The comparisons…

Wednesday, November 6, 2007

* AB x1 1 Would Significantly Expand Public Programs; Subsidies for Coverage
* Would Require Californian to Have Health Insurance, But Conditioned on Affordability
* Answers Critique by Governor in Veto of AB8, the Legislative Leaders’ Previous Proposal
* Hearing Scheduled for November 14th

New on the Health Access Weblog: More Analysis/Commentary of Nunez’s New Proposal on Health Reform; Breaking News on the Special Session, including new Assembly Health Committee: More on SCHIP and the Fallout from the Bush Veto;

Democratic legislative leaders on Tuesday announced out their latest health reform proposal, as the framework for a potential agreement with Governor Schwarzenegger. The press release is available at the website of Speaker Fabian Nunez.

The framework would provide more help to more Californians in getting affordable coverage than either the Governor’s plan or the legislative leaders’ previous proposal, AB8. It also moves in the direction of the Governor’s proposal in key areas, including spreading the financial burden among a broader range of contributors, and introducing a requirement that all Californians buy health coverage–although only if coverage is deemed affordable.

The new bill, AB X1 1 (the first bill in the first extraordinary session of the legislature) will be formally introduced as legislative language later this week. It is expected to be heard in the Assembly Health Committee hearing on November 14th. Financing elements of the plan, which include a hospital fee, employer fee and a $2-a-pack tobacco tax, would appear before voters in November 2008.

THE HISTORY: The latest proposal, by Assembly Speaker Fabian Nunez and Senate Pro Tempore Don Perata, is the latest legislative volley in the health reform debate, which began nearly a year ago when both leaders introduced separate plans. That was followed by the governor’s January release of a 10-page concept paper. The leaders then merged their plans into one bill, AB8, sent that to the governor, who vetoed it in October. That same week, the Governor finally released the legislative language of his proposal, which largely mirrored his January proposal. This new proposal is the legislative leaders’ attempt to deal with all the issues raised by the Governor in his veto of AB8.

THE PRESS CONFERENCE: Assembly Speaker Fabian Nunez hailed his proposal as a “breakthrough,” and mentioned that “the tumblers are falling into place,” and when the Governor moves, California “will finally unlock” the puzzle of health care reform. Senate President Pro Tem Don Perata acknowledged that “we’ve been doing this a long time,” and “if it was simple, it would be done: it’s not simply, and it’s not done.” But again, he emphasized that this would be the framework of a deal with the Governor, if the Governor met them with the significant steps that they took.

SUBSTANCE: WHAT’S IN THE BILL: Many of the concepts in the latest proposal closely follow what lawmakers have been discussing all year, with some adjustments:


* AB X1 1: The proposal include a major expansion of public program and subsidized coverage to low- and moderate-income Californians, and not just to children and parents, but the adults without kids at home. It includes: All children, regardless of immigration status, up to 300 percent of poverty. Parents of those children who are citizens or legal residents (up to 300 percent of poverty) would also receive coverage. Single, childless adults below 250 percent of poverty – many of whom currently can’t afford coverage, but don’t qualify for public programs now at all – would now qualify for Medi-Cal. The proposal also includes streamlining of these programs so that those eligible for the program can more easily get on and stay on. Individuals with incomes between 250% to 450% of poverty would receive a new tax credit to assure that coverage through the purchasing pool would not exceed 6.5 percent of income for overall health care costs.
* CHANGE FROM AB8: The proposal goes beyond AB8 with expansion of Medi-Cal to adults without children at home, funded by the new revenues raised. Another new element is the advanceable, refundable tax credits to ensure affordability for families up to 450% of the federal poverty level, or $92,925 for a family of four.
* DIFFERENCES WITH GOV’S OCT. PROPOSAL: The Governor’s plan expands public program coverage for parents up to 250 percent of poverty ($51,624), rather than 300 percent ($61,625) under AB X1 1. The Governor’s plan has subsidies through tax credits between 250 to 350% of poverty to buy coverage, rather than up to 450% in AB x1 1. That tax credit would make the cost of the premium 5 percent of the family’s income, but that credit would not take into account out-of-pocket costs.
* COMMENT: The proposal would be the largest public coverage expansion since the creation of Medicare and Medicaid 40 years ago. Millions of Californians would have access to get comprehensive coverage through Medi-Cal or Healthy Families.


