One more time, with feeling…

Thursday, November 15, 2007

* Assembly Health Committee passes Democratic leadership’s health measure, ABX1 1
* 60 witnesses testify for over three hours
* Floor vote set for week after Thanksgiving

New on the Health Access Weblog: More on the Hearing; How the Budget Crisis Impacts Reform; Reporter Snarkfest; Crossing Off the Gov’s AB8 Veto Reasons; The Gov’s Counteroffer; Bonuses for Retroactive Denials?; Initial Reaction’s to Nunez’s New Proposal;

For another time this year, the Assembly Health Committee Wednesday passed comprehensive health reform legislation aimed at expanding coverage to a significant swath of California’s 6.5 million uninsured. The newly reconstituted Assembly Health Committee voted on the first health reform bill of the special session, ABX1 1 (Nunez/Perata) and vowed to send the bill to its Senate counterpart by the end of the month. The bill passed on a 10-5 party-line vote.

The committee also rejected a Assembly Republican promote, AB X1 8, which opponents said would decimate the state’s HMO Patient Bill of Rights and other consumer protections, and promote high-deductible health plans through Health Savings Accounts, leaving more people underinsured in the state.

AB X1 1 goes beyond the ideas layed out in the previously passed – and vetoed — AB8 (Nunez/Perata) and Gov. Arnold Schwarzenegger’s own health care proposal, formally released and debated last month. In spite of its many iterations, Assembly Speaker Fabian Nunez stressed that ABX1 1 is still a work in progress. “What you have here is not a perfect document, but I would ask everybody to always compare it to the current health care system,’’ he said.

To get a more comprehensive analysis of what’s in ABX1 1, click here. In summary, ABX1 1 would:

* Significantly expand public programs to include:
* Children and parents up to 300% of the poverty level ($61,950 for a family of four),
* Childless adults up to 250% of the poverty level ($25,525 for an individual),
* And tax credits for families between 250% and 450% of poverty to help ensure that the cost of health care does not exceed 6.5% of income.
* Establish a minimum employer contribution of 6.5% for businesses with higher than a $250,000 payroll. Businesses with a smaller payroll would pay less.
* Require all Californians to have health coverage, as long as it was “affordable.’’ “Affordable” means that a family pays no more than 6.5 percent of its income on premium and out-of-pocket costs.
* Require insurance companies to sell coverage to every Californian, spend 85 cents of every premium dollar on health care and prohibit companies from charging sicker enrollees higher rates.
* Create a state-run insurance purchasing pool that would allow Californians to benefit from group negotiated rates.
* Contain the underlying costs of healthcare through public disclosure of cost and quality, bulk purchasing of prescription drugs, and the offer of a public insurer option.
* Establish a $2-per-pack tobacco tax and 4 percent fee on hospitals, in addition to federal, local, employer, and individual contributions to pay reform.


Many Republicans raised the concerns expressed by business interests. Some raised the specter of the Employee Retirement Income Security Act, ERISA, which bans states from explicitly dictating how businesses spend money on specific health benefits. Others also worried that small businesses, working on thin margins, would not be able to afford the coverage.

“Small businesses are saying the 2% fee (on a payroll of less than $100,000)would harm them. They tell me they’ll lose 295,000 jobs,’’ said Assemblyman Alan Nakanishi, R-Lodi.But Nunez said the plan falls apart otherwise. “The only way we can make this work is if everyone has a role,’’ he said.

On the ERISA question, Nunez responded: “We’ve had a roomful of lawyers who have been working with us …we’re not asking employers to pay for specific health care services.’’ Nunez is referring to ERISA provisions that say states can’t prescribe benefits packages, as multi-state companies would need to adjust health coverage from state to state to meet different mandates. (For one take, visit the Health Access WeBlog for our previous analysis of the Maryland decision here.)

Assemblyman Bob Huff, R-Diamond Bar, warned that relying on the tobacco tax to finance health reform was unwise, given that the numbers of smokers has steadily declined over the years, and a severe jump in tobacco taxes would drive more to quit – reducing the amount of revenues the state would draw from such a tax. To that, Nunez jokingly asked whether Huff would agree to support an even higher tax – at $3 to $4 per pack. Seriously, Nunez said he and staff were aware of the fact that tobacco taxes were a declining revenue source, but expected the hospital fee to increase ovcer time and offset the losses from tobacco, along with the kicking in of other reforms.

Assemblywoman Audra Strickland, R-Thousand Oaks, was unconvinced and asked whether the speaker had considered what would happen if health costs continued to exceed revenues. Nunez’ staff responded that MIT economist Jonathan Gruber – who had modeled the numbers for both the administration’s and legislative proposals – had taken the most conservative route in estimating costs. Gruber had “overestimated costs’’ by assuming that none of the cost containment provisions saved any money and “100% of the costs show up the first day’’ something that never happens in a program of this scale that requires years to operate at full capacity.

In light of yesterday’s Legislative Analyst’s Office’s fiscal forecast predicting a $10 billion budget shortfall over the next two fiscal years, Republicans also said this was not the time to be embarking on an ambitious quest to provide health care for all, even though Gov. Schwarzenegger said last week that health reform would actually help rein in costs by assuring the state spent health care money wisely and efficiently.

Assemblyman Hector De La Torre, D-South Gate, pointed out that because ABX1 1, if passed, would not be fully implemented until July 2010, the state had time to address budget issues and its deficit before the full reform was implemented.Democrats on the committee, while supporting the bill and health reform, also advocated for specific amendments.

