CalOptima, Orange County’s health insurer for the poor, has invested $430 million from its reserves to increase payments to hospitals and specialists amid sweeping changes to Medi-Cal.
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The funding, which kicked in July 1 and will last through the end of 2028, is the second such investment the insurance administrator has made in recent years. In 2024, CalOptima earmarked $526 million from its reserves to bolster provider rates through the end of 2026.
Yunkyung Kim, CalOptima’s chief operating officer, said the second round of funding aims to boost rates for outpatient hospitals and specialist physicians, two provider categories to which she said members have faced access challenges. The health system has around 9,600 primary care doctors and specialists, along with 43 acute and rehab hospitals it works with.
Along with helping ensure quality of care through the retention of doctors and specialists, CalOptima’s investment will help hospitals recoup the costs of treating uninsured patients who are unable to pay.
Patients who lose coverage typically delay preemptive care and go to the hospital only when they require emergency intervention for severe health crises, Kim said. Hospitals often bear the brunt of these costs because they’re legally required to provide emergency care to patients regardless of their insurance status, she said.
“As Orange County residents become uninsured, the cost of their health care becomes uncompensated,” Kim said. “That level of uncompensated care is certainly anticipated to become an increasing strain to all of our local hospitals, all of our local ERs.”
Some 3 million Californians, including 250,000 Orange County residents, are projected to lose coverage by 2028 as a result of policy changes from H.R. 1, last year’s massive federal tax and spending bill, and the state budget, according to a report released earlier this year by the UCLA Center for Health Policy Research and the UC Berkeley Labor Center.
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CalOptima, which serves about one-third of the county’s population, has seen an 8% enrollment drop since H.R. 1 was enacted in July 2025, with roughly 819,000 members remaining at the end of May. That translates to tens of thousands of members who have lost Medi-Cal coverage, officials said, leading to lower reimbursement rates for hospitals.
The 30-month funding commitment accounts for the time it takes for CalOptima to “establish that rate of spend as the new baseline,” Kim said. Once the higher baseline is set, the health plan will be able to seek reimbursement from the state. Until then, she said, the funding will have to be drawn from its reserves.
As of May 31, CalOptima had about $1.7 billion in reserves, though part of that is restricted in how it can be used. The $430 million earmarked toward provider rate increases will be drawn from the health plan’s $783 million unallocated resource pool, which is separate from those reserves, Kim said.
In addition to the investment in provider rates, CalOptima approved $3.6 million in grant funding to seven community-based organizations so they can help members maintain Medi-Cal coverage. The health program invested $20 million last October to help boost Medi-Cal enrollment.
“Our reserve level will allow us to support about 170 days of operations in the event that something were to happen and we’re not funded, so it leaves us still in a very strong financial position,” Kim said. “We still have $250 to $260 million remaining for the board to determine additional investments in future from that unallocated resource pool.”
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