Medi-Cal Bold Idea — Partially Unified Financing: Covered California for Most

Executive Summary

Medi-Cal covers more than one-third of Californians, but it operates within a fragmented insurance system that undermines continuity, equity, affordability, and accountability. As incomes fluctuate and employment changes, millions of Californians move between Medi-Cal, Covered California, employer-sponsored insurance, and periods of uninsurance, often losing access to providers despite having stable health needs. This fragmentation imposes high administrative costs, exacerbates racial and socioeconomic inequities, and weakens incentives to invest in prevention and long-term health improvement.

This paper proposes a bold reform: “Covered California for Most,” a system of partially unified financing in which most Californians obtain health coverage through plans offered by Covered California. Under this approach, Medi-Cal would no longer function as a separate coverage program for most low-income Californians. Instead, individuals currently eligible for Medi-Cal would be able to select the plan of their choice — which might be a plan that already largely or exclusively serves Medi-Cal beneficiaries — through Covered California. People in families with incomes below 138% of the federal poverty level (FPL) would enroll in plans with no premiums (for second lowest-cost plans); no or nominal cost sharing; and enhanced benefits comparable to those currently offered by Medi-Cal, including Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) and non-emergency medical transportation. Traditional Medi-Cal would remain in place for long-term services and supports, selected specialized services, and individuals dually eligible for Medi-Cal and Medicare.

At the same time, most Californians who currently receive coverage through employers would instead purchase insurance through Covered California. A payroll tax would replace a substantial share of employer health spending, and, on average, cost employers less than they contribute today. The payroll tax, combined with current Medi-Cal spending and federal premium tax credits, would finance the income-based subsidies needed to keep coverage affordable. As a result, employer-sponsored insurance would become optional rather than the backbone of coverage, and Californians would be able to retain coverage through the same plan regardless of changes in income, employment, or family circumstances.

The populations most affected by this reform would include current Medi-Cal beneficiaries, workers in low-wage and unstable jobs, people of color disproportionately affected by coverage churn, and middle- and upper-income families facing rising premiums and cost sharing in the employer-sponsored market. By stabilizing coverage and aligning benefits across income groups, Covered California for Most could substantially reduce inequities in access to and continuity of care.

This proposal seeks to achieve five primary outcomes:

• Stable coverage that eliminates churn driven by income and employment changes
• Greater equity, particularly for Californians with low incomes and communities of color
• Lower administrative costs through reduced duplicative eligibility determinations and payer complexity
• Improved affordability, by replacing regressive premium and cost sharing with transparent income-based contributions
• Stronger accountability for cost control and population health

The urgency of this proposal has grown. Federal policy uncertainty, including threats to Medicaid financing and the expiration of enhanced ACA subsidies, risks increasing uninsurance and coverage churn. At the same time, rapid premium growth in the employer-sponsored market is straining workers and employers. Without structural reform, these pressures will intensify, further fragmenting coverage and worsening inequities.

Covered California for Most is not a modest adjustment; it is a moonshot. It would require major state and federal action, careful transition planning, and broad stakeholder engagement. But it offers a coherent path toward a simpler, more equitable, and more sustainable health care coverage system — one that better supports Medi-Cal’s mission and the long-term health of Californians.

The Problem

Medi-Cal covers more than one-third of Californians, yet it operates within a fragmented coverage system that produces churn, inequity, and inefficiency. Coverage churn is widespread. National panel surveys suggest that roughly one-quarter to one-third of nonelderly adults experience a change in health insurance coverage over a two-year period. Even in California’s relatively stable insurance environment, approximately five million residents transition annually between Medi-Cal, employer-sponsored insurance (ESI), marketplace plans, and periods of uninsurance due to income volatility, employment changes, or administrative redeterminations.^[i] As a result, people lose access to providers and benefits despite having stable health needs.