De La Torre, said he was concerned that the bill did not specifically spell out what kind of benefit package consumers would be buying, even though they’d be required to receive coverage. The problem is that “affordable’’ health plans, are also those that cover few benefits and leave consumers on the hook for more health care costs – rather than less. “We need to try to do something to clarify the quality of the health insurance options – that it isn’t OK to offer a $10,000 deductible and have the policy be acceptable and have that work for the employee,” he said.

Assemblyman Dave Jones, D-Sacramento, author of AB1554 that would have required state approval for every health premium increase said he felt strongly that insurance companies needed to justify their need for premium increases.

Assemblywoman Patty Berg pointed out the irony of discussing health reform while the state has approved emergency regulations to disenroll eligible children from Healthy Families and put other eligible children on waitlists until money from the federal government State Children’s Health Insurance Program is hashed out and becomes available and reliable. (Read more about SCHIP here).

Assemblyman Ed Hernandez, an optometrist, said he worried about the availability of providers to care for newly insured. Assemblywoman Karen Bass said she hoped the state would also track health disparities among ethnic groups.


Feelings about ABX1 1 were also diverse among advocates and interest groups. Positions on the measure fell under five categories: Support, Support if Amended, Concerned, Oppose Unless Amended, and Oppose.

SUPPORT: Organizations that supported the measure generally supporter the notion that the package sought provide universal coverage. This included the California Association for Nurse Practiioners, American Nurses Association and the consumer group CALPIRG.

SUPPORT IF AMENDED: Organizations in this category also felt that ABX1 1 possessed many features that made it appealing – including insurance market reforms, broad public program expansions and a leap toward universal coverage. But advocacy groups in this category were waiting to see the complementary ballot measure language as well, and wanted some issues remained unresolved – such as affordability and a defined minimum benefit package. Organizations that weighed in as “Support if Amended” included: Health Access California, California Medical Association, California Labor Federation, AFSCME, Consumers Union, Small Business Majority, California Association of Public Hospitals, California Hospital Association, AARP, Congress of California Seniors, Service Employees International Union, Children Now/100% Campaign, Children’s Specialty Care Association, Children’s Hospital Association, California Chronic Care Coalition, ACORN, Unitarian Universalist Legislative Ministry, Latino Coalition for a Healthy California, Alzheimer’s Association, Latino Issues Forum, California Federation of Teachers, and the California Primary Care Association.

CONCERNED: Organizations in this group said they were not prepared to take an official position on the bill, yet, but said lawmakers needed to be mindful of the populations they represented and specific concerns they sought to raise. This included Western Center on Law and Poverty, an organization representing Christian Scientists, Los Angeles County, the California Immigrant Policy Center, Blue Shield of California, California Pan Ethnic Health Network, Greenlining Institute, LA Health Action, the Academy of Family Physicians, and the American Cancer Society.

This group also included Jennifer Kent of the Department of Health , representing the Schwarzenegger Administration, acknowledging the progress that the Democratic legislative leadership had come in dealing with the Governor’s issues, such as with guaranteed issue and Medi-Cal rate increases. She also reiterated where the Governor had adjusted his proposal (most notably last week in agreeing that the employer fee should go as high as 5.5% of payroll, and that subsidies should go to people up to 400% of the federal poverty level.) While her tone was positive, she did express concerns about where differences remained, including with the exemptions to the individual mandate in AB x1 1.

OPPOSE UNLESS AMENDED: Some business and industry groups fell into this category, including groups that stated their desire for health reform but had significant issues remaining. This included the Safeway-led Coalition to Advance Healthcare Reform, Small Business California, Kaiser Permanente, who did not want any individuals to be exempted from an individual mandate, if insurers were going to be asked to provide coverage to everyone, and Protection and Advocacy Inc., representing Californians with disabilities.

OPPOSE: Most organizations and industries in this camp opposed the previous reform proposal by the legislative leadership, although for different reasons from each other. They included: the California Restaurant Association, California Nurses Association, Association of Life and Health Plans, Foundation for Taxpayer and Consumer Rights, Blue Cross of California, National Federation of Independent Businesses, Chamber of Commerce, California School Employees Association, Howard Jarvis Taxpayers Association, California Association of Health Plans, California Manufacturers Association, Gray Panthers, Butte County Health Care Coalition, and California Small Business Association.

(Of interest, Blue Cross said that nearly 600,000 policyholders would hold plans that might disqualified under ABX1 1 – implying that two-thirds of its individual insurance policy holder are underinsured.)

WHAT’S NEXT: The Assembly is expected to return November 26, at which time AB x1 1 will be amended, and considered in both Appropriations Committee. In that week after Thanksgiving, the Assembly is expected to vote on the measure, and assuming approval, pass it through to the Senate. Speaker Nunez seemed committed to placing a version of AB x1 1 on the Governor’s desk in the next few weeeks.

If the Governor were to sign a version of AB x1 1, the expected plan would be to have most or all of the proposal be enacted only if and when a ballot measure would be passed with the financing elements of the proposal. If an agreement if reached, the Governor and legislative leaders, along with a coalition of supporting stakeholders, are expected to campaign for such a ballot measure to be slated for November 2008.

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

To view other resources from the Year of Health Reform, visit our website, at:

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