Schwarzenegger proposes sweeping plan to cover the uninsured

By: LAURA KURTZMAN - Associated Press Writer | Monday, January 8, 2007 7:02 PM PST ∞

SACRAMENTO -- Gov. Arnold Schwarzenegger on Monday laid out a sweeping proposal to extend health coverage to nearly all of California's 6.5 million uninsured people, promising to share the cost among businesses, individuals, hospitals, doctors, insurers and government.

The plan contains elements that are likely to provoke opposition from a wide range of powerful health care interests, including doctors, hospitals and insurers, as well as employers and unions. But it also contains carrots for each of them.

All Californians will be required to have insurance, and all but the smallest businesses will have to offer it to their workers. Insurers will no longer be allowed to deny coverage to people because of their medical problems.

All children, regardless of their immigration status, will be covered through an expansion of the state and federal Healthy Families program.

"I don't think it is a question or a debate if they ought to be covered ... The federal courts have made that decision -- that no one can be turned away," Schwarzenegger said. "The question really isn't to treat them or not to treat them. The question really is how can you treat them in the most cost-effective way."

The governor was supposed to give his address in person to a panel of health care stakeholders. Instead, he spoke via video link. He is still recuperating from breaking his right femur during a December ski vacation in Idaho.

Under Schwarzenegger's plan, all Californians will be required to have insurance, although the poorest will be subsidized. Businesses with 10 or more employees will have to offer insurance to their workers or pay 4 percent of their payroll into a state fund.

Smaller businesses will be exempt. More than 80 percent of California companies fall into this category, Schwarzenegger spokeswoman Julie Soderlund said.

Kim Belshe, Schwarzenegger's health secretary, said requiring people to obtain health insurance is vital to the plan's success. Hospitals, doctors and insurers will benefit if everyone has insurance and if Medi-Cal reimbursement rates are increased, she said.

"We must come together to create a more functional health care system that provides care for everyone," Belshe said.

She said $10 billion to $15 billion in new money will go to doctors and hospitals under Schwarzenegger's plan, which is more than they will be asked to pay.

The insurance mandate is likely to be met with stiff resistance. Unions will balk at the individual requirement, while business groups and Republican legislators will protest the business aspect.

The state will subsidize the estimated 1.2 million low-income people who do not currently qualify for coverage under Medi-Cal. They would be able to buy insurance through a state-run pool and will have to make a small contribution toward their premiums.

Schwarzenegger is betting that his plan will save $10 billion to $15 billion a year by cutting health care costs and redirecting money already in the system, an ambitious goal. He says the savings will offset the new fees he is asking doctors and hospitals to pay.

Hospitals will have to pay 4 percent of their revenues, while doctors will pay 2 percent.

The state also will increase what it pays doctors and hospitals through Medi-Cal, which is widely seen as woefully underfunded.

Schwarzenegger's decision to include an employer mandate is a blow to his business allies, who waged an expensive fight against a similar requirement just three years ago -- with the governor's help. Republicans reacted negatively.

"Imposing a new jobs tax on employers of any size and expanding costly government mandates is the wrong approach, one which will devastate our economy," Assembly Republican leader Mike Villines said in a statement. "We continue to agree with the governor's statements in 2004, when he argued that a new jobs tax will be a job killer and force many businesses to lay off workers, move out of state or close their doors for good."

Allan Zaremberg, president of the California Chamber of Commerce, said the governor was taxing businesses, doctors, hospitals and insurers to fund his plan. He questioned whether the skyrocketing cost of health care would mean that businesses would be asked to pay even more in the future, as premiums continued to rise.

"The biggest fear that we all face is that people who are satisfied with the system, who can afford the system, will suffer increased costs," said Zaremberg, one of the governor's key allies.

One business leader, Safeway chief executive Steve Burd, said the governor was on the right track. But he said businesses that do not offer health insurance should be charged more than 4 percent of their payrolls.

If it is cheaper for businesses to pay the fee than to insure their workers, businesses will have an incentive to drop coverage and let their employees join the state pool.

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