With providers navigating multiple payer rules, claims systems, and eligibility processes, administrative costs are high. Each change in coverage generates additional overhead and impedes the ability to measure quality and outcomes. Further, fragmentation has made it more difficult to contain health care cost growth. While Medi-Cal and Medicare use price setting to restrain growth of unit prices, private insurers pay hospitals more than twice as much for similar services.[ii] And since most hospitals are still paid on a fee-for-service basis, health systems benefit financially from increases in volume and are not incentivized to promote preventive care.

Because Medi-Cal disproportionately serves Californians with low incomes, people of color, and those with unstable employment, fragmentation also reinforces racial and socioeconomic inequities in access and quality. Medi-Cal beneficiaries have more trouble than people with private insurance accessing needed care, and low-income Californians with ESI spend a larger share of their income on health care than higher-income households. Incremental reforms have improved Medi-Cal, and California has made progress on affordability, but fragmentation has prevented the creation of a simpler, more equitable system of delivering care.

The Bold Idea

This paper proposes a fundamental restructuring of how health coverage is financed and organized in California. Instead of obtaining coverage through separate systems for Medi-Cal, ESI, and the individual market, most Californians would obtain health insurance through Covered California. Such a system would achieve the interrelated goals of reducing coverage churn, improving equity across income groups, lowering administrative complexity, strengthening accountability for cost control and population health, and allowing for stability and flexibility in plan choice.

Under Covered California for Most, Medi-Cal would no longer operate as a separate insurance program for the majority of low-income Californians. Instead, people currently eligible for Medi-Cal would enroll in Covered California plans that would function like Medi-Cal managed care plans, with no premiums for lower cost plans, no (or nominal) cost sharing, and enhanced coverage of key benefits like Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) and non-emergency medical transportation. Traditional Medi-Cal would remain in place for long-term services and supports, selected specialized programs, and individuals dually eligible for Medi-Cal and Medicare.

At the same time, ESI would cease to be the default source of coverage for working-age Californians. Instead, most workers would purchase coverage directly through Covered California with income-based subsidies paid for by employer payroll tax contributions, ensuring affordability across the income spectrum. This shift would not eliminate employer financial contributions but would change how those contributions are structured and delivered.

This approach would build on California’s existing managed care infrastructure by expanding the role of Covered California as the state’s central purchaser of health coverage. Health plans currently serving Medi-Cal members, including local initiatives and County Organized Health Systems, could continue to play a major role alongside plans already participating in Covered California, provided they meet qualified health plan (QHP) requirements and offer the enhanced benefits required for lower-income enrollees.

At its core, Covered California for Most offers coverage stability. Californians could remain enrolled in the same health plan regardless of changes in income, employment, or family circumstances, meaning coverage would be continuous and predictable. Rather than layering additional fixes onto a fragmented system, this bold idea reorients the system around a single, stable platform — while retaining flexibility where it matters most.

How It Would Work in Practice

Californians Seeking Coverage

All Californians seeking coverage would apply through Covered California, providing information on residency; household composition; income; and any other sources of coverage, such as Medicare or ESI. Implementation would require an initial open enrollment period during which millions of Californians would transition from Medi-Cal or ESI into Covered California plans, followed by ongoing annual open enrollment periods during which enrollees could change plans.

Covered California would use processes similar to those currently in place to annually determine eligibility for subsidies and enhanced benefit plans, including those available to people with incomes below 138% of the federal poverty level (FPL). Similar to the provisions of the Affordable Care Act, Californians would pay no more than a specified percentage of their income for the second lowest-cost Gold plan available in their rating area, which offers coverage comparable to most ESI.[iii] The enhanced subsidy schedule in place nationally from 2021–2025 could serve as a guide for setting required premium contributions.[iv]

Californians with incomes below 138% of FPL would enroll in Covered California plans offering enhanced benefits comparable to those currently provided through Medi-Cal, including services such as non-emergency medical transportation, EPSDT, and enhanced case management. These plans would have no premiums and little to no cost sharing. For these individuals, Covered California plans would function much like Medi-Cal managed care plans do today, but within a unified marketplace that also serves higher-income populations.

