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Thursday, June 21, 2007


* Newly-amended AB8(Nunez/Perata) to be heard on July 11 in Senate Health Committee
* Changes include: No individual mandate; affordable premium guarantee in pool
* Negotiations with Governor still expected into the summer

New on the Health Access WeBlog: Full SiCKO Coverage and Review; White House Hopes for Health Care; State Rankings; Limited Benefit Plans; Graduating into Uninsurance

Assembly Speaker Fabian Nunez and Senate President Pro Tem Don Perata, on Thursday, announced at a Capitol press conference that they would be merging their two health reform bills, AB8 and SB48, respectively into one bill – AB8 (Nunez/Perata).

“This is an expression of faith. This is an expression of real hope and real progress’’ to move the bills forward, Nunez said.

Having passed the full Assembly on June 7th, AB8 (Nunez/Perata) is expected to be heard in Senate Health Committee, chaired by Senator Sheila Kuehl, on July 11th. After the budget deliberations are completed, it is expected that the bill will serve as the basis for negotiations with Governor Schwarzenegger into the summer.


Senator Perata indicated that the leadership proposals were already “90% similar,” seeking to provide more security so people can get and keep coverage from their employer, through a public program, or by purchasing it as an individual. It would extend coverage to roughly 70% of the uninsured,and better ensure that the insured will get the coverage they need when they need it.

The previous bills, as well as the new AB8:
• Would require employers to contribute at least 7.5 percent of payroll to their workers’ health coverage. Employers would either provide private coverage for their workers, or pay such a fee.
• Would create a state-run purchasing pool, to provide a new, affordable option to cover their full workforce.
• Would expand existing public programs to cover all children, and subsidize coverage for more lower-income parents through this state-run purchasing pool.
• Would draw down new federal funds by bringing in more matching Medicaid money.
• Would also impose some new rules on insurers, including preventing rampant rejection of consumer for “pre-existing” conditions, and limiting the amount of premium dollars that goes for administration and profit.

The changes announced today did not change that basic framework, but were noteworthy for consumer advocates who were particularly concerned about affordability.

The bill does not include an “individual mandate”–a requirement that Californians, even those without access to public programs or employer-based group coverage, buy coverage on the individual market. “We know there’s a difference of opinion with the Administration. The reason we decided (to take out the individual mandate) is we need more time to figure out whether or no there is an affordable health care product for the average worker,’’ said Nunez. Given the interest by the Governor, and the financing issues, Perata said of the individual mandate, “that’s not there, but it’s not dead.”

Another key provision was a guarantee that workers in the purchasing pool would not have to pay more than 5% of their income for the premium, an important protection for lower-wage workers. Consumer advocates viewed this as an important step, although they will continue to advocate for corresponding guarantees on out-of-pocket costs, like deductibles.

The amendments does not introduce new concepts to the legislation, including ones that have been supported by consumer advocates, such as public review of insurance rates, or additional cost containment provisions. Rather, the amendments largely reconciled differences between the previous bills, and in that regard, most of those amendments made the legislation more favorable to consumers.

With the amendments, AB8:
* Does not contain an mandate on consumers to buy coverage in the individual market (as was required in SB48).
* Assures that premiums do not exceed 5 percent of income for workers earning less than 300% of poverty ($51,510 for a family of three) who are in the statewide purchasing pool.
* Requires all employers to pay at least 7.5 percent of payroll toward the health care for their workers. (Previously, Nunez’ legislation had exempted some businesses)
* Allows MRMIB to adjust employer fees on health coverage.
* Makes Section 125 plans available to all workers, to get a state and federal tax break on health premiums;
* Extends small group insurance rules to mid-size employers from 51-250 employees;
* Allows everyone without serious medical conditions to buy coverage in the individual market. Those with specified medical conditions would go into a high-risk pool, which is funded by an assessment on health plans.

To see the full description of how AB8 and SB48 were merged, click here.


Nunez and Perata fielded a wide range of questions at the press conference. Here are some of their responses:

On AB8’s compliance with the federal ERISA law?

Nunez: “This is a very different approach… nothing that can be compared to Maryland or even the Hawaii case… . We feel very confident, in the face of ERISA, we are going to be very consistent with federal law. The bigger threat, to be honest with you, is with a referendum. We’re being very careful to not make this bill a Christmas tree that includes everything that everyone wants to throw into it… That is the danger of having a bill like this. There might be some that think, OK, this is really going to happen now…. We are thinking about minimizing the potential for a referendum.”

What about exemptions for small businesses? Why isn’t it there anymore?

Perata: “We had everyone all in for ours (SB48) because, even though we’ve heard the plight of small businesses, the program simply does not work… and puts the burden and strain on other parts if you take it out.…That’s going to be an issue that will be negotiated, I’m sure. We’re still trying to look at the cost pools. If this were easy, it’d be done…. But now there’s a single vehicle, and people will be paying even more attention.

Nunez: With respect to the question about the employer exemption, to be honest with you, so far, I’ve only gotten criticism for it. No one’s come to the table saying they really like that provision. We didn’t see a lot of small businesses running to support us. In fact, people said we didn’t like this. There didn’t seem to be a lot of support for that provision.

What are the key differences with the governor’s concept of “shared responsibility”?

Nunez: We agree. We all have a role in this, the Governor says it is shared responsibility, that’s fine. I think our bill is pretty consistent with shared responsibility. Everbody has a role to play. Everyone has to tighten their belt. The providers, the doctors and hospitals, the insurance industry. Workers got a responsibility. Employers have a responsibility. and state and federal government has a responsibility… Ours is consistent with that value of shared responsibility.

Perata: You also can’t expect people to be responsible if you don’t offer them the opportunity to be responsible. And there’s so many people people shut out of the system right now. Conceptually, there no disagreement at all between the Governor’s ideas about health care reform and what this bill does. And we are hoping now we can get even more focused on discussing it. If it goes downstairs, (the bill)’s gotta be something (the governor’s) comfortable signing.


The new amendments do much to help consumers, but health advocates believe that more still needs to be done.

For instance, while the new AB8 caps premiums at 5 percent of income for workers, it does not factor in the costs to use the plans. After paying premiums, consumers still must pay copays, deductibles and out-of-pocket maximums – which in some cases – forces workers to spend as much as 32 percent on health care.

Consumers could also be further protected from price volatility if the state played a greater role in reviewing insurance rate increases and forcing plans to justify when they decide to raise premiums. This could help to mitigate the wild double-digit premium increases that we’ve seen the past decade.

Consumer advocates also remain concerned about workers who may lose coverage when they are between jobs


On July 11, AB8 will receive a thorough review in Sen. Sheila Kuehl’s Health Committee. At some point in July, both leaders will also meet with Gov. Schwarzenegger to try and reach consensus on issues where they do not agree.

Health Access will continue to provide updates as AB8 progresses.


Gov. Arnold Schwarzenegger held a press conference about how the state’s current health care landscape discourages entrepeneurship as people are afraid to light out on their owns and start their own businesses because they would not be able to get job-based health coverage. Watch a webcast of the event on the Governor’s website here.

The American Heart Association, the American Lung Association, the American Cancer Society, and PICO California called for an increase its tobacco tax to help fund health care reform, as part of the mix.

For more information, contact the author of this report, Hanh Kim Quach, policy coordinator, Health Access California,

Health Access California promotes quality, affordable health care for all Californians.
VIEW THE FILE Legislation

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