Since our founding in 1936, Consumers Union has worked to attain universal, affordable, high-quality health coverage for all. Over the past year we have sought to help craft reform that would bring affordable, comprehensive health insurance coverage and high quality care to all Californians, perhaps the most important and complex policy issue facing the State of California. We supported AB 8 (Nunez), in its finally amended state. We believe that ABx1 1 provides a bridge between AB 8 and ABx1 2, the Administration’s reform proposal, and with some amendments holds the promise of creating a system that would ensure the availability of needed, affordable health care for Californians.
Our framework for evaluating any proposal for universal health reform rests on three broad principles:
• Fair, adequate financing;
• Access to comprehensive, affordable care;
• Quality, efficiency and cost control.
We find that ABx1 1 meets these principles in large measure, and focus our comments below on some remaining areas on which we seek amendments. We understand that a parallel ballot measure is needed and being drafted to secure the financing for these landmark reforms; our final support will rest on the terms of that initiative.
Specifically, Consumers Union seeks amendments to:
• add parameters for the minimum benefit required to reach the threshold for being subject to the mandate;
• clarify enforcement of the individual mandate;
• tighten some of the individual market reforms.
Fair, adequate financing
Consumers Union agrees that all stakeholders including government, employers, providers, and individuals have a responsibility to contribute their fair share to achieving universal coverage. This bill requires consumers to secure coverage (see further discussion below), but caps their exposure for health care costs at 6.5% of income. That is, consumers whose total health care costs exceed 6.5% of their family income are exempt from the mandate. As well, there is allowance for a hardship exemption even if the consumer does not meet that threshold if there are extenuating financial circumstances. These two provisions are critical for fundamental fairness and we support them; they seek to ensure that consumers won’t be forced to buy coverage they cannot afford and place a limit on consumers’ exposure as there is one for other stakeholders.
Solid financing is needed to assure the long-term stability of the program. While the bill sets forth the component parts of the financing structure, and we understand they are to be placed in a ballot measure, it is impossible to fully assess the viability of the proposal without more specificity on the financing structure. The bill states the intent to finance this reform through a $2 per pack tobacco tax and we do not here express an opinion about the wisdom of this approach. Although it is a reasonable one to pursue, and one we could support, the likely decrease in smoking and therefore revenues over time could indeed pose a threat to the long-term sustainability of the program. We look forward to seeing the ballot language, at which time we can determine our final support for the bill.
The bill states the intent that it also will be financed by a hospital contribution of 4% of patient revenues and a scaled employer contribution of 2% if payroll is $100,000 or less, 4% for $100,000- $250,000 in payroll, and 6.5% with payroll greater than $250,000 per year. While we appreciate the bill’s attempt to find the middle ground for the employer fee on which policymakers can agree, a 6.5% cap for employers is a concern since the average employer in California providing coverage currently pays 8% of Social Security wages for healthcare. For employees who currently get health insurance through their own employer, the average employer contribution rises to more than 11%. Setting the employer contribution bar too low will encourage employers currently above that bar to contribute to the pool rather than provide health benefits, crowding out employer-based coverage and pushing more of the workforce into public programs or the purchasing pool. This concern could be allayed by ballot language setting forth an entire, solid financing scheme.
To achieve universal coverage, measures must be in place to ensure that California’s large part-time workforce is also covered. We understand that very low wage, part-time workers could get coverage through public programs under this bill, and it makes policy sense to foster employment–based coverage for them by separately specifying payment from employers on their behalf, as in the vetoed AB 8. This bill’s split between workers making less than $25,000 per year and those making more than $25,000 per year may benefit some of the same population, but may need adjusting. Further analysis of this provision is in progress.
Realistic access to comprehensive, affordable care
There are solid components of this bill that will widely expand access to insurance, for example through significant public program expansions that Consumers Union has long supported. Broadening Medi-Cal and Healthy Families eligibility, including to children regardless of immigration status up to 300% of the federal poverty level (FPL) and their parents as well as childless adults up to 250% of the FPL, is to be commended as additional help for the poorest Californians. In addition, subsidized coverage through the pool for those from 150% up to 250% of the FPL (capping premiums at 5% of income), plus tax credits for those between 250% and 450%, will provide some additional help for lower income Californians.
Other noteworthy, positive provisions address post-claims underwriting problems and guarantee issue; encourage e-prescribing, electronic medical records, and personal health records; broaden scope of practice rules to give greater flexibility to nurse midwives, nurse practitioners and physician assistants; and emphasize prevention through incentives, disease management programs, and “community makeover grants” as were in the Governor’s proposal.
The requirement that all residents of California secure health insurance—or be defaulted into the pool and then repay the state—is a concept Consumers Union has said could be an acceptable policy approach if the supporting features were in place to make coverage available with guaranteed issue, if it were affordable and workable, and if it provided a meaningful benefit. The creation in this bill of an expansive purchasing pool will reap the benefit of group purchasing. We would encourage opening it to any individual not covered by group insurance.