Some Californians currently eligible for Medi-Cal have incomes above 138% of FPL, including pregnant people and children under age two with household income up to 322% of FPL and children age 2–19 with income up to 266% of FPL. The question remains as to whether these groups should continue to have access to enhanced benefits under Covered California for Most. One approach would be to preserve eligibility for enhanced benefits for all populations currently eligible for Medi-Cal regardless of income, while a simpler approach would be to limit access to those with incomes below 138% of FPL. Although some families with access to ESI could choose to enroll children or pregnant members in Medi-Cal under current rules, in practice relatively few do so. This suggests that limiting enhanced benefits to those below 138% of FPL would affect a small share of currently eligible beneficiaries while substantially simplifying program design.

A reasonable and humane approach would be to allow all Californians, regardless of immigration status, to obtain coverage through Covered California for Most. While doing so would increase public spending, the cost is modest relative to the scale of California’s $500 billion health care system. Policymakers would need to decide whether to do so.

Medicare beneficiaries would continue to receive coverage through Medicare, and Medi-Cal would continue to provide supplemental benefits for individuals dually eligible for Medicare and Medi-Cal. At the same time, a new category of dually eligible individuals would emerge: individuals who receive acute care coverage through Covered California while relying on Medi-Cal for long-term services and supports. As experience with Medicare-Medicaid dually eligible individuals has demonstrated, careful coordination of benefits and incentives would be required to ensure effective care for this population.

Covered California

Covered California would have a greatly enhanced role. It would determine subsidies for over 20 million Californians, rather than its current two million enrollees; contract with health plans that provide benefits, such as non-emergency transportation, Enhanced Care Management, and EPSDT that are not covered currently by Covered California plans; and contract with Medi-Cal managed care organizations such as local initiatives and County Organized Health Systems.

DHCS would operate a residual Medi-Cal program for long-term services and supports, county behavioral health programs, California Children’s Services, and other specialized services that are not well suited to coverage through a commercial insurance model.

Health Plans

To meet Medi-Cal standards, plans currently under contract to Covered California would need to provide additional benefits, such as non-emergency transportation, Enhanced Care Management, and EPSDT. And while Covered California has already invested substantially in translation, outreach, and cultural competency requirements, expansion to a much broader enrollee population would likely require further strengthening.

Plans currently serving Medi-Cal beneficiaries, would, if they wanted to continue offering coverage, need to make the regulatory changes necessary to become QHPs and begin contracting with Covered California. With the exceptions of LA Care and the Inland Empire Health Plan, other local initiatives and County Organized Health Systems have not yet offered plans through Covered California.

Covered California plans have broader networks and higher payment rates than Medi-Cal plans, but narrower networks and lower payment rates than many employer-sponsored plans. Under Covered California for Most, health plans will adapt. A larger number of middle- and upper-income workers purchasing through Covered California would increase demand for broader provider networks and higher payment rates. At the same time, the integration of lower-income populations into the marketplace would place countervailing pressure on plans and providers to operate more efficiently. The likely result would be some convergence in networks and payment rates across plans over time, rather than the sharp distinctions that exist today.

Beyond benefits and networks, there are important differences between Medi-Cal managed care plans and Covered California QHPs in areas such as consumer protections, appeals rights, reporting requirements, and options to change plans outside of open enrollment. Policymakers would need to decide how many, if any, of the current Medi-Cal requirements to impose on the Covered California plans offered to people with incomes below 138% of FPL. It is relatively easy to construct an argument that non-emergency transportation is an essential benefit for people with low incomes but not for others; it is more difficult to explain why consumer protections, appeals rights, reporting requirements, and plan-switching policies should be different for lower- versus higher-income Californians.

