The money’s on the table

HEALTH ACCESS UPDATE
Tuesday, May 15, 2007

NEW NUMBERS FOR NUNEZ AND PERATA PLANS ON HEALTH REFORM

* Democratic legislative leaders release financial specifics on health care proposals
* Proposals would cover over two-thirds of uninsured; provide more security for workers
* Momentum for reform prospects, affordability for consumers and employers highlighted

New on the Health Access WeBlog: Theresa Mary Johnson, RIP

Over two-thirds of uninsured Californians would have health coverage under newly fleshed out proposals released by both Assembly Speaker Fabian Nunez and Senate President Pro Tem Don Perata Tuesday.

The new numbers show how each lawmaker’s health expansion plan would be paid for and provide more specifics on how coverage would be provided. Under the notion of “shared responsibility,” the proposals would set a minimum contribution for employers at 7.5 percent of wages (for both full- and part-time workers) toward worker health care; would create a statewide purchasing pool as a new option for employers to cover their workers; would expand public programs; would take advantage of federal tax breaks and matching funds; and would place new rules on insurers and reform the insurance market.

This is the first time that the legislative leaders have released the new figures since they both introduced their health coverage proposals in December, which were both aimed at increasing health coverage among California ’s uninsured. The numbers fill in many blanks for AB8(Nunez) and SB48(Perata/Kuehl), and show how their measures would pencil out in the real world.

The Legislative leaders worked with MIT economist John Gruber (who also modeled Gov. Arnold Schwarzenegger’s proposal), funded by the California Health Care Foundation, to run their plans through a computer model, which came up with the numbers that showed the contributions needed in order to make the health plan balance out. Professor Gruber will be presenting his model tomorrow at the State Capitol.

Here’s some information about the two plans with some of the new details:

  • Coverage expansion to the uninsured: Both cover 3.4 million (69% of uninsured)
  • Minimum employer contribution for health expenditures: Both set it at 7.5% of total Social Security wages (capped at $97,500) on health expenditures (for both full time and part-time employees), or pay an equivalent amount into the California Health Trust Fund
  • Employers who are exempted:
    • SB48(Perata) has no exemptions.
    • AB8(Nunez) exempts business operating for fewer than 3 years, with fewer than 2 employees, or with a payroll less than $100,000.
  • Number of Californians in statewide purchasing pool:
    • AB8(Nunez): Cal-CHIPP – 3.23 million projected to enroll
    • SB48(Perata): Connector – 4.1 million projected to enroll (3.6 million adults, 500,000 children.)
  • Estimated premium for individuals: For both: Individuals would pay between 0 to 2.8 percent of income for coverage. Families of four (with only one worker): Up to 4.5 percent on income.
  • Requirement on individuals:
    • AB8(Nunez): Must take up coverage if employer offers coverage, and it’s deemed affordable.
    • SB48(Perata): Individual mandate unless income is below 400% of poverty ($40,840 for an individual, $82,600 for a family of four) OR health coverage is more than 5 percent of a person’s income.
  • Assistance for low-income families:
    • AB8(Nunez): Families and workers below 300% of poverty ($30,630 individual, $61,950 family of four) would receive some relief if they purchased coverage through their employer (through premium assistance), or through Cal-CHIPP.
    • SB48(Perata): Families and workers below 300% of poverty would pay a portion of the estimated $224 (per member per month) premium based on a sliding scale.
  • Benefits on which estimated are based: Standard coverage, which includes doctors’ visits, hospital coverage, labs and prescription drugs.

IMPACT ON WORKERS AND CALIFORNIANS

Under these proposals, most workers would either have their employer provide health coverage, or would get their coverage through a statewide purchasing pool. In the pool, the contribution for workers to pay toward health care would be based on ability to pay. The pool would also use a Section 125 federal tax break to reduce the cost of coverage. Both proposals provide some kind of relief for workers and families who earn less than 300% of poverty.

The following chart shows impacts on both single workers and families.

As the table shows, single workers would spend no more than 2.8 percent of their annual income on coverage; families would spend no more than 4.5 percent on their premiums.

Coverage offered would also be considered comprehensive plans, with “Knox/Keene benefits,” which cover doctors, hospital visits, as well as prescription drugs.

Both of these proposals provide a more affordable option for workers than is considered in Gov. Arnold Schwarzenegger’s plan. In Schwarzenegger’s proposal, a worker in the “subsidized” insurance pool person earning between $19,600 to $24,500 (201-250% of poverty) would be asked to spend about 6 percent of their income on premiums alone. That does not include deductibles of $500 and a maximum of $3,000 for the year. In the Schwarzenegger proposal, for families earning more than 250% of poverty, there would be a requirement to buy bare-bones high-deductible plans, with out-of-pocket costs of up to $10,000.

IMPACT ON EMPLOYERS

For many employers, the plans would not have an impact. The plans include a minimum employer contribution of 7.5 percent of wages (for both part- and full-time employees) for health expenses. Assembly Speaker Nunez’ proposal does exempt some smaller businesses. If employers do not wish to spend money on health services themselves, they can contribute an equivalent amount to the statewide purchasing pool, which would use the money to help buy coverage for the workers.

The amount proposed in both plans is far lower than the amount that firms who offer health insurance are already spending for coverage. According to the analyses of both plans, 61.5 percent of businesses already provide health coverage that amounts to an average of 13.8 percent of wages ($79.4 billion total).

However, the Democrat leaders’ proposals require a greater contribution than the 4 percent contribution that was recommended by Gov. Schwarzenegger when he unveiled his plan in January. At that time, the CEO of Safeway, Steve Burd, said the amount was too low. Schwarzenegger also exempted employers with fewer than 10 employees.

OTHER ELEMENTS

Remaining elements that are not addressed here, would remain the same as when introduced initially, such as expansion of Healthy Families to cover all children under 300 percent of poverty, and insurance market reforms to allow people to get coverage regardless of their health status.

WHAT’S NEXT

This is only the first step – of many first steps. Both proposals still must be vetted by each house’s Appropriations committee in the next couple of weeks, which will consider the fiscal implications to the state.

With this financial information, Perata and Nunez’s proposals can be compared alongside two other health reform proposals in the discussion, Gov. Arnold Schwarzenegger’s and Sen Sheila Kuehl’s.

Health Access will continue to provide timely news and analysis as the health reform debate this year continues. For more information, contact the author of this report, Hanh Kim Quach, at hquach@health-access.org.

Health Access California promotes quality, affordable health care for all Californians.

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