Gov., Nunez forge a health plan

After nearly a year of often tortuous negotiations, Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nunez have settled on a plan to extend health insurance to 3.6 million Californians who lack it through a new tax on all employers and tobacco sales, officials said Friday.

The leaders have agreed to ask voters in November to require employers to spend between 1% and 6.5% of their payroll costs on healthcare. The measure would also levy a tax on tobacco sales of at least $1.50 a pack, although it could be as high as $2 a pack, the aides said.

“It’s an incredible plan,” Nunez (D-Los Angeles) said in an interview. “I couldn’t tell you there is one single outstanding issue that is a make-or-break issue.”

Daniel Zingale, a senior advisor to Schwarzenegger, said the leaders “have agreed on the framework of the healthcare reform that will go before voters.”

Nunez’s office on Friday filed a companion bill that contains the details of how the plan would work and scheduled an afternoon vote in the Assembly on Monday, presuming a few details will be resolved over the weekend.

That bill does not contain the taxes or other measures that would provide the $14 billion a year needed to finance the ambitious overhaul and would not take effect unless the ballot measure passes. That puts Democratic lawmakers in the highly unusual position of voting on the plan without being able to assess whether the intricate financing scheme will be adequate. Republicans have already vowed to vote against the measure.

The moves came as Schwarzenegger promised to call an emergency session of the Legislature for early January to make cuts to the state’s budget. The governor’s office estimates the projected gap may reach as high as $14 billion by July 2009, which is threatening to sap political momentum from the healthcare plan.

On Thursday, Senate President Pro Tem Don Perata (D-Oakland) said that while he supported most of the Nunez-Schwarzenegger plan, he intends to delay a Senate vote on the measure until the governor outlines how his proposed budget cuts will affect existing healthcare programs for the poor and disabled

The Nunez-Schwarzenegger plan would require almost all Californians to obtain private medical insurance. Those earning below 2 1/2 times the poverty level -- or $51,625 for a family of four -- would receive state subsidies to pay for most of their premiums.

Families earning more than that but no more than four times the poverty level -- $82,600 for a family of four -- would be able to fully deduct any premium costs that exceed 5.5% of their incomes, which translates to $4,543 for a family at the top of that range. There would also be tax credits for people who retire before they qualify for Medicare at age 65 so that they would not spend more than 10% of their savings on insurance.

Under the plan, California employers with payrolls of up to $250,000 a year would have to spend at least 1% on healthcare for their workers. Those that didn’t would pay into a state-run health insurance pool that would help secure coverage for the employees. Companies with payrolls up to $1 million would have to pay 4% and those with payrolls up to $15 million would have to pay 6%. All larger companies would pay 6.5%.

The plan would extend coverage to 800,000 low-income children and many impoverished adults who currently do not qualify for public programs. It would omit about 1 million illegal immigrants as well as another 500,000 people who are poor but either refuse public coverage or cannot document that they are legal residents.

The bill the Assembly will consider Monday would upend the way California’s insurance market works. Insurers would be barred from denying coverage to people because of existing medical ailments and would have to spend at least 85% of premiums on medical care.

Many insurers, including Kaiser Permanente and Blue Shield of California, have supported this approach for months, but the state’s largest insurer, Blue Cross of California, is preparing to fight the ballot measure.

The plan also contains a $2.3-billion tax on hospitals, supported by the industry, that would pay for increased MediCal payments to doctors and institutions that treat the poor. That tax would also qualify California to draw another $2.3 billion from the federal government.

Those involved in the negotiations said the only major piece still to be ironed out is the tax on tobacco. