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Insurance News Today - January 9, 2007

To succeed with his plan to extend health care to 6.5 million uninsured Californians, Gov. Arnold Schwarzenegger will have to find common ground between groups that often are at odds.

Union leaders quickly balked at a requirement that all Californians have insurance, calling it a tax on the middle class. A demand that all but the smallest businesses offer their workers insurance upset many of Schwarzenegger's business allies.

"I look forward to everyone now having those debates," Schwarzenegger said via videolink to a panel of health care stakeholders who assembled Monday to hear his plan. "There are a lot of people around the table."

Under the proposal, all Californians must have insurance, although the poorest will be subsidized. Those who go uncovered will be subject to tax penalties.

Businesses with 10 or more employees will have to offer insurance to their workers or pay 4 percent of their payroll into a state fund. Smaller firms, which the governor's office said make up 80 percent of California businesses, will be exempt.

Insurers would no longer be allowed to deny coverage to people because of their medical problems. All children, regardless of their immigration status, will be covered through an expansion of the state and federal Healthy Families program.

"If you can't afford it, the state will help you buy it. But you must be insured," said the governor, who presides over a state with more uninsured people than any other. "That is number one."

Schwarzenegger said his plan will save $10 billion a year by cutting costs and redirecting money already in the health care system.

Many applauded the breadth and ambition of the Republican governor's plan, which a special team of advisers spent six months developing in secret.

Several experts said it went even further than Massachusetts, which last year became the first state to require everyone to have health insurance.

"This plan one-ups Massachusetts," said Peter Harbage, a health care consultant with the New America Foundation. "The governor has gone further and added doctors, hospitals and health plans" to those who must help pay.

The state will subsidize the estimated 1.2 million low-income people who do not currently qualify for coverage. They would be able to buy insurance through a state-run pool and will have to make a small contribution toward their premiums.

Kim Belshe, Schwarzenegger's health secretary, said an additional $10 billion to $15 billion will go to health care providers under Schwarzenegger's plan. The state will increase reimbursement rates to help doctors and hospitals.

But in turn they will have to pay into the new system. Hospitals will be assessed 4 percent of their revenues, while doctors will pay 2 percent.

Insurers, seeing the possibility of 4 million to 5 million new customers, praised the proposal, despite the new restrictions it places on them, such as limiting administrative costs.

"The governor's plan is bold, comprehensive and visionary," said Bruce Bodaken, chairman of Blue Cross of California. "Taking each part separately, there's something for everyone to hate. But taken as a whole, there's a lot to like."

But employers and doctors said they were being taxed to fund it, while unions protested that low-income workers would bear the brunt of the costs because they will be forced to buy insurance.

"This is all going to be on the backs of the individual, the workers," said Angie Wei, a lobbyist with the California Federation of Labor.

Schwarzenegger's decision to include an employer mandate is a blow to his business allies, who waged an expensive fight against a similar requirement just three years ago — with the governor's help. Republicans reacted negatively.

"Imposing a new jobs tax on employers of any size and expanding costly government mandates is the wrong approach, one which will devastate our economy," Assembly Republican leader Mike Villines said in a statement.

Democrats said they were open to the governor's ideas. But Assembly Speaker Fabian Nunez, a Democrat, said if all workers are required to buy insurance, insurers will raise their prices "and ultimately make health care less affordable."

Nunez and Senate President Pro Tem Don Perata, a Democrat, have put forth their own health reform ideas. They and the governor now begin what may be a long process of trying to achieve a compromise.

Republicans, who are in the minority, may have less of a say in whatever plan emerges unless it involves raising taxes, which requires a two-thirds majority.

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