Hospitals and Safety-Net Providers

Nearly all California hospitals currently participate in at least one Covered California network. If Covered California became the dominant source of coverage, hospitals would face strong incentives to participate broadly to maintain patient access and revenue. Maintaining transitional support for safety-net providers — including disproportionate share hospital funding, FQHC prospective payment protections, and other supplemental financing — would likely be essential during implementation. As coverage becomes more stable and comprehensive, patients who currently rely on safety-net providers may increasingly receive care in broader provider networks, potentially reducing reliance on traditional safety-net financing over time.

Employers

Under Covered California for Most, employers would pay a new payroll tax and would no longer be penalized for not offering ESI. Employers would pay the payroll tax regardless of whether they offered ESI, assuring that all employers contribute to the cost of subsidies for lower- and middle-income Californians. Most medium and large employers have substantial numbers of workers with incomes below 500% of FPL ($72,000 for a single worker; $135,000 for a worker with a spouse and children) who would receive large marketplace subsidies under Covered California for Most.[v] With no penalty for not offering insurance, and subsidies pegged to Gold-level plans, it is likely that most employers will instead let their workers take advantage of the subsidies available through Covered California.

Employers with few subsidy-eligible employees might continue to sponsor insurance. Some employers with large numbers of subsidy-eligible employees might think that continuing to offer ESI will enable them to more readily attract and retain the labor force they need than discontinuing ESI. However, these employers are likely to lose out to competitors that instead contribute money to Individual Coverage Health Reimbursement Accounts (IHCRAs), tax-favored accounts employees can use to purchase coverage through Covered California and to receive reimbursement for out-of-pocket payments. [vi] As a result, most Californians who currently receive coverage through ESI would instead obtain coverage through Covered California.

Some multistate employers might continue to offer ESI to their California employees, but many employers would likely decide that they and their employees would be better off allowing California employees to purchase through Covered California and make an IHCRA contribution.

Legislative Changes

At the state level, California would need to adopt a subsidy structure and ensure that Californians with incomes below 138% of FPL could enroll in plans with no (or nominal) copayments and enhanced benefits similar to those in the current Medi-Cal program. California would need to enact a payroll tax and designate the proceeds from that tax to Covered California for Most. Constitutional amendments would be needed to avoid Gann limits on state and local spending. Consideration would be needed of whether to increase the penalty on Californians who do not have creditable insurance.

Federal participation could be structured in a variety of ways, including continuation of current matching arrangements with appropriate waivers or a negotiated block grant. The key requirement is that federal funding be sufficiently flexible to support a unified subsidy structure in California and at least equal to the federal funds that are received today. Federal tax law would need to be changed so that Californians can purchase Covered California plans with pre-tax income.

The state and federal governments would need to agree on what the state would promise to continue to receive federal funding. A reasonable starting place is that California would guarantee universal marketplace access, robust subsidies, and enhanced benefits for residents with lower incomes.

Individuals covered through federal programs such as TRICARE, the Veterans Health Administration, and the Indian Health Service would likely remain outside Covered California for Most because of federal preemption issues and because those programs already function as distinct delivery systems. The federal government would need to decide whether to continue supplying federal health benefits to California-based federal employees or to let them obtain coverage through Covered California and compensate with higher wages or IHCRA contributions.

Financing and Affordability

Achieving the goals of Covered California for Most requires a financing structure that aligns existing federal, state, and employer health spending. Federal Medicaid funds, ACA premium tax credits, and state General Fund dollars currently supporting Medi-Cal would continue to finance a substantial share of coverage. These funds would be consolidated into a unified subsidy structure rather than used to support multiple separate coverage programs tied to income or employment status.

Total health spending in California under Covered California for Most would initially be comparable to current levels and could plausibly be somewhat lower, primarily due to reductions in administrative complexity and insurer overhead.[vii] Extending coverage to the roughly 2.3 million Californians who remain uninsured would increase spending but is unlikely to outweigh potential administrative savings.

