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National Underwriter - Life & Health Edition
Jan 15, 2007 - 01:00 AM

by ALLISON BELL

Bricks Fly At Schwarzenegger's Universal Health Proposals

California Gov. Arnold Schwarzenegger has unveiled a proposal that requires employers with 10 or more employees to provide health insurance coverage, expands access to free and subsidized individual health coverage, and makes many state residents buy coverage for themselves and their children.

The proposal, which includes some provisions based on a health insurance program recently adopted by Massachusetts, calls for health insurers to sell coverage on a guaranteed-issue basis and limits their ability to increase rates for insureds with health problems.

It also would require health insurers doing business in the state to spend 85% of their premium revenue on patient care.

But most public attention has focused on other proposal provisions that would:

- Make free Medicaid health coverage available to all California children, including children who have been brought to the United States illegally, who live in households with incomes under 100% of the federal poverty limit, and subsidized coverage available to children in households with incomes from 100% to 300% of the federal poverty limit.

- Make free Medicaid coverage available to legal resident adults with incomes under 100% of the federal poverty level and subsidized coverage available to adults with incomes from 100% to 250% of the federal poverty level.

- Impose a 4% fee on employers with 10 or more employees that fail to provide health coverage.

- Use a variety of tactics to get adults with incomes over 100% of the federal poverty level to buy subsidized or conventional health coverage for themselves and their children.

- Increase the rates that Medicaid pays doctors and hospitals, to avoid shifting the cost of treating Medicaid plan members onto the shoulders of holders of commercial health coverage.

Schwarzenegger, a Republican, said all Californians should help the uninsured, because the fact that 6.5 million California residents lack health coverage hurts all state residents. "Unpaid medical bills mean billions of dollars in hidden taxes for the rest of us because those services all have to be paid for," he said.

California health insurance groups have been letting other voices dominate the chorus of protests against the proposal.

Christopher Ohman, president of the California Association of Health Plans, has warned that a guaranteed-issue rule will not work unless the state tackles anti-selection problems by requiring all state residents to have health insurance. But, at press time, CAHP was not directly criticizing the plan.

"Going forward, we must ensure that any program that is created does not negatively impact the ability to bring product choice and flexibility to consumers, while maintaining affordability," Ohman says in CAHP's official statement.

The California Association of Health Underwriters, Sacramento, also has been taking a restrained approach to the Schwarzenegger proposal.

"We applaud the governor for attempting to incorporate different perspectives and interests to reform our health care system," CAHU President David Benson stated.

Meanwhile, bricks have been flying at the Schwarzenegger plan from groups at all points on the political spectrum.

On the right, State Assemblyman Chuck DeVore, R-Irvine, Calif., is opposing the proposal on the grounds that it would help illegal immigrants and hurt small businesses.

"Gov. Schwarzenegger broke his campaign promise not to raise taxes, DeVore says.

Instead of imposing new taxes and expanding Medicaid coverage for the poor, California should eliminate restrictions that discourage employers from setting up health savings account programs, DeVore says.

On the left, several consumer groups are praising the requirement that health insurers sell coverage on a guaranteed-issue basis but complaining that the proposal would require individuals to buy coverage without setting any limits on prices.

"This proposal gives a blank check to insurance companies," says Emily Clayton, a health care advocate at California Public Interest Research Group, Sacramento.

In addition to letting insurers raise rates at will, the Schwarzenegger proposal would set no limits on doctors' and hospitals' charges, according to the Foundation for Taxpayer and Consumer Rights, Santa Monica, Calif.

Groups representing employers and health care providers also are objecting to the Schwarzenegger proposal.

The California Chamber of Commerce, Sacramento, says using a 4% payroll "fee" to help fund state health insurance program expansion could be problematic, because state payroll has been growing at just half the rate of health care costs in recent years.

The proposal could increase Medicaid income for doctors and hospitals that treat Medicaid beneficiaries. But Dr. Anmol Mahal, president of the California Medical Association, Sacramento, is describing the proposal to tax physician fee income as a "tax on being sick."

"The people forced to pay this tax will be the people who need health care most," Mahal says.




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