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Individual Mandate in California Would Cost up to $10 Billion Yearly, Study Estimates

APRIL 28, 2006 –- Requiring California residents to purchase health insurance could cost the state between $6.8 billion and $9.4 billion per year, according to a new study by the non-partisan Institute for Health Policy Solutions.

The idea of an individual mandate came to the forefront when Massachusetts passed legislation earlier this month that aims to provide near universal coverage for the state's 6.4 million residents—550,000 of whom are uninsured—as well as subsidize premiums on a sliding scale for people earning below 300 percent of the federal poverty level. Republican Gov. Mitt Romney signed the legislation into law April 12.

An individual mandate in California would cost more because the state has a far higher proportion of uninsured and low-income residents, the study notes. Redirecting existing state funding for the uninsured also wouldn't provide as much money to subsidize the purchase of insurance in California as it would in Massachusetts. Massachusetts' plan relies on redirecting $1 billion in existing funding to pay for new subsidies to low-income residents to buy insurance—about $1,300 to $1,800 per uninsured resident annually. Were California to similarly redirect $2 billion in existing state funds, doing so would yield only $300 per uninsured resident annually.

The institute's model for a health insurance mandate in California, however, only focuses on an individual mandate. The Massachusetts law contained a provision requiring payment of a fee of $295 per employee by employers with 11 or more full-time workers who do not offer or contribute to workers' health coverage. Massachusetts lawmakers were expected to override a Romney veto of the provision.

Were California able to redirect all $2 billion of its existing funds to a subsidy program, the cost of an individual mandate in the state would fall to somewhere between $4.8 billion and $7.4 billion per year, the study calculated.

The institute's brief is part of a larger ongoing analysis to be released this summer.

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