Employers in California currently spend roughly 9%-10% of payroll on health coverage, although the amount varies widely by industry and wage level.[viii] Under this proposal, direct employer expenditures on ESI would partially be replaced by payroll tax payments that would be lower than typical employer contributions today. Under the enhanced premium tax credit subsidy structure created by the Inflation Reduction Act, employee contributions for Covered California plans would be higher than they are at present, particularly among higher-income households, although the winners and losers will depend on income, age, plan choice, and employer decisions.

Preliminary estimates suggest a payroll tax of roughly 5% could support the subsidy structure envisioned for Covered California for Most, though the precise level would require more refined modeling and will inevitably depend on employer responses.[ix] The lower employer contribution would shift financing toward higher-income households, who would receive smaller subsidies under the enhanced ACA schedule than they currently do from employers.

Because payroll-based financing is sensitive to economic cycles, a stabilization mechanism, such as a reserve fund, would be needed to maintain subsidy levels during recessions and avoid procyclical reductions in coverage or affordability.

Risks and Tradeoffs

The political challenges are substantial. This proposal would likely require Democratic control of Congress and the presidency, strong leadership at both federal and state levels, union support, and at least some employer engagement. Provider groups may be uneasy about payment and market changes, while the continued role of private insurers would likely draw criticism from both the right and the left. Because Medicare would remain unchanged, engagement from seniors may be limited. Even so, developing a well-specified proposal is arguably valuable should a favorable political window emerge.

Coordinating federal and state actions presents another challenge. Federal policymakers are unlikely to engage seriously unless California demonstrates clear commitment — for example, by enacting a payroll tax contingent on federal cooperation. At the same time, California policymakers may be reluctant to take politically difficult steps without reasonable assurance that federal partners will ultimately participate. Navigating this sequencing problem will require careful political strategy.

Operational and implementation risks are also significant. Covered California would need to expand administrative capacity substantially. Medi-Cal managed care plans would need to transition effectively into the new structure, and safety-net providers could face financial or operational disruption during the transition. Capacity constraints and provider consolidation could create short-term access or affordability challenges.

An additional concern involves individuals with complex or high-cost needs who would continue to receive some or all their care outside of Covered California plans, including those requiring long-term services and supports or specialized behavioral health services that Medi-Cal would continue to organize and deliver. These populations account for a disproportionate share of total spending, and fragmentation between Covered California plans and residual Medi-Cal programs could create challenges for care coordination, accountability, and financing. Ensuring that incentives are aligned across programs — and that plans and providers have clear responsibility for managing care for these individuals — will be critical to avoiding cost shifting and gaps in care.

Shifting enrollment responsibility from employers and public programs to individuals raises the risk that some Californians may fail to enroll in or maintain coverage. While Covered California has experience with large-scale enrollment, expanding to a population of this size would require substantial investment in outreach, navigation, and automatic or facilitated enrollment strategies, as well as a substantial tax penalty on people who remain uninsured. Without careful attention to these issues, the system could experience higher rates of uninsurance than intended, particularly among populations with limited administrative capacity or unstable living circumstances.

Financial uncertainty is another important risk. Estimates of required subsidies and payroll tax revenues may prove inaccurate, and long-term health care cost growth could exceed projections. Without effective cost-control mechanisms, policymakers could face pressure either to increase financing or to accept reductions in access, affordability, or quality. A more unified purchasing platform would strengthen California’s ability to restrain health care cost growth but does not guarantee success.

