Susan Braig, an Altadena artist, goes over her medical bills. Since being… (Irfan Khan / Los Angeles…)
SACRAMENTO — Seeking to salvage two years of efforts to completely remake California's health insurance system, Gov. Arnold Schwarzenegger and Democratic legislators are nearing deals intended to rein in costly, meager medical insurance policies sold directly to individuals.
In the final weeks of the legislative session, they are negotiating measures that would limit insurer profits on individual plans, require plans to provide a minimum set of benefits and restrict insurers' ability to cancel policies retroactively.
The new focus reflects how far Schwarzenegger remains from his original healthcare goal: to orchestrate medical insurance for the 5 million Californians who lack it. Despite a year of strenuous campaigning for his vision, which garnered attention nationwide, the state Senate rejected that $14.9-billion plan in January.
Many of the concepts now under discussion were included in that proposal. Although most California insurers supported the governor's broader effort because it would have created millions of new customers, the industry is uniformly resisting the current push to circumscribe some of its most lucrative products.
Three million Californians buy health insurance on their own rather than through employers. Insurers keep premiums low -- and profits high, their critics say -- on some individual policies by limiting the services they cover. Such plans may exclude prescription drugs and maternity services, for example; others may cover only hospital visits.
Many of the policies have big deductibles and require patients to pay large portions of their expenses, costing them much more than coverage obtained at workplaces.
Studies have found that people with individual plans are more likely to end up with financially debilitating medical bills when serious illness strikes. California regulates these policies less firmly than it oversees coverage sold to businesses, though individuals have much less leverage to negotiate.
"The individual market really is the worst place to buy insurance," said Michael Russo, a healthcare advocate for the California Public Interest Research Group. "People can't band together to take advantage of greater bargaining power in groups, and as a result of that, they pay more to get less."
Insurers say the proposals being negotiated would drive up the cost of premiums and prompt some people to forgo coverage. Anthem Blue Cross, the largest seller of individual policies in California, says 70% of the people who bought coverage directly in the last year previously had been uninsured.
"By limiting product flexibility, we'd also be limiting the affordability and access to coverage," said Nicole Kasabian Evans, a spokeswoman for the California Assn. of Health Plans.
The average monthly premium for policies obtained individually in 2006 was $259, compared to $382 for policies bought by small businesses for their workers, according to the most recent survey by the California HealthCare Foundation, an Oakland nonprofit devoted to improving healthcare.
But a person with individual coverage paid an average of $1,825 in deductibles and co-payments, triple the $630 paid by someone insured through a small business, the survey found.
Three bills heading toward final legislative passage would restrict insurers' ability to cancel policies retroactively by alleging that customers had lied about their medical histories when applying for coverage. That practice has led California regulators to fine major health plans more than $15 million for not sufficiently scrutinizing applications or failing to prove that they were deceived.
Democrats want to limit cancellations to the first 18 months of coverage and require insurers to obtain approval from regulators before revoking a policy. Schwarzenegger wants to let insurers keep the recision option but impose new rules intended to thoroughly vet people's medical histories. The governor also would have independent arbitrators decide whether an insurer could cancel a policy.
Another measure aims to ban the most limited policies and make it easier for consumers to comparison shop in a market in which, said Marian Mulkey, a senior program officer at the California HealthCare Foundation, "it is quite difficult to understand all the provisions, limitations and features of policies."
This legislation would require individual healthcare policies to cover physician services, hospital care and preventive services, and would set a maximum amount patients would have to pay each year toward their bills. State regulators would sort policies into categories based on the benefits they offer and establish minimum benefits for each category. Presumably, that would allow consumers to compare what competing companies offer.
Schwarzenegger has asked Sen. Darrell Steinberg (D-Sacramento), author of the bill, SB 1522, to limit it to categorizing plans and not order insurers to offer specific benefits.