how it can spend the resulting revenue.
The plaintiffs are not contesting the state's decision to provide benefits to immigrants. Their legal challenge focuses solely on whether the tax breaches existing voter-mandated constraints on the state's taxing authority over health plans.