Distributional Tradeoffs and Financing Choices

A central tradeoff in Covered California for Most is how financing shifts across income groups, particularly for middle- and upper-income workers. Under the proposal as written, many higher-income households will pay more for insurance premiums than they do today. For example, under the enhanced ACA subsidy structure, a family purchasing a $30,000 Gold plan through Covered California would receive no subsidy once required premium contributions reach 8.5% of annual income, which is roughly $350,000. A household at or above that level — currently accustomed to an employer paying 70–80% of the premium — would instead be responsible for the full cost of coverage. Even if economic theory suggests that employer savings from no longer providing ESI would be passed back to workers in the form of higher wages, such adjustments are unlikely to occur fully or immediately, particularly for non-union workers. As a result, many higher-income households would perceive the proposal as a substantial financial loss.

Unionized workers may be better positioned to negotiate compensation adjustments that reflect the shift from employer premium contributions to payroll tax financing. For non-union workers, employers could partially offset these effects through ICHRA contributions. However, under current rules, ICHRA contributions cannot be tailored in a way that fully compensates higher-income workers for the loss of employer-sponsored coverage without raising equity and regulatory concerns.

Policymakers could mitigate the impact on higher-income households by reducing the maximum required premium contribution from 8.5% to a lower level – for example, 5% of income. Doing so would extend subsidies much further up the income distribution; for a $30,000 family premium, subsidies would reach households with incomes of $600,000. However, this approach would require a higher payroll tax or additional public financing. Policymakers could go further by giving all Californians access to second lowest-cost plans with no premium contributions. This could be financed through a substantially higher payroll tax that could be shared between employers and employees.

Even if employers increase total compensation to reflect their savings, the distribution of those gains across workers would be varied. Employer premium contributions today are a fixed cost per worker. Replacing that with a payroll tax equal to a percentage of wages would shift financing toward higher-wage workers. For lower-wage workers, 5% of wages is typically much less than employer premium contributions, meaning their compensation would increase substantially if savings were equally distributed. For higher-wage workers, 5% of wages may be closer to or greater than employer contributions, implying smaller gains or even losses.

At the same time, the move to income-based subsidies in Covered California further redistributes resources toward lower- and middle-income households. Taken together, these changes mean that redistribution is not incidental to the proposal — it is a core feature. While policymakers can adjust the degree of redistribution through subsidy design and payroll tax levels, the underlying shift away from flat employer contributions toward income-based financing will inevitably make health care financing more equitable.

There is a wide range of financing options, each balancing affordability, equity, and political feasibility in different ways. Identifying the best option will require careful consideration of how costs are distributed across workers, employers, and taxpayers, as well as how those distributions are perceived. The success of Covered California for Most will depend not only on its technical merits, but also on whether these tradeoffs are viewed as fair and sustainable.

Finally, Covered California for Most would change how Californians perceive the cost of coverage. Under ESI, a substantial share of premiums is paid by employers and is largely invisible to workers, particularly because contributions are excluded from taxable income. Under Covered California for Most, individuals would pay premiums more directly, even if those payments are offset by higher wages or subsidies. This shift in salience could generate resistance, even among individuals whose total compensation and coverage value are unchanged or improved. At the same time, greater visibility of health care costs may strengthen public and political support for efforts by Covered California and other policymakers to moderate premium growth, potentially contributing to more effective cost control over time.

Conclusion

California faces a narrowing window to reshape its health coverage system before fragmentation, affordability pressures, and federal retrenchment deepen existing inequities. Medi-Cal has been asked to shoulder an ever-growing share of the state’s coverage burden, even as beneficiaries cycle in and out of the program and providers struggle to deliver consistent care across payer boundaries. At the same time, ESI — long treated as the stable core of the system — has become increasingly expensive, uneven, and ill-suited to a labor market defined by job mobility and income volatility.

Covered California for Most responds directly to this moment. It builds on California’s existing strengths — an established marketplace, sophisticated managed care infrastructure, and a commitment to equity — while addressing the core structural weakness of today’s system: fragmented financing tied to employment and income thresholds. By creating a stable, unified source of coverage for most Californians, this proposal aligns incentives for prevention, reduces administrative waste, and treats coverage as a public good rather than a contingent employment benefit.