* AB X1 1: A sliding scale up to 6.5% of payroll. Employers with a payroll higher than $250,000 annually would be required to pay 6.5 percent in health benefits. Businesses with smaller payrolls would contribute on a sliding scale (Less than $100,000 payroll would pay 2 percent for health benefits, between $100,000 and $250,000 would pay 4 percent for health benefits). Employers would have a two-pronged test to ensure that the benefit was being broadly shared among all workers. As part of this two-pronged test, they would have the option of providing private coverage or paying a fee into a statewide purchasing pool for those earning more than $25,000, AND for those earning less than $25,000.
* CHANGE FROM AB8: The previous proposal required all employers – regardless of size and payroll – to pay 7.5 percent for health benefits.
* DIFFERENCES WITH GOV’S OCT. PROPOSAL: The governor’s proposal requires an employer contribution of 4 percent of payroll if a business has more than 10 employees. Businesses with fewer than 10 workers would pay between 0 percent and 4 percent. Even if a business pays into the purchasing pool, their workers would not qualify to receive coverage from the pool if the worker doesn’t meet the standard income requirements for public program coverage or subsidies.
* COMMENT: The employer contribution is lessened to deal with the concern raise by Governor Schwarzenegger in his veto message, but it still provides employers a new, affordable option by which to cover their employees. Having a group purchasing pool, and a sliding scale contribution level allows businesses to actually provide a benefit that might otherwise be out-of-reach. Additionally, ensuring that businesses pay on both their lower-wage (less-than $25,000 earners) and higher earners assures that everyone benefits, not just the high-earning or longest-serving workers.


* AB X1 1: All Californians would be required to have coverage as long as the premiums plus out-of-pocket costs do not exceed 6.5 percent of a person’s income. In addition, those within the requirement can apply for a hardship exemption. Those who do not comply would be automatically enrolled in the purchasing pool.
* CHANGE FROM AB8: Required only workers to accept coverage offered to them on the job if the premium and out-of-pocket costs were less than 5 percent of wages.
* DIFFERENCES WITH GOV’S OCT. PROPOSAL: Every Californian would be required to have coverage, without exception, limit, or condition. No considerations for affordability or hardship.
* COMMENT: Consumer advocates have been wary of an individual mandate that would force Californians to buy coverage that was unaffordable, or that they had been denied, or was too complicated to use and keep. AB X1 1, however, addresses many of those concerns by ensuring that Californians would be exempted from the mandate if it is deemed unaffordable. Most Californians, after all, want health coverage; but often, it is unavailable or unaffordable. Additionally, AB X1 1 would establish new rules for insurers, restricting their ability to deny enrollees for so-called “pre-existing’’ conditions. More details are being sought about the minimum coverage level (although requiring high out-of-pocket cost plans will be prevented by the affordability protection).


* AB X1 1: Would raise Medi-Cal rates, as part of the package with the hospital assessment and the drawing down of federal matching funds for California.
* CHANGE FROM AB8: AB8 didn’t include the Medi-Cal rate increase and hospital assessment, due to inability to get the needed 2/3 vote.
* DIFFERENCES WITH THE GOV’S OCT PROPOSAL: Essentially the same proposal.
* COMMENT: California has some of the worst Medicaid reimbursement rates in the country. This will allow those on Medi-Cal to have better access to providers, and better fund the health system we all rely on, by drawing down California’s fair share of federal matching funds.


