Calif. Moves Closer To Health Care Reform

The state Assembly approved a massive health care reform plan that will expand coverage to nearly 70 percent of the state's uninsured and require most Californians to buy health insurance.

Lawmakers approved the $14.4 billion plan on a party-line, 45-31 vote on Monday.

"Fundamentally, health care is a right and not a privilege, and it ought to be afforded to everybody," Assembly Speaker Fabian Nunez, the bill's author, told his colleagues before they voted. "Make no mistake about it, this is truly a historic effort."

Funding for the health care package relies on fees imposed on hospitals and employers, as well as boosting the tax on cigarettes. If the plan is passed by the Senate, it will go to voters in November 2008.

It would represent the largest health care overhaul undertaken by any state if voters give their approval.

Of the 5.1 million people who are considered permanently uninsured in California, 3.7 million would be covered under the plan, according to Nunez's office. That includes children from low-income families, employees at small businesses that cannot afford to provide health insurance and Californians with pre-existing medical conditions who have trouble finding coverage.

The Assembly leader struck the deal last week with Gov. Arnold Schwarzenegger, who made health care reform his top policy priority this year and broke ranks with his party to get it done.

"It is time for the people to stop living in fear of losing their medical coverage, of living in fear that they are literally one hospital stay away from having to file personal bankruptcy," Schwarzenegger said at a news conference after the Assembly vote, surrounded by Democratic lawmakers.

Members of his own party, health insurance companies and business groups criticized the proposal, in part because they say it relies on risky funding sources. They also said it penalizes California employers.

The tobacco tax would bring in about one-tenth of the health care program's funding, but critics said the amount of money generated by the tax increase will decline as fewer people smoke and buy cigarettes in California. The program also relies on $4.5 billion in federal matching dollars that Republicans say may not materialize.

Republicans said the state cannot afford a massive health care reform plan as it faces a budget deficit projected at $10 billion to $14 billion over the next two fiscal years.

Committing to such a long-term expenditure with questionable revenue could create "a fiscal meltdown in California," Assemblyman Chuck DeVore, R-Irvine, told his fellow lawmakers.

He also criticized Schwarzenegger for raising spending and promoting tax increases after the governor was elected on a platform of fiscal responsibility.

Assembly Minority Leader Mike Villines, R-Clovis, predicted the reform plan would fail at the ballot, in part because voters will reject higher taxes.

The plan represents a compromise between Schwarzenegger and legislative Democrats. The governor had wanted to require all Californians to buy a health insurance policy, but Democrats worried about affordability for lower-income workers. In turn, Democrats wanted employers to chip in more money to pay for the program.

The bill would require all employers to spend a minimum amount on employees' health care or contribute to a state-run insurance pool.

Nunez said employers would be assessed on a sliding scale, ranging from 1 percent to 6.5 percent of payroll depending on the size of the company. The cigarette tax - now 87 cents per pack in California - would rise by as much as $2 per pack.

Insurance companies, meanwhile, would have to provide policies to everyone and could no longer refuse coverage to people with pre-existing conditions. Insurers also would be required to spend 85 cents of every dollar on health care services.

Under the plan, all children, including immigrants, would be eligible for subsidized coverage as long as their families did not earn more than 300 percent of the federal poverty level, or about $62,000 a year for a family of four.

While the bill would expand coverage, some union representatives said it does not go far enough in protecting lower- and middle-income workers.

For example, employers could meet the bill's provisions to set aside a certain amount of money for health insurance but then offer coverage only to some employees. They also would not be required to cover part-time workers.

Employers that do not offer insurance would be required to pay into a new statewide health insurance pool, which would be available for low- and middle-income workers who also would be given subsidies to buy coverage.

Most Californians would be required to have insurance by 2010.

Union leaders also complained that no one knows what the cost to individuals will be or what kind of health coverage they would receive if they bought policies through the state pool.

Individuals could petition the state for an exemption to the insurance mandate if they could show that buying a policy would create an economic hardship.

Many of the financing details remained unclear even as lawmakers were asked to vote on the bill, called the Health Care Security and Cost Reduction Act. Those provisions will be addressed in the language of a ballot initiative that Democrats and Schwarzenegger are still negotiating.

The Senate was not expected to take up the bill before next year despite pressure from supporters to act by the end of the week. Sen. President Pro Tem Don Perata, D-Oakland, asked the state's legislative analyst to study the long-term fiscal effects of the bill on the state's general fund.

He won't bring the bill to the Senate floor until he gets the answers he seeks, Perata spokeswoman Alicia Trost said.

Schwarzenegger said he hoped the Senate would act before he gives his State of the State address on Jan. 8.