This is my second essay for 2007. After my first essay, delineating the four different proposals on health insurance coming to the California Legislature this year, I received several requests to further describe the Governor's proposal.
This essay sets forth the elements of his proposal, including recent changes described by his staff, which have not been reported in the press. Visit my website at www.sen.ca.gov/kuehl to read my previous essays.
For those of you who received this essay by forwarding, it is written by California State Senator Sheila Kuehl. If you wish to subscribe to receive these essays on a continuing basis, (no charge), please send an e-mail to Sheila.Kuehl@sen.ca.gov, titled "subscribe". If you receive it directly and wish you didn't…..send an e-mail to the same address, but title it "unsubscribe".
Reality vs. Press Releases
The Governor has consistently described his proposal as "universal healthcare", promised it would cover all of California's children, and indicated that everyone---doctors, hospitals, businesses, insurance companies and consumers---would have "shared responsibility" in paying for the plan. The press has dutifully repeated his phrases, in almost every case without a modicum of analysis. The details of the proposal reveal quite a different picture.
The Bottom Line of the Governor's Proposal: Individual Mandate
The central basis of the Governor's plan is simply to mandate that every Californian must, by law, carry health insurance. There is no requirement that it be affordable and no minimum coverage. This means that the requirement can be met by a bare-bones policy covering only catastrophic events, with a $5,000 deductible and up to $7500 in out of pocket expenses for all the things that aren't covered by the policy.
This is not universal health insurance. Think for a moment about automobile insurance. Even before Prop 103 passed, limiting the amounts by which insurance companies could raise your auto insurance premiums to those approved by the Insurance Commissioner, we all had to have auto insurance. Would you call it Universal Auto Insurance? 25% of Californians don't comply --- so many that we all have to carry Uninsured Motorist Insurance, in effect paying more for those who are uninsured, just as the Governor has suddenly discovered we do in the area of healthcare.
His proposal would simply continue this problem in the much more complicated and important area of health insurance, with no controls on raises in premiums and no requirement for comprehensive or even adequate coverage, so every Californian could be required to pay high premiums, high deductibles, high co-pays and high out of pocket expenses, for very little coverage.
Employer Mandate only on 20% of California employers
Conservatives in the Legislature have focused fiercely on what they call an employer mandate. But the Governor's plan requires only those California businesses that employ 10 or more to provide minimal coverage to their employees or to pay 4% of their payroll into a central government fund, which would then subsidize the purchase of private insurance by their employees. Only 20% of California businesses employ more than 10 people. Of these, 80% are already providing some health insurance to their employees, at a cost of 9-11% of payroll. In a way, this is an invitation to businesses to reduce what they pay for health insurance for their employees. 4% of the payrolls of businesses with more than 10 employees would not be sufficient to provide healthcare for their employees. With a limit on what the businesses pay, but no limits on what employees pay under the mandate, even more of the premiums, co-pays and costs would devolve on employees than they do now.
Employees of businesses with fewer than 10 employees would be required, under the individual mandate mentioned above, to buy insurance for themselves and their families. Their employers would not be required to do anything.
Scope of Coverage Minimal
The Governor's proposal does not establish any minimums for the coverage benefits that must be offered. As a matter of fact, in a recent addition to the presentation of his proposal, the Governor called for more "flexibility in insurance underwriting" and repeal of "excessive government regulation". This means he would like to roll back even the most minimal requirements now in the law for coverage but still require everyone to buy policies and pay whatever premiums are charged.
This is not "cost-containment" as the Governor has indicated. This is actually allowing the insurance companies to sell inadequate coverage to those who wish to gamble that they won't need it, but are required to buy something to comply with the law.
Cost Containment Proposals
The Governor's proposal contains no real cost containment measures. It merely shifts the cost of unlimited premiums onto consumers. The proposal attempts to label the fact that he would allow insurance companies to offer greatly reduced coverage as "cost containment".
In addition to simply requiring less coverage, the Governor also proposes to limit insurance company overhead to 15%, mirroring a bill I carried last year which died under insurance company lobbying. This means that the companies must pay out 85% of their premiums to providers, which could help provide more adequate reimbursements to providers. It does not, however, affect the cost of healthcare.
Additionally, the Governor puts off seismic retrofit of hospitals again.
Low Income Californians
The Governor has indicated he wants to provide subsidies to help families with incomes below 250% of the federal poverty level ($32,000 for single parent with one child, $50,000 for family of four) fulfill their mandate to buy private insurance. They would pay up to 6% of their income for the coverage by law, which, for some, is significantly higher cost sharing than they might be paying now as Medi-Cal beneficiaries. Families with incomes slightly above the level would be required to buy insurance without subsidies.
Children
The Governor has indicated he would like to see all California's children covered by insurance. Under his proposal, families would be subsidized as described above, up to a certain level of income. Above that, children would be covered by the requirements on adults to buy insurance.
Guaranteed Issue
Many have praised the Governor's proposal to require insurance companies to cover all applicants, regardless of pre-existing conditions or prescribed medications. The proposal also indicates there would be limits on how much those with pre-existing conditions could be charged. It does not, however, address the fact that the insurance companies would likely raise their overall premiums to cover the new risks they would be required to assume.
"Community Rating vs. Modified Community Rating
Related to guaranteed issue, in a way, is "community rating" because a strict "community rating" system means that everyone in a geographic area is taken into account in setting premiums and all in that area share the risk. Although it does prevent one person in a pool from shouldering the burden of their own condition, it is still a gentrified form of "redlining," as area residents in one location would all be in a pool.
The Governor's most recent explanation of this section of the proposal, however, could potentially exacerbate the problem by adopting a "modified" community rating system that would allow the private insurance companies to differentiate in premiums on the bases of age, gender and regionalized location. A strict "community rating" system would not allow these differentiations, so, at the very least, some clarification is needed.
Medi-Cal Reimbursements raised to Medicare levels
Payments to doctors and hospitals would be higher if the federal government agrees to the raise. For all those not on Medi-Cal (California's coverage for the poor), however, there would be no requirements concerning the level of payments to healthcare providers made by private insurance companies.
Provider fees (or taxes, according to some)
Hospitals would be required to pay 4% of their gross revenues into the same fund as large employers to help subsidize insurance for the poor. Physicians would be required to pay 2% of gross revenues. Logically, this means that, should doctors and hospitals raise their fees to adjust for these taxes, the sick would be paying a disproportionate share of subsidizing health insurance for the poor.
Hospital Funds Redirected to Insurance Companies
The Governor's proposal takes most of the money now directed to hospitals to pay the costs of caring for the indigent and uses it to buy insurance for the indigent. Such a shift could actually lessen the money actually spent on indigent care as insurance company overhead is allowed, under the Governor's proposal, to be as high as 15%. (In most companies, it's now as high as 30%).
Prevention, Health Promotion and Wellness
The Governor's proposal requires Medi-Cal, Healthy Families, health plans and insurers to offer a health benefit package that provides incentives for healthy behavior, such as gym memberships or Weight Watchers programs. It also proposes ways to improve health status and reduce risk factors in programs related to diabetes, medical errors, obesity and tobacco use.
What Happens Now?
The Governor's proposal is seeking a legislative author. When one is found, a bill will be introduced, either in the Senate or the Assembly and will be heard by the Health Committee in that House, the fiscal committee, go for a Floor vote and start all over in the other House. There will be heavy negotiation between the Speaker of the Assembly, the President of the Senate and the Governor as to any legislation to be adopted in this session. At the same time, my single payer bill, SB 840, will be reintroduced and follow a similar, but parallel, track.
Stay tuned and stay informed.
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