Individual market reforms including guaranteed issue and community rating on an immediate basis, and small group expansion to 100 employees will ameliorate some of the dysfunctionality of the non-employer-based private market. We urge that the five-tiers of coverage in the individual market be further defined so that consumers know what they are getting and can readily compare various offerings to get the best value and right benefits for them. We also urge that the rating between the tiers be tightened to ensure that the most comprehensive care is not out of line with the skimpiest, and that some constraints are placed on pricing amongst age groups. We expect that there will be variations in price between the youngest and oldest age groups, but would urge some adjustment be used to avoid pricing consumers over the age of 50 out of the market.
One concern we have is the absence of a definition of coverage used to determine whether a consumer meets the 6.5% threshold. The parameters of a basic benefit package should be defined in the bill including hospital, doctor, lab and other services in Knox-Keene, as well as preventive services and prescription drugs. Omitting any statutory parameters on the scope of coverage which will determine affordability is asking consumers to buy a “pig in a poke”—we have no way of knowing the basis on which consumers’ ability to buy will be determined and thus whether the program would serve their needs. While it is understandable that the details of policies be left for the regulatory process, basic parameters of the benefit structure should be written into statute.
As well, the bare language on “minimum health care coverage” to satisfy the individual mandate should be addressed. This need not be the same as the minimum coverage definition used to calculate whether a consumer is subject to the mandate. In fact, separating the two definitions could ensure that once a consumer is determined subject to the mandate they retain their right to choose the coverage that best suits their needs. Setting parameters for the minimum creditable coverage should be framed to avoid illusory insurance.
We support the broad outreach and education program about the individual mandate with multiple entry points envisioned in this bill. Widely publicized, clear information about the mandate and ways to access the right coverage for each consumer’s needs will be critically important. Enforcement of the individual mandate, however, is unclear other than the statement that MRMIB will enroll into the pool those without coverage for more than 63 days after leaving employment and then will recoup from the consumer the cost of such coverage. Without further detail, this could allow for heavy interest and collection fees, tax refund and Earned Income Tax Credit intercepts, and the use of private collection agencies. The enforcement authority should be spelled out in the bill with limits on interest and collection fees. Without doing so, the specter of collection agencies and lack of definition of minimum creditable coverage in the bill create a vague, dual threat for consumers faced with the new individual mandate.
Quality, Efficiency and Cost Control
This bill contains strong, concrete measures aimed at controlling health care costs, an essential step to ensuring that the reforms enacted are enduring. Given the skyrocketing cost of health care, strong measures are needed to slow that escalation and to sustain any new program for the long-term. The creation of a dramatically enhanced system for collecting and disseminating health care safety, quality and cost information at all levels of the healthcare system as contained in this bill is a critically important step to save health system dollars. The bill’s California Health Care Cost and Quality Transparency Commission will develop a plan, validated through the regulatory process, to ensure comprehensive and efficient collection of data from physicians, hospitals, and nursing homes to help consumers choose the best-value care and give providers the information and incentives they need to improve their performance.
Public disclosure of safety and quality information, such as mortality rates by hospital, has been shown to instigate concrete, self-improvement by health care providers—to save lives and also save health system dollars for both public and private payers.
Studies repeatedly show that public reporting of medical outcomes leads to improved performance. (See, e.g., “Hospital Performance Reports: Impact on Quality, Market-Share and Regulation”, Hibbard, J., Stockard, J., and Tusler, M., Health Affairs (July/August 2005)) And improving performance saves lives, while also saving money in the health care system. While there are some voluntary efforts underway to collect data on health care quality and cost, the data are incomplete, inconsistent and hard to compare.
Under ABx1 1, health care providers will have the information they need to evaluate their performance vis a vis their peers and make improvements. Requiring public reporting of key cost drivers such as hospital-acquired infections, as 20 other states do, will be result in significant savings—of lives and dollars. The Administration estimates that hospital-acquired infections cost the health care system in California $3 billion per year, and medical errors cost another $1 billion per year. Exposing these outcomes and other federal “Patient Safety Indicators” to the light of day will result in improvement and reduced hospital stays.
In addition, the bill’s disease management programs, prevention requirements, support for the use of health IT, pooled purchasing arrangement for prescription drugs, together will we believe foster better health and long-term systemic savings. The public insurer option built on California’s local initiatives is an especially important piece of the package which will create a nonprofit option for consumers and healthy competition to keep insurance costs down.
Consumers Union expresses our deep appreciation for the commitment shown by the Assembly Speaker and President pro Tem to making high quality, affordable health care available to all Californians. We believe that ABx1 1, with the suggested amendments, would provide an historic step toward comprehensive reform in California.
Elizabeth (Betsy) Imholz is the Director of Special Projects for Consumers Union. In this capacity as a consumer advocate, she focuses on lobbying the California legislature on policy issues related to insurance, health care, trade school regulation, and general consumer protection. Prior to coming to CU, she was a public interest attorney in New York City.