The full report on a full hearing…

Thursday, November 1, 2007


  • Assembly Speaker announces intent to vote on a new health care bill by Nov. 26
  • Legislators and stakeholders grill Gov’s health plan on affordability, financing
  • Despite questions, many agree: Don’t lose momentum. Get something done this year.
  • Thousands of Californians from across the state send text messages to Gov. Schwarzenegger urging health care reform

Gov. Arnold Schwarzenegger’s health legislation was vetted over five hours on Wednesday by the Assembly Health Committee, which examined key aspects of the proposal – including whether it would be affordable to consumers, whether it would help drive down health care costs, and whether it had enough financial backing to keep it afloat.The informational hearing did not result in a vote–no legislator agreed to author the proposal for it to be a bill–but the event did allow lawmakers to delve into 220-page tome and hear from consumer advocates, doctors, hospitals, insurers and other stakeholders about the legislation’s far-reaching impacts.

A deal, however, is attainable, said Assembly Speaker Fabian Nunez. “In areas where we disagreed, the Governor has made movement and he should get acknowledgement for the movement he has made,’’ Nunez said. He said he wanted the Legislature to strike a deal with the governor and vote on a health care proposal by Nov. 26.

The desire for movement was palpable on Wednesday as hundreds of consumers involved with the It’s Our Healthcare coalition arrived at the Capitol to watch the hearing, in various overflow rooms around the Capitol. The coalition also set up a giant screen facing the Capitol that allowed thousands Californians to text message the governor about the need for health care reform this year, and broadcast their message on the screen that could be viewed live on .


While the legislative hearing on Wednesday focused on the Governor’s proposal, Schwarzenegger’s legislation is not the only health reform bill on the table this year. In September, the Legislature passed AB8 (Nunez/Perata), which would have provided health coverage to approximately 95 percent of Californians. AB8, however was vetoed by Gov. Arnold Schwarzenegger in mid-October. Before 2007, the Governor has vetoed legislation that would create a single-payer health care system (SB840) and provide universal health care to all children (AB772). In 2004, Schwarzenegger also aggressively campaigned against Prop. 72, which would have required all businesses with more than 50 workers to provide health coverage. After the past several years of rejecting reform measures, Schwarzenegger made a commitment to work on the issue in 2007, releasing a 10-page concept paper in January. In October – 10 months and thousands of meetings later, came the release of the Legislative draft.

This Assembly Health Committee hearing was the first opportunity to review the draft in its actual detail. The Committee has a full analysis of the draft, as well as an agenda for the day. Some key concepts in the governor’s proposal are:

  • Individual mandate: The governor would require all Californians to have health coverage, without condition, limit or exception. Everyone would be automatically enrolled in some plan, and the state would later recover money for the premiums, enforcing the mandate through various agencies. The “minimum credible coverage” is no longer defined; instead the Secretary of Health and Human Services will define it, although employer-based coverage would count even if it was below the minimum.
  • Public program expansions: Expands public programs for all children up to 300% of the federal poverty level, and many qualified parents and adults without children at home up to 250% of the federal poverty level ($25K for an individual, $50K for a family of four). Some streamlining of these programs. Allows low-income adults and families up to 150% of the poverty level, to qualify for no-cost Medi-Cal. ($15K for an individual; $30 for a family of four)
  • Minimum employer requirement: Requires that employers of more than 10 workers spend at least 4% of payroll for health care benefits. Employers with fewer than 10 workers would be required to contribute on a sliding scale of 0-4% of payroll.
    Insurance market rules: Insurers would be prevented from denying people based on “pre-existing conditions,” phase in restrictions on charging people more for their health status, and have to spend 85% of the premiums they receive on all their plans on patient care, rather than administration and profit.
  • Provider rates and fees: Medi-Cal rates would be increased for doctors and hospitals. Hospitals would be required to pay a “dividend’’ in the form of a 4% provider fee. Doctors would not be assessed such a fee, as originially proposed.
  • Lottery: The state would lease lottery operations to a private company to raise about $2 billion/year to help finance the program.

Individual Mandate

Lawmakers from both parties asked wide-ranging questions to seek clarification and air their thoughts on the governor’s bill.Assemblywoman Karen Bass asked about the individual mandate: “How can it not be punitive?”

The administration’s Health and Human Services Secretary Kim Belshe called the mandate “a partnership approach.’’ Belshe said she hoped that employers, community-based organizations, schools and providers, would all work together to help build a “culture of coverage’’ that encouraged and educated Californians about how and where to obtain health insurance.

