Most California insurance plans could be ineligible for tax credits under the GOP’s new proposal

Reporting from Sacramento —  An antiabortion provision in the recently unveiled House GOP plan to replace Obamacare could make it impossible for most Californians to take advantage of proposed tax credits meant to offset the cost of health insurance.

The Republican healthcare proposal would offer individual tax credits to people who do not get insurance from their employer, but it would prohibit that money from being spent on plans that cover abortion — a ban that would make virtually all health plans in the state ineligible for such credits.

The restriction, should it become law, sets the stage for yet another clash between liberal California and the GOP-dominated federal government.

“On the face of it, it’s a direct challenge to how [health insurers] operate in California,” said Amy Chen, an attorney with the National Health Law Program, which backs abortion access. “In practice, I think there would almost certainly be legal challenges to the federal provision and its implementation in California.”

A top California Democrat said he also saw an impending conflict.

The House GOP proposal “is directly at odds with California law and California’s constitutional protection of an individual’s right to have access to abortions,” said Dave Jones, the state insurance commissioner.

The potential collision stems from how thoroughly California has embraced abortion rights, starting with enshrining a right to privacy in its Constitution. In 1981, a court ruled that, under the California Constitution, the state must treat abortion and maternal care neutrally. Any plan offered or regulated by the state that offers pregnancy coverage must also cover abortions.

State law now requires all policies in the individual and small group markets to cover abortion.

Other states have taken steps to guarantee abortion coverage in healthcare. Massachusetts requires health insurers to cover “medically necessary” care, which often can apply to abortions. New York has proposed a regulation that would mandate insurers to cover medically necessary abortions requiring a co-pay. But no state is as comprehensive in requiring private insurers to cover abortion as California.

“California is basically in a class by itself,” said Elizabeth Nash, a state policy analyst with the Guttmacher Institute, a think tank that supports legalized abortion.

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The state’s position in favor of abortion rights can be at odds with the federal government’s. For 40 years, Congress has routinely approved a provision barring certain federal funds from being used to subsidize elective abortions. In crafting the Affordable Care Act, former President Obama vowed that no federal dollars would go toward abortions.

In response, insurers that sell plans on the Covered California exchange, which was set up by Obamacare, effectively segregate the premiums they collect into separate funds, so that the federally provided subsidies are not put toward abortions.

Opponents of abortion have argued that California’s coverage requirements violate a religious freedom law that protects healthcare providers who object to abortion on moral grounds. The Obama administration upheld California’s policy, but House Majority Leader Kevin McCarthy (R-Bakersfield) has asked new Health and Human Services Secretary Tom Price to revisit the issue.

“Congressman Kevin McCarthy believes that California’s current policy mandating that elective abortions be offered in every health plan offered in the exchange directly violates” the federal law, said his spokesman, Matt Sparks.

The Obamacare replacement proposal put forth by House Republicans this week adds a new wrinkle.

The plan would do away with the income-based subsidies that consumers can use to purchase insurance. Instead, people who aren’t insured through an employer would qualify for tax credits based on their age, with older consumers getting larger credits. People over 60 could get as much as $4,000 annually, while those under 30 could get as little as $2,000 per year.

Under the bill, those tax credits could not be put toward a plan that covers abortion.

“If Congress adopts the current House GOP plan in its present form … its tax credits could not be used to purchase 98% of California’s current insurance offerings,” said Chuck Donovan, president of the Charlotte Lozier Institute, a think tank that opposes abortion. “They could only be used to purchase one of the four multi-state plans. The GOP plan would not affect California’s mandate, except to the extent that it would create an incentive for California to allow abortion-free insurance options, which the state, an outlier in this regard, should do anyway.”

Abortion rights advocates say that sets up an untenable conflict between California and the federal government.

“Something has to give,” said Nash of the Guttmacher Institute. If the policy went into effect as written, “either the state would have to revise their law potentially or … people would be penalized several thousand dollars because they would want a plan that has full coverage including abortion coverage.”

Advocates on both sides of the issue caution it is far from clear that the bill in its current form would become law. The proposal has had a rocky rollout, facing pushback from the conservative flank of the GOP, as well as uniform opposition from Democrats.

Donovan said he believed the abortion restriction would not stall a replacement plan.

“In fact,” he said, “we expect such mandates to help propel any reform plan forward.”

Jones said he hoped the U.S. Senate “would take a different view and pull this language from the bill.”

Otherwise, he said, it could open the potential for lawsuits.

“Were I [state] attorney general, I would sue to challenge this if it remains in the bill,” said Jones, who is running for the post in 2018.

A spokesperson for state Atty. Gen. Xavier Becerra did not respond to a request for comment.

Meanwhile, state regulators are keeping an eye on the provision as it makes its way through Congress. The California Department of Managed Health Care, which regulates more than 90% of the state’s commercial health plan market, “has just begun its review of the proposal,” said spokesman Rodger Butler.

Amy Palmer, spokeswoman for Covered California, said the abortion provision “is one of the many issues contained in the House proposal we are looking to better understand so that we can be prepared to provide technical assistance to policymakers.”

Insurers struck a similar “wait-and-see” note.

“Plans will continue to provide covered, medically necessary services until changes in federal law take effect,” said Charles Bacchi, president and CEO of the California Assn. of Health Plans. “This is a bridge we will cross when we get there.”

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Updates from Sacramento