California Politicians Cry Foul Over Newsom’s Move To Drive Healthcare Costs Even Higher

Independent California Rep. Kevin Kiley criticized Democratic Gov. Gavin Newsom on Wednesday for recently approving a healthcare tax hike that he says will impose high cost burdens on residents across the state.

California state legislators approved a revamped healthcare tax that would impose higher costs on Californians with private insurance to help safeguard billions of dollars in federal Medi-Cal funding, CalMatters reported on June 18. If finalized by President Donald Trump’s administration, the move could hike annual healthcare premiums by roughly $400 for a family of four, according to the outlet.

“They are imposing this new tax that’s gonna raise people’s healthcare premiums [by] hundreds of dollars,” Kiley told the Daily Caller News Foundation in an interview on Wednesday. “What’s even worse is that this is something that the voters have explicitly said the state isn’t allowed to do. So it violates, at the very least, the spirit of … Proposition 35, which is passed by the voters. So we are encouraging the Federal Department of Health and Human Services (HHS) to stop this tax from going into effect.”

“This is not something that people in our state can afford,” he continued.

Newsom signed California’s 2026-2027 state budget into law on June 29 in an effort to enact “a balanced spending plan that protects Californians today while strengthening the state’s long-term fiscal future,” according to a news release.

When reached for comment, Newsom’s office referred the DCNF to the California Department of Finance (DOF).

“It’s the Trump administration that was advocating for H.R.1 in the first place, which is what necessitated this change,” California DOF Deputy Director of Legislation Christian Beltran told the DCNF in a statement. “We hope and expect it will be approved by the federal government. Specifically, the MCO Tax authorized by Chapter 24, Statutes of 2026 (SB 125), conforms with new federal requirements in H.R. 1. The tax is structured to apply uniformly across both Medi-Cal managed care plans and commercial plans, as required by H.R. 1.”

In November 2024, voters in California approved Prop 35, which made the Managed Care Organization (MCO) tax permanent, “subject to continued federal approval, and dedicating the resulting revenues to specified Medi-Cal program purposes beginning in 2025,” according to the California Department of Health Care Services (DHCS). Prop 35 also requires the DHCS to “consult with a stakeholder advisory committee prior to proposing or implementing any new provider payments or changes to existing provider payments supported by” the MCO tax.

Kiley claimed in a Monday X post that Newsom the healthcare tax “will increase premiums for Californians by hundreds of dollars,” adding that the move “defies the will of our voters, who passed Prop. 35 to limit such tax increases.”

“This affront to both affordability and democracy cannot stand,” Kiley claimed in the social media post.

Republican California Reps. Vince Fong and Jay Obernolte said in a June 24 letter addressed to Newsom and California State Medicaid Director Tyler Sadwith that, “as written, the reworked MCO tax would increase costs on commercial health plans and appears designed to preserve state revenue to offset General Fund obligations, rather than make health care more affordable.”

The California Association of Health Plans (CAHP) claimed in a June 30 statement that Newsom had “approved a budget that balances the state’s books on the backs of California’s working families and small businesses with a big tax increase on their health coverage.”

“At a time when Californians are already stretched thin by the rising costs of housing, groceries, childcare, and transportation, adding hundreds of dollars in new health insurance costs is the wrong choice,” according to CAHP’s statement. “Previous MCO taxes were designed to strengthen Medi-Cal while protecting affordability for Californians with commercial coverage.”

California State Assembly Republicans similarly warned in a Monday statement that the new health tax is poised to “drive up premiums for families, workers, and small businesses across the state.”

“This new Healthcare Premium Tax is a wolf in sheep’s clothing,” Assemblyman Carl DeMaio said in a statement. “Newsom and Sacramento Democrats blew billions, can’t balance a budget, and now they want working families to pay the price with another $425 in higher healthcare costs. Californians are already struggling to afford coverage—the last thing they need is another backdoor tax hike from Sacramento.”

DeMaio and over a dozen other GOP members of the California State Assembly also sent a July 6 letter to HHS Secretary Robert F. Kennedy Jr. and Centers for Medicare And Medicaid Services Administrator Dr. Mehmet Oz alleging that “at a time when California families’ healthcare costs are already rising at an unsustainable rate, this [tax] proposal would add another $425 cost per year for the typical family.”