Assemblyman Bob Huff, however, pointed out that the state currently has an auto insurance mandate – yet 25% of Los Angeles drivers (approximately 14% statewide) – do not carry auto insurance. Huff expressed concern that Californians would not comply with the mandate and wait until the last minute – when they get sick – to obtain coverage. And if insurance market reforms go through – and insurers are required to issue coverage to anyone that applies “doesn’t that drive up premiums for everyone else?’’ since only sick people would have coverage, Huff asked. Huff was also concerned about the state’s ability to recover premium dollars from workers in the “underground’’ economy and who have little tax liability would pay for their coverage.

To address Huff’s concerns, Belshe elaborated more on the administration’s plans. “People want to be insured if it is affordable and available,’’ Belshe said. But should some individuals not comply with the mandate, they would be automatically enrolled in the most basic plan. Our goal is to “maximize enrollment’’ and that would also include a “premium recovery strategy’’ that would essentially harness the premium cost from a workers’ pocketbook and “using at their contact with the outside world to get their money.”

Many lawmakers said they were concerned about whether the plans would be affordable for Californians and did not like the idea that the governor’s proposal did not establish a minimum benefit package that assured them that families would receive a good value for their premium dollar.”How do you define affordable coverage, specifically,’’ asked Assemblyman Kevin De Leon. “Is it premiums? Is it out-of-pocket costs? Is it premiums plus deductibles? This is important to me. Where my constituents live, they have to worry about how to pay for gas, car and electricity,’’ he said. “Affordability is a really critical question.’’

Belshe said the administration agreed that affordability was an issue. “Today, healthcare is just not an affordable option. That’s why (the governor) has built in very strong affordability provisions,’’ which she said included public programs expansions, subsidies and tax credits. But Belshe also admitted there were differences of opinion over where lines on affordability should be drawn. The administration and legislative leaders are still discussing whether a cap should be imposed at the premiums or out-of-pocket costs.

“That’s a point of difference and ample opportunity for robust conversations. We need to think through a couple of things,’’ Belshe said. “What is the cost of looking more expansively? How would it be financed and at what expense to other (state) general fund priorities?”

Assemblyman Mark Leno was particularly concerned with families above 350% of poverty ($72,300 for a family of four) who would be required to buy coverage, but with no tax credit or subsidy to help. Belshe said, however, that employers would be required to allow workers to use pre-tax dollars to buy coverage – a move that could save families up to 33% on their premiums. But Leno seemed unconvinced. “It still seems to me that the employee’s cost is going to be more than $7,000 as well as deductibles of as much as $10,000,’’ he said.

At a minimum, Belshe said, caps on out-of-pocket costs would give families catastrophic protection. “Now, a family a exposing themselves to bankruptcy because they have no protection whatsoever.’’ As consumer advocates pointed out later, it is important to note, though, that 60 percent of all Americans have less than $12,000 in liquid assets, which would mean a $10,000 cap on costs (on top of a premium) would wipe out their savings.

Cost containment:
Lawmakers also examined whether the plan would rein in the underlying costs of health care – what causes health inflation to increase at rates three times that of wages or the price of other goods. Assemblywoman Mary Hayashi asked why the governor’s proposal did not set up a system to purchase prescription drugs in bulk in the same way that AB8 did. Belshe said that such a mechanism wasn’t as acutely necessary because Californians would have health coverage – and therefore would not pay as much for drugs. “No one pays more for prescription drugs than the uninsured. Why? Because they’re buying on their own. Under the governor’s plan, the’re insured, so they have cheaper drugs,’’ she said.

However, the governor’s plan does not specify what benefits should be included in a minimum benefit package. Many high-deductible policies do not have prescription drug coverage, leaving those individuals to continue paying top-dollar for prescription drugs. In addition, AB8 did allow for the statewide purchasing pool to use its full purchasing power to negotiate for the best possible prices.

Assemblyman Dave Jones, the author of a bill earlier this year that would have instituted rate regulation of insurance premiums, hammered away tirelessly on issues of containing premium costs. In one exchange, Jones extracted an admission from the HealthNet lobbyist that premiums would likely increase, regardless of whether there was an individual mandate.

“There’s nothing in Governor’s proposal that provides for regular review or a cap on rates. At the end of the day, it is a proposal that requires everyone to buy insurance from you, but there’s no restraint in the price you can charge them, I can see why you might like that plan,’’ Jones said.

