Our system of private for-profit health insurance is a disaster for the uninsured and insured alike. Nearly seven million Californians lack health insurance. Insurance co-payments for workers are skyrocketing, and the responsible businesses that do cover their employees are being crushed under the rapid escalation in insurance premium rates.
Until this year, Governor Schwarzenegger was a consistent foe of pro-patient health care reforms – vetoing SB 840 (Kuehl), which would have set up a framework for universal health care and campaigning against Proposition 72, which would have mandated employment based coverage for large employers.
Now the Governor says he wants to address the health care crisis. Along with Senator Don Perata, Assemblyman Fabian Nunez and other lawmakers, he recently outlined his ideas for expanding health coverage.
The renewed spotlight on health care reform is a welcomed development for consumers. The Consumer Federation of California (CFC) will work to make sure that any reform plan serves the interests of the public, not the insurance industry’s bottom line.
As health insurance premiums continue to increase beyond the consumers’ ability to afford them, an astonishing 25% of every health care dollar spent is eaten up by insurance industry bureaucratic waste, excessive salaries, and outlandish profits. Yet, public programs like Medicare administer their health plans with only 3% overhead.
CFC believes health care is a right, not a privilege – and that every Californian deserves access to high quality, affordable health coverage.
Last year CFC supported Senate Bill 840, which would have provided universal health insurance for all Californians at no added cost simply by taking the for-profit insurance industry waste out of the system and using those dollars for the delivery of health services. Unfortunately, the Governor, thanks in part to the $3.5 million he received in health-related industry contributions, vetoed the bill.
Here are comments on some key elements of the Schwarzenegger proposal.
The Good: Expanding Public Programs, Better Rules for Insurance Industry
The governor’s plan expands two important public health programs, Medi-Cal and Healthy Families, for children and adults up to 300% of the federal poverty level, regardless of immigration status, and expands Medi-Cal coverage for adults without children. It requires insurers to dedicate 85 cents of every premium dollar to health care; and it prohibits insurers from denying coverage to individuals because of their health status – or “pre-existing conditions.”
The Bad: Unshared Responsibility, Increased Consumer Risk
The Schwarzenegger plan doesn’t cap health premium costs, doesn’t guarantee consumers quality and accessible health coverage, doesn’t reign in pharmaceutical industry price gouging, and forces low-income uninsured people to purchase high deductible plans that won’t cover most medical expenses. Components of the proposal that shift the risk and responsibility for health coverage from the government and the employer to the consumer include:
“Individual Mandates” – Shifting the Burden to the Consumer: The Schwarzenegger proposal requires the uninsured to buy high deductible health insurance or face increased taxes or fines. With $5000 deductibles, the uninsured will face big out of pocket costs for routine or preventative care. The result is insurance without real coverage.
“Health Savings Accounts” (HSA’s) – A Tax Break for the Wealthy and Healthy: The governor’s proposal includes Health Savings Accounts (HSA’s). HSA’s allow a worker to set aside pre-tax income in an account to cover out-of-pocket health costs. HSA’s don’t help individuals who can’t afford health insurance. Coupled with the governor’s individual mandate, HSA’s set up a system where the uninsured would pay most of their actual health care bills from their own pockets, not from insurance coverage.
Insufficient “Employer Mandates”: The proposal requires employers with 10 or more employees to contribute to the health care system, either by providing some coverage or paying 4% of their payroll to a state pool. But, employers already spend an average of 7.2% of their total payroll on health care (even Wal-Mart spends 7%). Unless the employer fee is raised, it won’t provide improved coverage to the 19 million Californians who now get coverage through their jobs. It could even give employers an incentive to reduce health coverage by opting to pay the fee in lieu of providing health insurance. An unacceptable package, but not a bad starting point for the debate.
Endangering the Safety Net: The proposal siphons half of the money ($2 billion) that currently goes to public hospitals to pay for their care of uninsured patients and awards it to private insurance companies to provide health coverage. According to Health Access, “even with more insured people, this could provide huge problems for key public hospital that we all rely on, yet which have been chronically underfunded.
For example: Kern and Monterey Counties , which have been teetering on closure; San Francisco, which relies on San Francisco General and network of clinics to administer its not-yet-implemented Health Access Program for universal access, and in Los Angeles King-Drew hospital, which has had its own set of issues, and LA County/USC Medical Center. The closure of any public hospital would be hugely damaging for all Californians, who rely on trauma centers and emergency rooms in their community to provide care when they need it.”
In the coming months CFC will work for the maximum expansion of health coverage as possible and vigorously oppose elements of any health plan that shifts the responsibility and risk onto the consumer while rewarding the health insurance industry and HMO giants that have failed to serve the public interest.
The Consumer Federation of California is a non-profit advocacy organization. Since 1960, the Consumer Federation of California has been a powerful voice for consumer rights. CFC campaigns for state and federal laws that place consumer protection ahead of corporate profit. Each year, CFC testifies before the California legislature on dozens of bills that affect millions of our state’s consumers. CFC also appears before state agencies in support of consumer regulations.