* AB X1 1: There is a multiplicity of eight different funding sources, including an individual contribution (capped at 6.5% of income), an employer contribution (sliding scale up to 6.5 of payroll), a hospital fee (roughly 4%); federal matching funds; reinvested state savings; better use of the “Section 125” federal tax credit; a $2-per-pack tobacco tax increase; and potentially some contribution from counties as medically indigent adults are covered by the state.
* CHANGE FROM AB8: The previous legislation was constrained to revenues only achievable in a majority vote bill, and did not include the hospital or tobacco taxes.
* DIFFERENCES WITH GOV’S OCT. PROPOSAL: Governor’s proposal has a lower employer contribution of four percent, but higher – and possibly unlimited – contribution from workers and individuals. Instead of a tobacco tax, Schwarzenegger’s proposal derives additional revenues from leasing the state’s lottery.
* COMMENT: Most of the financing elements would be put before voters in November 2008.


* AB X1 1: A combination of many (but not all) of the ideas from the legislature and the Governor. Requires prevention efforts, transparency so providers disclose cost and quality information, bulk purchasing of prescription drugs, health information technology and a public insurer to compete with private plans.
* CHANGE FROM AB8: The proposal adds language from the Governor’s proposal around health information technology, e-prescribing; obesity; smoking cessation; and community makeover grants.
* DIFFERENCES WITH GOV’S OCT. PROPOSAL: Include cost containment elements that were included in AB8. On transparency, Schwarzenegger’s proposal only sets up an advisory committee to set up disclosure procedure, but no long term follow through. The Governor’s proposal does not include prescription drug bulk purchasing, nor a public insurer option.
* COMMENT: Cost containment remains a central focus for health advocates. Without addressing the underlying cost of health care, health inflation will continue to outpace wages and cost of living increases, rendering any reforms moot within a few years.


* AB X1 1: For Individuals/families: Assures that the cost of health care (premiums plus deductibles) does not exceed 6.5 percent of income for families up to 450% of poverty ($92,925 for a family of four) For employers: The requirement is scaled to go to 6.5 percent of payroll; many employers pay more now, and will continue to pay more, of their own choosing.
* CHANGE FROM AB8: AB8 restricted premiums and deductibles to 5 percent of income. All businesses had to pay the same amount under AB8.
* DIFFERENCES WITH GOV’S OCT. PROPOSAL: The new proposal extends subsidies and support to a greater swath of Californians, making health care more affordable.
* COMMENT: Affordability has been the key issue for health advocates – particularly if there is any requirement to take up or buy coverage. Californians should not be penalized for not purchasing coverage they can’t afford, can’t get and provides little or no value or coverage. Exempting Californians for affordability gives consumers the necessary escape valve against unaffordable coverage. Expanding public programs is a huge boon to many middle-income Californians. And a group purchasing pool could help negotiate lower rates for all eligible workers.

OVERALL COMMENT: While most organizations are waiting for legislative language to be released later this week, Health Access California and some other consumer groups are pleased with the framework as described. It would dramatically secure and expand public program coverage and group coverage for millions of Californians, making coverage more available and affordable in each of the ways that people get coverage-through public programs, on-the-job benefits, or buying it as individuals. The proposal include many elements–on public program reforms, insurance market consumer protections, and cost containment provisions–that if passed in any other year would be a major consumer victory in their own right.

Even with all these benefits, consumer advocates will be vigilant when looking at the full legislative language if any population gets more of a burden than a benefit. The notion of an individual mandate has been controversial, but many of those concerns would be addressed with the concepts described, including strong affordability protections and exemptions; significant subsidies with the ability to get coverage through a statewide purchasing pool, and if this was done in the context of expanded group coverage and a smaller individual market. Issues that will be reviewed by consumer advocates will include the definition of minimum benefits; how out-of-pocket costs are factored in either the minimum standards or the affordability protections; the nature of the affordability test; and the structure of the statewide purchasing pool.

PROCESS: AB X1 1 is expected to be formally introduced on Thursday, November 8.

On November 14th, the Assembly Health Committee will convene a hearing on the bill. Speaker Fabian Nunez said he hopes to have a floor vote on the measure by the week after Thanksgiving.

For more information, contact the author of this report, Hanh Kim Quach, at

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