Sacramento Bee
January 9, 2007

Debating a remedy
Governor unveils sweeping plan mandating coverage for all

By Clea Benson and Aurelio Rojas
Bee Capitol Bureau

Gov. Arnold Schwarzenegger on Monday proposed a sweeping overhaul of the way health care is purchased and delivered in California that would mandate new contributions from employers, individuals, health plans, health care providers and the government.

Schwarzenegger released the plan to a Sacramento audience via a satellite uplink from Los Angeles, where he is recuperating from a broken leg. He said his doctor recommended that he avoid air travel more than once a week. He is expected to deliver his State of the State address in Sacramento today.

The governor, who promised a health reform plan when he campaigned for re-election last year, said his solution could be a model for the nation on how to bring down health costs and ensure everyone has coverage.

"This year in Sacramento, we can again make history using a comprehensive approach building on shared responsibility," Schwarzenegger said.

Democratic legislative leaders have unveiled their own health care packages in recent weeks. The proposals are similar to the governor's in that they would require new contributions from individuals and employers, though they are less detailed at this point.

All the proposals will come up for legislative debate. Assembly Speaker Fabian Núñez, D-Los Angeles, said health care hearings could begin as soon as early February.

Health insurance premiums in California have gone up 55 percent in the last five years. Meanwhile, about one in six Californians -- 6.5 million people -- are uninsured.

The governor's proposal would shift costs so the insured are not paying higher premiums to offset the costs of treating uninsured patients who flood emergency rooms when they get sick. Those costs boost premiums for the insured as much as 10 percent, according to health care studies.

Schwarzenegger would require health plans to sell insurance to anyone, no matter how sick they are. It would require individuals to have health insurance. And it would require employers who do not provide coverage to pay a 4 percent payroll tax that would go to an insurance pool if they have 10 or more workers. Doctors and hospitals would have to pay a percentage of their revenues into the system.

The plan would also include a massive expansion of government health care programs for the poor, which currently are largely limited to families and people with disabilities. All adults living under the poverty level -- individuals earning less than $9,800 a year -- would be covered. And the state would raise the rates it pays doctors who treat Medi-Cal patients.

The plan would ensure coverage for all children, regardless of their immigration status. Nearly 800,000 California children are uninsured.

Overall, Schwarzenegger's plan would raise about $12 billion -- $5.5 billion of it in new federal funds -- to pay for the expansion.

Though all participants would pay more up front, the governor said, "If you look at the math, everyone has been left with a better deal here."

Advisers to the governor described the plan as an expansion of the state's nearly $200 billion health care economy. Doctors and hospitals would get new patients, and health plans would get new members. Employers who now provide coverage for their workers would see premium costs go down.

"What we really heard today was a philosophy for how to create a new and improved health care marketplace," said Peter Harbage, a Sacramento-based health care consultant who advised the administration on the plan.

Harbage described the plan as a "centrist" solution.

Reaction was mixed, drawing more positive response from Democrats than from the governor's fellow Republicans.

The governor's proposal "put me at ease," Núñez said. "I now firmly believe there is an end game that can be achieved."

Assembly Republican leader Mike Villines, of Clovis, praised some aspects of the governor's plan but said he opposed requiring employers to pay for health care.

"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," he said.

In addition to requiring new contributions from various groups, the governor's plan would seek to control medical costs by reducing regulations on health plans, requiring insurers to provide incentives for healthy living, introducing new tax breaks for individual health expenditures, expanding the use of new information technology, and requiring insurers to spend at least 85 percent of revenues on patient care instead of on overhead.

Harbage and others described the governor's plan as a jigsaw puzzle that would work only if all interlocking pieces were kept in place.

It remains to be seen whether the groups affected will support it. Monday, no one appeared ready to reject it outright.

Chris Ohman, president of the California Association of Health Plans, a group representing insurers, said the plans would not support a requirement that they sell insurance to everyone without a mandate that individuals must have coverage.

"If you just select certain items that are politically attractive on the menu and don't tackle the other parts, the whole plan can fall apart," he said.

Meanwhile, consumer advocates said the requirement that individuals have insurance was most troubling to them.

"While the governor's proposal sets some needed and better rules for insurers, employer and public programs, it inappropriately places the risk and burden of health coverage mainly on individual consumers and families," said Anthony Wright, director of Health Access, a group representing consumers.

Jeffrey Miles, spokesman for the California Association of Health Underwriters, a group representing insurance agents, questioned whether the state would really be able to get an additional $5.5 billion annually in federal Medicaid funds to help pay for the plan.

"Obviously," he said, "the devil is in the details."

Administration officials described the governor's plan as a starting point.

"We know people will disagree with this proposal," said Kimberly Belshé, California secretary of health and human services. "We anticipate that and we welcome the debate."