Matthew Goodlon, program evaluator for the Legislative Finance Committee, presented a legislatively required evaluation of the Health Care Affordability Fund (HCAF) established by 2021 legislation. The evaluation found that surtax revenues have substantially exceeded subsidy expenditures so far, and recommended clearer performance measures and multi‑year targets.

Goodlon summarized how the premium surtax and related premium tax flow into state revenue and the HCAF: for every $100 in premiums, about $6.76 is collected in tax and surtax (approximately $3 premium tax and $3.75 surtax) and a legislatively set share of the surtax is distributed to the HCAF. He said that figure and the HCAF balance led to a large FY24 beginning balance and a sizable carryover into FY25.

The evaluation’s principal findings included that HCAF appropriations have exceeded demand to date and that HCA should develop explicit five‑year uninsurance‑rate performance targets and additional measures that track program reach and fiscal performance. The report noted the HCA has implemented three subsidy programs: small business premium relief, marketplace affordability subsidies, and a coverage expansion program that remains to be launched for specific populations (including planned options for undocumented residents); actuaries estimate first‑year costs for the coverage expansion program in a range depending on rate assumptions.

Goodlon and HCA officials flagged an important federal policy risk: enhanced federal marketplace subsidies are set to expire at the end of the calendar year absent congressional action. The report modeled that if enhanced federal subsidies end, per‑member costs for state subsidies could rise materially (a presenter estimated average subsidy costs could increase from about $45 per member per month to roughly $130), and enrollment and state costs could change substantially. Goodlon recommended that the legislature require HCA to set explicit targets for reducing uninsurance and link surtax distribution shares to those targets.

Alex Castillo Smith, deputy secretary at the Health Care Authority, said HCA largely agreed with the report’s recommendations and emphasized the agency’s intent to align HCAF spending with performance measures and to leverage federal funds where available. Smith also warned that possible federal changes and provider‑tax discussions at the federal level could alter state fiscal dynamics and that HCA will monitor Washington actions closely.

Why it matters: the HCAF evaluation gives lawmakers a fiscal view of a new revenue stream created to subsidize premiums and expand coverage. The findings call for clearer performance goals and an explicit approach to adjusting HCAF distributions if federal subsidies or program demand change.

The committee heard that HCAF has funded marketplace subsidies, small business assistance and other health initiatives, and that lawmakers will need to decide how to balance carryover, ongoing subsidy needs and potential new coverage expansions.