The lay of the land… and affordability amendments!

Friday, September 7th, 2007

* AB8 (Nunez/Perata) Amended with Additional Affordability & Cost Containment Measures
* As Deadline Approaches, Options Include Special Session, Ballot Initiative

New on the Health Access WeBlog: More on Health Reform Negotiations; Blue Cross Opposition; Health Wonk Review; Supreme Sacrifice; Cartoons; Tony Snow’s 401K; Health Wonk Review; Hospital Billing; New Endowment Ads; New Census Data Released; Policy vs. Politics; Governor’s Budget Cut Impacts;

With a legislative deadline looming in the next week, negotiations are reportedly still continuing on major health reform this year.

Legislative leaders have continued to amend AB8(Nunez/Perata) in the last two days, including making changes supported by consumer and health advocates on affordability and cost containment. There are reported to be talks between the legislative leaders and the Governor, who offered his own concepts in the beginning of the year, but no word has been given on where those negotiations are.

The legislative session is officially scheduled to end on September 15th, although there has been talk of ending earlier, on September 11th, in deference to the Jewish holidays. Given the shortness of time, two other options have emerged regarding the process of passing health reform.
* Press reports have indicated a willingness by legislative leaders to go into special session, this year. This could be concurrent with the ongoing legislative session, or be called anytime in the fall.
* There has also been consideration to placing some or all of the health reforms in a ballot measure next year, one which would be supported by the Governor and legislative leadership. An initiative, while risky, has some appeal to the policymakers because of the ability to raise revenues to fund coverage expansions, especially given the prohibitive bar of raising taxes in the legislature because of the 2/3 vote requirement and Republican legislative opposition. Placing a ballot measure on the February 2008 ballot would require 2/3 vote of the legislature; the other option would be to submit signatures to qualify for the November 2008 ballot.


AB8(Nunez/Perata) is the main vehicle for the Legislative leadership. It seeks to make health coverage more available, affordable, and administratively simple in each of the three ways that consumer now get coverage: through employers, public programs, and the individual market.

Also in the legislative consideration is SB840 (Kuehl), to create a statewide single-payer, universal health care system, which is pending in the Assembly Appropriations Committee. Senator Kuehl intends to move the bill next year, so that it may continue to be the focus of organizing and education efforts by health and consumer advocates.

The framework of AB8(Nunez) bill would:

· Create a statewide purchasing pool initially for employees and dependents of employers that choose to use the purchasing pool. A new, affordable option for employers to cover their entire workforce, the purchasing pool would cover an estimated three to four million people.
· Establish a standard for a minimum employer contribution to spend 7.5% of payroll on health benefits, either by paying into the purchasing pool or by expending the funds on health insurance or other health benefits.
· Expand Medi-Cal and Healthy Families to expand coverage for children and parents up to 300%FPL, which is around $60,000 for a family of four.
· Reform the individual insurance market so that coverage is available to anyone who wishes to purchases, by limiting insurers ability to deny people based on “pre-existing conditions,” and providing better funding for coverage for those that are denied, through an assessment on insurers.
· Bring in billions in new federal dollars to California ’s health system, by getting matching funds for these expansions of public programs and employer contributions.
· Offer workers tax savings, by providing the ability to pay premiums, or share-of-premiums, with pre-tax dollars, for a savings of 15-40%.
· Place other rules and oversight on insurers, including limiting the percentage of premium dollars that go to administration and profit, rather than patient care.
· Expands small group insurance reforms, to make getting more accessible and affordable for small and medium-size employers with 2-100 workers.
· Encourage use of health information technology and disease management.

Recent amendments include additional cost containment provisions to foster better transparency and data on cost and quality of health care, to allow for prescription drug bulk purchasing, and to facilitate a public insurer option in addition to the purchasing pool. It would allow ventures to build on the various county-based “Local Initiatives” that currently offer Medi-Cal and Healthy Families and that have pioneered universal kids coverage.


