WHEN Gov. Arnold Schwarzenegger, on crutches, unveils his expected grand redesign of the state's health insurance system Monday, he must tackle the biggest obstacle to insuring the uninsured: insurance companies.
The governor said recently that California's high number of uninsured residents -- about one in five -- acts as a hidden tax on the insured by forcing them to pay higher premiums, deductibles and co-pays. He has strongly hinted that he favors a system requiring individuals to buy health insurance, as well as assuring coverage for all children in the state (who constitute about 12% of the uninsured).
But he's said nothing about reforming insurance companies or HMOs.
Schwarzenegger's experience with health insurers is not your average citizen's. Anyone as rich as he is doesn't have to worry about medical expenses. He and his surgeon surely didn't have to seek permission for treatment. They didn't have to argue with a cost-control center demanding something cheaper -- such as outpatient surgery. The governor won't fear that his insurer will retroactively cancel his policy or double his premiums because of the surgery.
Not only is Schwarzenegger immune to most people's struggles with insurers, he's also enjoyed nearly $1 million in direct political contributions from them, according to public contribution reports.
It is this political relationship that should worry Californians hoping for real healthcare reform. Insurance companies, after all, will spend whatever it takes and call in every favor they're owed to stop reforms that restrict their profits, curb their extravagant overhead or limit what they can pay their chief executives.
For health coverage truly to be affordable and accessible, the governor and Legislature must force insurers to accept the following rules of fairness:
* A "take-all-comers" rule. Insurers today can deny a health policy to individual buyers in California for almost any reason. In Massachusetts, which recently required all citizens to carry health insurance, insurers have to take all patients, regardless of preexisting conditions. California insurers should be required to do the same.
* Charges set by community, not condition. California health insurers want to insure the healthy, not the sick, so they charge individuals who even \o7might\f7 become sick astronomical premiums. Those who do become ill can see their premiums skyrocket or their policies canceled. It's the opposite of Massachusetts and other states where health insurers must base premiums on broad characteristics such as age and regional healthcare costs -- not on a buyer's specific medical condition. The purpose of insurance, after all, is to spread the risk.
* Regulation of health premiums like auto premiums. California auto insurers must show that their profits are reasonable and ask permission of state regulators before raising premiums. The system has saved motorists tens of billions of dollars on their auto insurance since it was adopted in 1988. It's the least the state should demand of health insurers, who now face little to no scrutiny of their profits or bloated administrative costs. As a result, health insurers that sell to individuals spend as little as 50 cents of every premium dollar on actual medical care.
* A ban on health insurance policies that set no limits on what patients can pay. A policy that pays only $300 a day for a hospital stay that costs as much as $10,000 a day may cost a lot less than comprehensive policies, but it is hardly worth the paper it is printed on. Fringe insurers have been held accountable in California courts for such "junk insurance," but traditional insurers are moving toward similar "mini-policies." All policies should have an out-of-pocket maximum. If you're left with half a million dollars in medical bills, as one California patient was recently after her husband's death from cancer, then you're not really covered.
* A "California Health Plan" offering universal access to public officials' health coverage. The state employees' retirement and benefits fund, CalPERS, has used its size and clout to cut drug costs and provide care without paying for insurers' profit and overhead. Hundreds of thousands of state employees, including legislators and gubernatorial aides, have access to this directly state-funded system. If all Californians had access to this well-run, low-overhead plan, private insurers would be forced to drop prices and reduce overhead and profits if they wanted to compete.
California insurers won't like these proposals, and won't be shy in reminding the governor and Legislature about favors owed. Whether our elected officials respond to the desires of insurers or the needs of California will determine everything about healthcare reform.