Jan 9, 2007

Governor makes tough promise

Schwarzenegger pledges health coverage for uninsured

By Laura Kurtzman / Associated Press

SACRAMENTO - Gov. Arnold Schwarzenegger boldly stepped forward Monday with a plan to extend health coverage to 6.5 million uninsured Californians.

It is the most difficult thing he has attempted as governor. The cost of health insurance is soaring and California has more uninsured people than any other state.

To succeed, Schwarzenegger will have to find common ground between groups that often are at odds. And his plan has something in it for everyone to dislike.

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

By sharing the pain, Schwarzenegger is taking on a variety of powerful interests, from doctors to business groups to insurers. But he also is promising them something in return.

Under Schwarzenegger's plan, all Californians will be required to have insurance, and all but the smallest businesses will have to offer it to their workers. Insurers will 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," he said. "That is number one."

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

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.

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

Under Schwarzenegger's plan, 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.

The state will subsidize the estimated 1.2 million low-income people who do not currently qualify for coverage under Medi-Cal. 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 Medi-Cal 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.

Belshe said the requirement that everyone have insurance was key to the plan's success.

"We must come together to create a more functional health care system that provides care for everyone," she said.

But some questioned whether the plan's financing would work, since nearly half the $12 billion cost is supposed to come from the federal government.

"I'm very skeptical of that," said Jeffrey Miles, of the California Association of Health Underwriters. "That might be overly optimistic."

Schwarzenegger wants to expand Medi-Cal to cover poor adults. Medi-Cal and Healthy Families also would be expanded to cover all children in families earning less than $60,000.

Reacting to the governor's announcement, several 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.

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.

Allan Zaremberg, president of the California Chamber of Commerce, said the governor was taxing businesses, doctors, hospitals and insurers to fund his plan. He questioned whether the skyrocketing cost of health care would mean that businesses would be asked to pay even more in the future, as premiums continued to rise.

"The biggest fear that we all face is that people who are satisfied with the system, who can afford the system, will suffer increased costs," said Zaremberg, one of the governor's key allies.

One business leader, Safeway chief executive Steve Burd, said the governor was on the right track. But he said businesses that do not offer health insurance should be charged more than 4 percent of their payrolls.

If it is cheaper for businesses to pay the fee than to insure their workers, businesses will have an incentive to drop coverage and let their employees join the state pool. And, if health insurance premiums continue to rise as they have for decades, the state will have to pay more money each year to maintain coverage for those it is subsidizing.

The governor believes he can lower medical costs by encouraging healthy lifestyles.

Democrats said they were open to the governor's ideas. But Assembly Speaker Fabian Nunez, D-Los Angeles, 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, D-Oakland, 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.