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Gov. Offers Bold Prescription

All Californians would be required to carry medical insurance.

$12-billion Proposal

Critics include doctors, hospitals, insurers and some legislators.

January 09, 2007|Jordan Rau | Times Staff Writer

SACRAMENTO — Calling for massive changes throughout a healthcare system he called "broken," Gov. Arnold Schwarzenegger on Monday proposed a $12-billion plan that would require all Californians to obtain medical insurance while helping the poorest to afford it.

The plan, which both critics and supporters called the most audacious in the country, would dramatically reshuffle the financial underpinnings of an already fragile industry. The governor said his plan would control spiraling health costs while ensuring coverage for the quarter of a million children and 5.6 million adults who lack insurance.

"Everyone in California must have health insurance," Schwarzenegger said via teleconference from Los Angeles, where he is recuperating from a broken leg. "If you can't afford it, the state will help you buy it, but you must be insured."

Only Massachusetts has required all residents to carry insurance, but California's larger population of uninsured and poor makes Schwarzenegger's goals much more challenging. To pay for the plan, Schwarzenegger proposed placing new fees and obligations on doctors, hospitals, employers and insurers -- all powerful lobbies in Sacramento.

Schwarzenegger was widely praised for tackling such a huge issue so comprehensively. But many leading consumer advocates, academics and business leaders said they feared that the governor's proposal was inadequately financed and would shift more responsibility for healthcare to families while unintentionally encouraging businesses to drop or downgrade the coverage they now offer.

Employers with 10 or more workers would have to offer plans that cost them at least 4% of their payroll. Those who refuse would be required to pay an equivalent amount into the state's insurance fund for people with no other option. That mandate, while greeted skeptically by businesses, was criticized as too lax by advocates who said that a majority of companies that now provide insurance already contribute much more money.

"It's the equivalent of setting the minimum wage at $3 an hour," said Anthony Wright, executive director of Health Access California, a consumer advocacy group.

Those earning more than 2 1/2 times the federal poverty level -- a total of $41,500 a year for a family of three -- would not receive a subsidy but would still have to buy insurance if their employer did not offer it. The cheapest plan would require families to pay $2,000 a year in premiums, and as much as $10,000 in out-of-pocket medical costs.

"By setting this as a minimum, the tendency will be to undermine and reduce the current level offered by some employers, who will use this to justify reducing their benefits much more," said E. Richard Brown, director of the UCLA Center for Health Policy Research, who nonetheless called the proposal "very impressive" in its reach.

Steven A. Burd, chairman of the Safeway grocery chain, who was invited by the administration to comment on the proposal, also lauded the effort but said it did not ask enough of employers. Their required contribution, he said, "is frankly too low and should be higher."

The plan was welcomed by the Democrats who control the Legislature, which must approve any proposal. Assembly Speaker Fabian Nunez (D-Los Angeles) called it "good work" and "a good start."

But he said that he could not agree to requiring everyone, whether working or not, to obtain health insurance "until and unless we solve the problem of the costs of the premiums."

Schwarzenegger's fellow Republicans showed little enthusiasm for the plan, saying that the governor's strategy of funding it through mandated employer contributions and assessing a portion of earnings of doctors, hospitals and health plans violated the anti-tax cornerstone of his reelection campaign.

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Republican opposition

"If we put any form of mandate on a business, we are seeing a jobs tax," said Assembly Republican leader Michael Villines of Clovis, echoing the argument that Schwarzenegger himself made in 2004 when he successfully campaigned against Proposition 72. That Democratic plan would have required employers to provide health insurance or pay into a state fund.

The administration insisted that its plan did not include taxes, instead labeling the levies "coverage dividends." The debate is more than semantic: A measure with taxes needs two-thirds support in the Legislature, giving the GOP veto power. Otherwise, it needs only a simple majority that could be obtained solely with Democratic votes.

Another part of the plan provoking Republican resistance would provide healthcare for impoverished children who are in the United States illegally. Senate Republican leader Dick Ackerman of Irvine called such a provision a "nonstarter."

The governor said emergency rooms are required by federal law to treat anyone who shows up, regardless of status. "So the decision for my team was, do we treat them in emergency rooms at the highest cost available or do we do it right and do it efficiently?" he said.

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