AB8 is a majority vote bill, but with multiple funding sources, including the minimum employer contribution; required worker contributions; reinvested state savings; new federal Medicaid matching dollars, use of Section 125 federal and state tax breaks, and an assessment on insurers.

INDIVIDUALS: AB8 includes individual responsibility, for those who have their risk of health costs shared by an employer or the statewide purchasing pool. Unlike the Governor’s plan, AB8 does not have a mandate to go into the individual market, for those that lack access to group coverage from a public program or an employer.

Other amendments were made today to ensure affordability,(in print and on-line Monday September 10). These amendments have been long sought by health, labor and consumer advocates. While AB8 requires workers to take up coverage offered at work or in the purchasing pool, there are exemptions for those with other group coverage (for example, through a spouse).

With the amendments, the bill now would also exempt anybody from having to take-up employer-based coverage that would cost them more than 5% of their income.

In the purchasing pool, those under 300% of the federal poverty level (around $30,000 for an individual, $60,000 for a family of four) would be guaranteed coverage at a maximum premium of 5% of their income; they would not have to take up coverage if the plan had a maximum of more than $1500 for total out-of-pocket costs, including deductible.

EMPLOYERS: While most employers already provide coverage to their workers, all employers would have to contribute 7.5% of payroll to health care under AB8. For those that don’t provide coverage or provide minimal benefits, they would also have a new purchasing pool option to only pay 7.5% of payroll, and get the benefit of having all their workers covered. This is a significant, especially for low-wage and small employers, that would have to pay a much larger percentage of payroll to cover their workers, and is a reason they are more likely not to. Right now, most employers pay more than 7.5%. Like the minimum wage does for pay, this minimum employer contribution would set a standard that employers can’t go below, but that many do above, in order to attract and retain workers in the job market.

GOVERNMENT: In the biggest expansion of public program coverage in 40 years since the creation of Medicare and Medicaid, children and parents under 300% of the poverty level would be eligible for Medi-Cal or Healthy Families-type coverage. This is partially funded from the reinvested state savings from having employers contribute to the health care of worker that have been on existing public programs. The rest comes from federal matching funds, which California has been leaving behind every year. Expanding the use of “Section 125” plans uses federal tax breaks to also finance coverage.

INSURERS: Insurance companies would be required to spend 85% of premiums collected on patient care, rather than administration, marketing, and profit. They would be limited in their ability to deny coverage because of “pre-existing conditions,” and they would pay an assessment per covered life to help fund coverage for those Californians in the individual insurance market that were denied coverage.

PROVIDERS: AB8(Nunez) does not include the provider taxes proposed by Governor Schwarzenegger in his proposal, largely because of the 2/3 vote requirement. The hospitals yesterday came out in support of the hospital fee, which would be used to bring down federal matching funds, that would be used to increase the Medi-Cal reimbursement rates, as well as expand coverage. (See below.) This component will need either significant Republican votes to pass, or need to be passed by a ballot measure.


Earlier estimates indicate that AB8 would cover 70% of the uninsured, 3.2 million of the 4.9 million Californians that are uninsured at any point in time, through expansions of group coverage, through employers and public programs. (About 6.5 million Californians are uninsured at some in the year: about 4.9 million at any point in time, according to the California Health Interview Survey.)

If the bill is accompanied by a hospital provider fee, AB8 can cover 80% of the uninsured, four million of the 4.9 million uninsured, by expanding Medi-Cal to cover 600,000 very poor adults without children at home (“childless adults below 100% of the federal poverty level”). If the bill includes the hospital provider fee and such an additional Medi-Cal expansion, such reforms can cover 97% of Californians.


The next Health Access Update will detail the similarities and differences with Governor Schwarzenegger’s proposal, as they continue to negotiate.

For a daily update on health reform negotiations, visit the Health Access WeBlog, at:

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

Leave a Comment

%d bloggers like this: