California’s decision to raise its hourly minimum wage to $15 by 2022 could have unintended consequences for thousands of workers who will make too much money to stay on Medi-Cal, the state’s health insurance program for low-income residents.
Those workers will need to get health insurance through their employers or buy it on Covered California, the state’s Obamacare insurance exchange, or buy insurance, without subsidies, on the broader insurance market.
That could mean higher costs for many workers, though for the vast majority of them, the benefit of higher wages could outweigh the costs, said Miranda Dietz, a researcher at the University of California, Berkeley Labor Center. People buying through Covered California can qualify for subsidies for their premiums and copayments, depending on their income.
“The subsidies are really strong for the lower income folks,” Dietz said. “Folks still come out ahead.”
Even small wage increases will push people off the Medi-Cal rolls. In January, the minimum hourly wage will rise from $10.00 to $10.50 for businesses with more than 25 employees. By next June, about 4,000 Medi-Cal recipients are expected to leave the program as their rising incomes make them ineligible, according to the Department of Health Care Services, which oversees Medi-Cal.
Covered California estimates that by 2020, the minimum wage increase could result in 67,558 to 204,740 additional people leaving Medi-Cal and buying plans on the insurance exchange.
In fact, the wage hike is expected to drive most of the new enrollment in Covered California in the coming years, according to an analysis conducted for the exchange.
As workers’ incomes rise, they’ll also be more likely to afford employer-sponsored health coverage. Health Access California, a statewide advocacy group, recently estimated that about 77 percent of workers earning $15 an hour would choose their employers’ health insurance plan if available.
Health Access also estimated that California’s Medi-Cal spending would drop by about $700 to $800 million each year as more low-wage workers leave the program.
With Medi-Cal’s expansion in recent years under the Affordable Care Act, it increasingly has become a program for working people. More than two-thirds of its adult beneficiaries, nearly 4.7 million people, are in the labor force, and a majority of those hold full-time jobs, according to a report released Friday by the Bay Area Council Economic Institute.