Fong Demands Answers on California’s Health Care Tax

WASHINGTON, D.C. - Yesterday, Congressmen Vince Fong (CA-20) and Jay Obernolte (CA-23) demanded answers from Governor Gavin Newsom and State Medicaid Director Tyler Sadwith, raising serious concerns about a revised health care tax buried in California's recently passed state budget. The proposal would raise costs on millions of Californians with private health insurance and appears to violate a voter-approved law.

The two lawmakers sent a letter that was co-signed by Reps. James Gallagher (CA-01), Kevin Kiley (CA-03), Tom McClintock (CA-05), David Valadao (CA-22), Young Kim (CA-40), Ken Calvert (CA-41), and Darrell Issa (CA-48).

California families are already among the most financially strained in the nation, facing high housing costs, soaring gas prices, and mounting pressure on household budgets. Now, Governor Newsom's budget proposes a new tax on commercial health plans that would cost enrollees an additional $8.85 per person, per month - a more than 400% increase from what commercial plans were previously taxed. The California Legislative Analyst's Office has warned that insurers will likely pass these costs directly to consumers through higher premiums, potentially costing working families hundreds of dollars more per year.

"Californians are already struggling with high costs of living, including rising housing costs, high gas prices, and mounting pressure on household finances for basic necessities," the letter states. "This proposal would place an additional financial burden on working families, employees, and employers who rely on commercial health insurance."

Making matters worse, this proposal appears to directly violate the will of California voters. In November 2024, voters overwhelmingly approved Proposition 35, which limits taxes on commercial health plans to $2.50 per member and requires that any health care tax revenue go toward improving Medi-Cal, not plugging the state's budget hole. Newsom's proposal does both things that voters specifically prohibited.

"What makes this even more troubling is that Californians explicitly weighed in on this question," the letter continues. "In November 2024, voters approved Proposition 35, which directs MCO tax revenue toward specific Medi-Cal improvements and prohibits those funds from replacing existing state Medi-Cal spending. Proposition 35 set a $2.50 limit on commercial plans to protect Californians from premium increases. The current proposal appears to move in the opposite direction by increasing the tax on commercial plans and using the resulting revenue to support broader budget obligations.

"Our constituents deserve transparency about how this policy will affect their pocketbooks and whether it honors the commitments made to voters at the ballot box," the letter concludes. "We urge the state to pursue a budget solution that does not increase health care costs for Californians, who are already struggling with California's high cost of living."

To view the full letter, click here.

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