The open enrollment deadline for California’s Covered California marketplace passed on January 31, 2026 — and for thousands of families across the state, whatever plan they locked in is now their financial reality for the year. When I met Dennis Valdez on a drizzly Tuesday morning in late February at a Rite Aid pharmacy in Sacramento’s Midtown neighborhood, he had already locked in his family’s plan. He wasn’t sure he could afford to keep it.
I overheard him at the pharmacy counter, quietly asking a technician whether the store carried any patient assistance enrollment forms for a brand-name medication his wife had been prescribed. The pharmacist handed him a printout. He folded it carefully into his coat pocket, and when he turned around and saw me writing in a notebook, he smiled — a little embarrassed, a little tired. He agreed to talk.
A Stable Income That Suddenly Didn’t Feel Stable
Dennis Valdez is 59, a restaurant manager at a mid-size hospitality group with locations across Sacramento and Roseville. He earns roughly $97,000 a year — comfortable by most measures, especially for a family of four. His wife, Renata, works part-time as a dental hygienist, bringing in approximately $28,000 annually. Their daughters are eight and four years old.
On paper, the Valdez household looks upper-middle. In practice, Dennis told me, the margins had been tightening for two years. “We’re not living extravagantly,” he said when we sat down at a coffee shop across the street from the pharmacy. “We have a mortgage, two car payments, daycare for the little one. There’s not a lot of slack in the budget.”
The health insurance hit came first. Dennis’s employer had been subsidizing a group health plan, but at the start of 2026, management restructured the benefit, passing significantly more of the premium cost to employees. The family had been paying $974 per month for a PPO plan covering Dennis, Renata, and both children. Starting January 1, that figure jumped to $1,847.
“I thought there was a typo in the benefits email,” Dennis told me, laughing without much humor. “I literally read it three times. I called HR. There was no typo.”
He looked into switching to Covered California, the state’s ACA marketplace. According to Covered California, a family of four at the Valdez household’s income level would likely qualify for limited premium tax credits — but not enough to make a comparable plan meaningfully cheaper than what his employer was now charging. He stayed with the employer plan.
The Co-Signed Loan Nobody Warned Him About
By March 2026, Dennis had adjusted to the higher premium — barely. Then a letter arrived from a lender he hadn’t thought about in over a year.
In the spring of 2023, Dennis co-signed a $28,000 auto loan for his younger brother, Marco, who had thin credit and needed a vehicle to take a job in Stockton. Marco made payments for about eighteen months. Then, in the fall of 2024, the job ended and the payments stopped. The car was repossessed in December 2024. By January 2026, the lender had written off the remaining $19,400 balance — and issued Dennis a Form 1099-C, reporting the canceled debt as income.
Under IRS rules, when a lender forgives or cancels a debt, the forgiven amount is generally treated as taxable income for the borrower — or, in the case of a co-signer, potentially for the co-signer as well, depending on how the debt was structured. According to IRS Topic No. 431, canceled debt is included in gross income unless a specific exclusion applies, such as insolvency or bankruptcy.
Dennis is neither insolvent nor in bankruptcy. His accountant told him in early March that the $19,400 would likely be added to his taxable income for the 2025 tax year, potentially pushing him into a higher effective tax bracket and generating a tax bill he had not planned for.
Child Support That Never Comes — and the Budget Gap It Creates
Renata has two children from a prior relationship — though one is now an adult. The younger child, who is eight, is Dennis’s stepdaughter, and her biological father has a court-ordered child support obligation. As Dennis explained it to me, that obligation has been inconsistently honored for years.
“He’ll pay for two months, then disappear for four,” Dennis said. “Renata has been through the enforcement process. The state has his number. It still doesn’t come regularly.” The court-ordered amount is $620 per month. In 2025, the family received a total of $2,480 — four months’ worth — out of a possible $7,440. The gap, roughly $4,960, was absorbed silently into the family budget.
California’s child support enforcement system, administered through the Department of Child Support Services, has tools including wage garnishment, license suspension, and tax refund interception — but collection still depends on the non-custodial parent having traceable income, which Dennis says has been the persistent problem.
Where Things Stand — and What Dennis Is Doing About It
Dennis is analytical by nature. He showed me a spreadsheet on his phone — a color-coded monthly cash flow breakdown he updates every Sunday night. The current version, he said, shows a monthly deficit of approximately $1,100 after all fixed expenses, the new premium, and average variable costs. “I’ve closed a lot of gap already,” he told me. “We cut the streaming subscriptions, the gym memberships. We haven’t eaten out once since January.”
He has not yet filed his 2025 taxes. His accountant is working through whether the insolvency exclusion under IRS Publication 4681 applies to any portion of the 1099-C amount — a calculation that involves comparing Dennis’s total liabilities to his total assets at the time the debt was canceled. Dennis acknowledged he wasn’t sure how that math would fall.
He is also exploring whether his employer’s HR department made an error in calculating the premium increase, and whether the new plan structure was properly disclosed during the required annual enrollment window. He hasn’t pursued a formal complaint yet, but said he plans to raise it in writing before April ends.
On the child support front, Dennis said Renata re-engaged the Sacramento County DCSS office in February and requested a formal review of the enforcement case. The agency told her it could take several months before any new collection action would be initiated. The family is not counting on that money arriving reliably.
The Weight of Being the Responsible One
What stayed with me after my conversation with Dennis wasn’t the spreadsheet or the 1099-C or even the insurance premium — it was a comment he made almost as an aside, while we were putting our coats on to leave.
That’s not self-pity, exactly. Dennis didn’t frame it that way. He said it quietly, matter-of-factly, the way someone does when they’ve already made peace with a thing and are just naming it out loud for the first time.
He is six years from 65. His plan, still intact in rough outline, is to keep managing restaurants through his early 60s, shore up retirement contributions in his 401(k) — currently sitting at approximately $214,000, he mentioned — and hope that the combination of his savings and eventual Social Security income fills the gap when he steps back. The 2026 disruptions haven’t broken that plan. They’ve just made the runway feel shorter.
When I asked whether he regretted co-signing the loan for Marco, he was quiet for a moment. “No,” he said finally. “I’d probably do it again. I just wouldn’t be as naive about what it could mean for me if things went wrong.” He picked up the prescription assistance printout from the table, folded it again, and put it back in his pocket.
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