Belshe, however, said she did not believe that premiums needed to be regulated or restrained – and that competition among insurers would drive down premiums. “The governor has confidence in the market place,’’ she said. She later added that doing nothing about health reform this year “will assure that the relentless increases will continue.’’One thing lawmakers believed could help contain costs – at least for consumers – was further definition of the “minimum benefit package,’’ which would allow consumers to know the minimum value of the plan they would be required to buy.

The governor’s latest proposal requires Belshe to oversee a process to define a minimum benefit package. Lawmakers said such a process left them uncomfortable and concerned.

Assemblywoman Fiona Ma ticked off a number of diverse needs that patients have in health care. “How can we be assured the minimum benefit package would address off lf these?’’ she asked.

“It’s a fair question,’’ replied Belshe, “but what we heard (from those they met with) was that they favored an open, public participatory process that wasn’t too prescriptive.’’Assemblyman

Jones, was unconvinced. “I understand the process, but to ask without more assurance with respect to what the content of plan would be is a great leap.’’

Other issues

The wide ranging discussion also touched on:

  • the adequacy of the lottery funds to pay for reform (the Legislative Analyst’s Office raised concerns about this possibility),
  • whether the plan violated the federal law that bans states from dictating how businesses provide benefits (Belshe said it doesn’t and the law was crafted to minimize exposure to legal challenge),
  • how the plan dealt with health disparities within communities of color (Belshe said she hoped the emphasis on prevention, obesity, healthy living and tobacco cessation would help),
  • whether there would be adequate physicians to take care of the newly insured and whether access to health professionals would improve (Belshe indicated that many uninsured get care not but not in the mose efficient way; she also said that’s where the role of retail clinics, staffed by nurses and physician assistants would come in hand).


The Assembly committee later heard from all sectors of the health care debate, on a variety of topics divided by panel, including:
* the role of individuals and employers
* private health insurance markets
* government programs,
* cost and quality,
* and finally, general public comment.

While opinions about how the Governor’s plan would impact consumers and play out in the long run differed, they all agreed that the state should not squander the momentum this year to accomplish reform.

“We can get this done. We need to make use of the optimism of 2007 and make sure it does not slip to political cynicism in the election year of 2008,’’ said Mark Weideman, vice president of Blue Shield of California.

The ground staked out by groups, however, was familiar territory. Some businesses said they agreed with the Governor’s approach, and feared a bigger employer mandate would drive businesses from California, or cause them to cut jobs or go out of businesses. Insurers insisted they needed an individual mandate to assure they received premiums from both younger and healthy Californians, in addition to people who needed more health coverage.

Many consumer, constituency, and labor groups, including members of It’s Our Healthcare! continued to make constructive suggestions on points that have been raised all year, especially in comparison to


  • Affordability: AB8 conditioned any requirement to take up coverage to a percentage of income (5 percent) for health spending (premiums plus out-of-pocket costs).
  • Employer responsibility: AB8 required 7.5 percent of payroll rather than the governor’s 4 percent, to assure that workers who get coverage had more security in their coverage, that resources that employers already spend were maintained to keep the financing of health care viable; and that too much burden wass not shifted onto workers.
  • Cost containment: AB8 included several key elements to help contain costs, including prescription drug bulk purchasing, the option for a public insurer to compete with private insurers, cost and quality data collection and disclosure, prevention, and other methods.

Consumer and community groups that spoke – both on a panel or to offer public comments on the governor’s plan include: Health Access California, California Labor Federation, Service Employees International Union, AARP, CALPIRG, Consumers Union, California Pan-Ethnic Health Nework, California Association of Public Hospitals, Children’s Defense Fund and the 100% Campaign, Western Center on Law and Poverty, California Primary Care Association, Insure the Uninsured Project, AFSCME, American Cancer Society, Health Officers Association of California, California Chronic Care Coalition, Foundation for Taxpayer and Consumer Rights, California Nurses Association, Children’s Specialty Care Coalition, Children’s Health Initiatives, Jericho, California Alzheimer’s Association, Moms Rising, American Diabetes Association, Latino Coalition for a Healthy California, California Immigrant Policy Center, Community Health Councils, Inc., Congress of California Seniors, California School Employees Association, Carpenters Union, Planned Parenthood of California, and others.Other groups, such as the California Medical Association, California Hospital Association, insurance brokers, pharmacists, and counties also spoke as well.

For Health Access California’s 15-page letter on the Governor’s health reform, and other analyses and resources about health reform, visit the Health Access website at:

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

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