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there's a sizable group earning over 50k who don't choose to buy insurance

The are people who should consider Health Savings Accounts (HSA's).

As part of that gigantic Medicare bill President Bush signed in his first term, these accounts allow people under age 65, with qualifying high deductible health insurance plans (HDHP's), to set aside pre-tax money from their income. This money can be saved for tax-deferred retirement, like any other pre-tax retirement account, or the money can be withdrawn tax-free and penalty-free for medical expenses at any time.

The tax benefits of HSA's were designed to encourage people to buy affordable high-deductible health insurance -- especially healthy young people who don't really need regular health insurance and who pay income taxes -- and also to save enough money in a personal account to cover the deductible in case of a serious medical problem. The full amount of one's annual HSA contribution can be deducted from income before the AGI is calculated, so this deduction is immune from the alternative minimum tax (AMT).

However, HSA's are not as abundantly available as IRA's at banks or for investing, and many banks charge fees simply to open or maintain HSA's. The contribution and deduction are limited by the smaller of the HDHP deductible or an inflation-adjusted maximum dollar amount; in 2006, $2700 is the maximum HSA contribution limit for a single person under age 55 in 2006, compared to $4000 for an IRA for the same person (with income below the phase-out threshold for Roth IRA's), significantly fewer people qualify for HSA's than for IRA's. Tax reporting is also more complicated, since many states do not conform to federal law on HSA's, whereas most or all states conform to federal law on IRA's. So, banks and brokerages are less interested in offering HSA's.

California does not conform to federal tax rules on HSA's. Therefore, HSA contributions are only deductible from one's income for 1040 (IRS) federal returns, but not for one's 540 (CA FTB) state return. Maybe Gov. Schwarzenegger could encourage more Californians to buy insurance by raising awareness of HSA's and by removing the CA tax penalty for keeping a HSA.