State looks at more ways to require health coverage

By Aurelio Rojas -- Bee Capitol Bureau
Published 2:15 am PST Wednesday, January 12, 2005

The novel concept of requiring Californians to have health insurance - like auto insurance - is drawing interest from Gov. Arnold Schwarzenegger and lawmakers who plan to introduce legislation making it mandatory.

Modeled on a national plan by the New America Foundation, a Washington-based think tank, the "universal coverage, universal responsibility" approach faces numerous political hurdles.

The state would have to subsidize low-income workers; the New America plan and the proposed legislation both call for employer subsidies that voters recently rejected. Moreover, insurers would be required to cover clients with pre-existing medical conditions.

But in the aftermath of the narrow defeat of Proposition 72, which would have required employers to provide insurance for workers, the new proposal has provoked serious discussion in the Capitol.

In his State of the State speech, Schwarzenegger offered no solutions for the estimated 6.3 million Californians without health insurance, and his proposed budget is expected to slash social services.

But during an appearance in October at the Panetta Institute in Monterey, the Republican governor acknowledged, "We have too many people that are uninsured in this state.

"We have to really address this once and for all and figure out a way of how we do it, like with car insurance, where we make it law that people carry insurance, and they are really insured," Schwarzenegger said during a question-and-answer session.

The governor - whose health secretary has conferred with New America officials - said: "It's unfair to so many people when you have people using the hospitals for emergency and then creating a huge cost."

Kim Belshé, secretary of the state Health and Human Services Agency, said the administration is looking at a "number of different strategies."

"We've been talking to research organizations - think-tank groups like the New America Foundation that have come forward with some very innovative thinking." Belshé cautioned that Schwarzenegger has not decided how to proceed.

But two members of the Assembly - Keith Richman and Joe Nation - are moving forward with a package of legislation that includes making health insurance mandatory.

"What we're looking at is a system where individuals would be required to have at least catastrophic coverage," said Richman, R-Northridge, adding that the law could be enforced through tax returns.

The bipartisan legislation, scheduled to be introduced next month, envisions establishing purchasing pools that would allow small businesses and individuals to purchase insurance at more affordable prices.

"I believe that our proposal, over some fairly short period of time, is going to expand health care coverage for everyone in California and provide a basic level of health care benefits," said Nation, D-San Rafael.

Richman said the lawmakers have not decided whether the income threshold for the government subsidies should be 200 percent of the federal poverty level ($37,700 for a family of four) or 300 percent ($56,550).

But he and Nation believe the program can be implemented without requiring employer contributions.

"Once you cross the line, and it becomes an employer mandate, it really is not an individual mandate," Nation said.

Richman is confident most employers will continue to voluntarily provide insurance for workers.

"(The proposal) begins to move the system away from an employer-based system to a more individual system without taking the employer out of the system," he said.

But Laurie Rubiner, director of the Universal Health Insurance Program at the New America Foundation, said the state's costs would dramatically increase without mandatory employer contributions.

"It really depends on whether there is going to be an employer contribution to figure out what the costs are going to be," said Rubiner, estimating it will take $660 million to $800 million to cover uninsured children.

Belshé said Schwarzenegger is "open to a number of approaches for closing the gap for people who are uninsured.

"(But) he has been very clear that an employer mandate is problematic to the extent that it imposes costs on businesses that they can ill afford."

Beth Capell, a lobbyist for Health Access, a coalition of consumers, unions, seniors and other organizations, is skeptical about the efficacy of a universal proposal that does not mandate employer contributions.

It currently costs $10,000 annually to cover a family of four.

"All this stuff about, 'Oh, we'll subsidize low-income families,' is terrific," Capell said. "But if you're a family of four, making $60,000 a year - which is beyond the subsidy threshold - how are you going to pay $10,000 for insurance?"

Health Access led the campaign for Proposition 72. Capell said supporters, heartened that they came within 200,000 votes of succeeding, are considering another ballot measure.

In addition to mandatory employer contributions, the New America plan advocates that individuals without minimal insurance face civil penalties.

It places caps on the amount a family would pay and provides tax credits to employers and insurers. Participating insurers would have to sell minimal coverage to anyone who applied.

The head of the California Chamber of Commerce, which led the fight to defeat Proposition 72, remains adamantly opposed to mandating employer contributions for health insurance.

"It just kills the economy by driving jobs out of California," chamber President Allan Zaremberg said.

A better solution, he said, would be to improve the "clinic structure" in California - after the state solves its budget crisis.

Zaremberg also calls for expanding "first-dollar coverage," under which no deductible or co-insurance is applicable to covered expenses.

"First-dollar coverage, for many of the low-wage uninsured, through the clinics, and maybe a real catastrophic policy, is the way to go," Zaremberg said.

The California Medical Association, which supported Proposition 72, has since backed away from requiring employers to provide insurance for workers.

"With the failure of (Proposition 72), we're looking for something that might be a little more incremental," said Dr. Jack Lewin, chief executive officer of the physicians organization.

The new CMA plan, which Lewin likens to the Richman-Nation proposal, would require anyone whose income is greater than 400 percent of the federal poverty level - about $62,000 for a family of three - to purchase insurance.

"We're looking at a universal coverage strategy with an individual coverage mandate rather than an employer mandate," Lewin said.