Federal uncertainty heightens the stakes. Potential Medicaid financing constraints, new work requirements, and the loss of enhanced ACA subsidies all point toward more churn and more uninsurance under the status quo. Meanwhile, California is investing heavily in delivery system reform through initiatives such as CalAIM — investments whose impact will be blunted if coverage instability continues. Without bold reform, the state risks layering transformation efforts onto a foundation that remains fundamentally misaligned.

Covered California for Most is not easy, and it is not risk-free. But the alternative — continued incrementalism in the face of mounting fiscal and structural pressures — carries its own risks, including widening disparities and declining public confidence in the health system. For the next generation of Californians, the question is not whether change is needed, but whether the state will be prepared with a credible, well-developed vision when political conditions allow. This proposal aims to provide that vision.

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Endnotes

[i] National Medicaid analyses suggest that roughly 20% of beneficiaries lose eligibility or fail renewal in a given year (Medicaid and CHIP Payment and Access Commission, An Updated Look at Rates of Churn and Continuous Coverage in Medicaid and CHIP, https://www.macpac.gov/wp-content/uploads/2021/10/An-Updated-Look-at-Rates-of-Churn-and-Continuous-Coverage-in-Medicaid-and-CHIP.pdf). Analysis of California’s individual market shows median enrollment durations of approximately 14 months and a monthly termination rate of 3.9%, implying annual turnover on the order of 20% or more (JAMA Health Forum, https://jamanetwork.com/journals/jama-health-forum/fullarticle/2799211). Job turnover data from the Bureau of Labor Statistics Job Openings and Labor Turnover Survey indicate monthly separations of roughly 3–4% of employment, implying substantial annual job transitions affecting employer-sponsored coverage (https://www.bls.gov/news.release/jolts.t20.htm). The aggregate estimate of approximately five million annual transitions reflects a conservative synthesis of these sources and California-specific enrollment levels.

[ii] Private insurers pay California hospitals about twice Medicare rates. Kronick and Neyaz estimated that private insurance payments to California hospitals averaged 209% of Medicare in 2016 (Richard Kronick and Yusra Neyaz, Private Insurance Payments to California Hospitals Average More Than Double Medicare Payments, West Health Policy Center, 2019, https://westhealth.org/wp-content/uploads/2023/11/West-Health-Policy-Center-Hospital-Pricing-Analysis-May-2019.pdf). More recent analysis presented to the Office of Health Care Affordability Board, based on HCAI hospital financial data for 2018–2022, reports a weighted mean commercial-to-Medicare payment-to-cost ratio of approximately 205% for comparable hospitals, using a closely related methodology (Office of Health Care Affordability, February 2025 OHCA Board Meeting Presentation, table on “Unit and Relative Price Measure Distributions, 2018–2022,” https://hcai.ca.gov/wp-content/uploads/2025/03/February-2025-OHCA-Board-Meeting-Presentation.pdf).

[iii] Estimates of actuarial value for employer-sponsored insurance are not routinely published, but available analyses suggest values in the low- to mid-80% range. For example, an analysis conducted under contract with the U.S. Department of Labor estimates an average in-network actuarial value of approximately 84% for employer-sponsored plans (U.S. Department of Labor, Employer-Sponsored Insurance Actuarial Values and Sensitivity Analysis, https://www.dol.gov/sites/dolgov/files/ebsa/researchers/analysis/health-and-welfare/employer-sponsored-insurance-actuarial-values-and-sensitivity-analysis.pdf).

[iv] That schedule is: 0% of income up to 150% of the Federal Poverty Level (FPL), between 0%-2% from 150-200%, 2%-4% from 200-250%, 4%-6% from 250%-300%, 6%-8.5% from 300%-400%, and 8.5% above 400%.

[v] The income threshold for subsidies will depend on the individual’s age, household size, and the premium for the second lowest cost Gold plan in the rating area, but for many workers the threshold will be around 500% of FPL.

