California’s government spent an estimated $12.4 billion in 2025 on healthcare for illegal immigrants, the Associated Press reported. Now Sacramento wants you to cover the bill. Gov. Gavin Newsom and Democratic lawmakers are pushing a redesigned health-plan tax that would raise the levy on private health insurance plans starting in 2027 — if Washington approves it — and critics warn the cost lands directly on working families.
Brian Blase, president of the right-of-center Paragon Health Institute, told Fox News Digital the math is simple: “The One Big Beautiful Bill Act limited California’s ability to target the tax just on Medicaid insurers, so California is proposing to raise the health insurance tax on people that have private coverage… the estimates are that would increase insurance for families by $400 a year.” Health insurers put the hit at about $100 per person per year — $400 for a family of four, on top of normal rate increases.
The tax has united an unlikely coalition against Newsom: the California Medical Association and the California Association of Health Plans are suing to block it, arguing it violates Proposition 35 — the voter-approved law that limits how much the state can tax commercial health-plan enrollment and dictates how the money gets spent. Doctors and insurers almost never agree on anything. On this, they’re on the same side of a lawsuit.
Here’s the backstory Sacramento hopes you skip: after Washington tightened the rules on health-plan taxes used to draw federal matching funds, California could no longer aim its old tax mainly at Medicaid insurers after 2026. So the state designed a two-track proposal — one similar to the old scheme that might violate federal law, and one that shifts the burden onto private plans. If the feds reject the first track, Prop 35 may sunset entirely, per the Department of Finance’s H.D. Palmer.
Newsom spokeswoman Tara Gallegos insists the tax doesn’t violate the proposition: “The state disagrees with their claims, and we believe the courts will too.” Meanwhile, California keeps bleeding residents — nearly 10 million people left for other states between 2010 and 2024 while just over 7 million moved in, with the cost of living the reason people cite most.
What they’re not telling you
Read that $12.4 billion number again. California handed free healthcare to people here illegally, blew a crater in the Medi-Cal budget, and now the “solution” is a new tax on the health insurance of citizens who actually pay for their own coverage. When asked point-blank whether expanding coverage to illegal immigrants created the need to raise taxes, Blase answered with a strong “yes.” And notice who’s suing: not some partisan group — the doctors AND the insurance companies, together. When the people who provide your care and the people who pay for it both go to court to stop a tax, that tax isn’t about healthcare. It’s about making working families cover Sacramento’s spending spree while the state refuses to cut a single benefit it handed out.
Video: Washington Examiner on YouTube — “California Republicans urge RFK Jr. to block new Newsom-backed taxes on health insurers.”
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