California's new health-plan tax sparks backlash over immigrant costs and private premiums
Governor Gavin Newsom backs a redesigned health-plan tax to fund Medi-Cal after federal rule changes, prompting doctors and insurers to sue over its legality and impact on private coverage.
Facing a shortfall after Washington tightened rules on health-plan taxes that fund federal matching dollars, California proposes a new levy on private insurers beginning in 2027, a move championed by Governor Gavin Newsom. The redesign aims to cover the $12.4 billion Medi-Cal expense on undocumented residents reported for 2025. Opponents, led by the California Medical Association and the California Association of Health Plans, have filed a lawsuit claiming the tax breaches voter-approved Proposition 35 and exceeds limits on health-plan taxation.
Insurers warn the added cost could translate into roughly $100 more per enrollee each year, or $400 for a typical family. Proponents argue the change aligns with the One Big Beautiful Bill Act and is necessary to sustain Medi-Cal financing. The governor’s spokesperson asserts the state will prevail in court, while officials note a fallback plan if the federal government rejects the proposal.
Why it matters
The tax could raise health-insurance costs for millions of Californians while reshaping how the state funds care for undocumented residents.
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