[vi] Matt McGough et al., Explaining Individual Coverage Health Reimbursement Arrangements, Peterson-KFF Health System Tracker, October 22, 2025.

[vii] For an in-depth analysis of the savings from a system of unified financing and the additional costs of providing universal coverage, see: Key Design Considerations for a Unified Health Care Financing System in California (PDF), Healthy California for All Commission, April 2022. Since the report analyzes a scenario of fully unified financing that includes Medicare, its estimates are not directly applicable to Covered California for Most, but the basic result — that savings from lower administrative costs would likely exceed the additional costs of universal coverage — would likely also apply to Covered California for Most.

[viii] The California Health Care Foundation’s California Health Insurers Almanac reports approximately 13.7 million commercial enrollees and 5.9 million individuals in administrative services only (self-insured employer) arrangements, for a total of 19.6 million with commercial or employer-related coverage (https://www.chcf.org/resource/california-health-insurers-enrollment-almanac/). Subtracting approximately 2.3–2.6 million individuals enrolled in the individual market, including roughly 1.7–1.8 million Covered California enrollees, yields an estimate of approximately 17 million Californians with employer-sponsored insurance. Average premiums are drawn from the California Health Benefits Survey (CHCF/KFF, 2025, https://www.chcf.org/resource/california-health-benefits-survey-2025/), which reports premiums of approximately $9,000 for single coverage and $25,000–$26,000 for family coverage, with employers paying roughly 75–80% of total premiums. Assuming that roughly 45% of covered individuals are in single coverage and 55% are in family coverage, and that family policies cover approximately 2.6 individuals on average, implies approximately 7.5–8 million single policies and 3.5–3.8 million family policies. Applying the corresponding premiums yields total premiums of approximately $160 billion annually and employer contributions of roughly $120–130 billion.

Total wages and salaries in California were approximately $1.8 trillion in 2025 (Bureau of Economic Analysis, State Personal Income and Employment, Table SAINC, “Wages and Salaries,” https://apps.bea.gov/itable/?ReqID=70). Employer-sponsored insurance covers a majority of working-age individuals but is disproportionately concentrated among full-time and higher-wage workers; as a result, the share of total wages associated with workers receiving employer-sponsored insurance is higher than the share of the population covered. Assuming that employers offering ESI account for approximately 75% of total wages (about $1.36 trillion), these estimates imply employer ESI costs of roughly 9% of payroll for workers with ESI, which is consistent with other estimates.

These calculations are intended as back-of-the-envelope estimates to establish order of magnitude rather than precise totals.

[ix] I assume that funds currently used to pay for coverage for Medi-Cal beneficiaries and for people purchasing coverage through Covered California will remain available and sufficient to subsidize coverage for these groups under Covered California for Most. There are approximately 20 million Californians who are covered by ESI, are uninsured, or are purchasing off-exchange individual coverage and who will potentially need new subsidies to purchase coverage under Covered California for Most. A rough estimate is that the total premium for the second lowest-cost Gold level coverage for these 20 million people in 2024 would be $179 billion. (One way of constructing this estimate is starting with the $160 billion for ESI, increasing it by the ratio of 20 million to 17 million to get to $188 billion, discounting it by 0.8/0.84 to reflect the slightly lower AV for Gold coverage compared to ESI. An alternate approach uses the 2024 premiums from Covered California, which in the December 2024 member profile report are reported to average $755/month for the Gold plan, or $9,060/year. Multiplied by 20 million people, which gives a total of $181 billion, although the premium for the second lowest cost Gold plan would be lower. Given the income distribution for these 20 million Californians and the Inflation Reduction Act subsidy schedule, they would be expected to pay approximately 45% of the premium of the second lowest cost Gold level coverage, or approximately $78 billion, with $96 billion coming from subsidies. That represents 5.3% of a payroll tax base of $1.8 trillion.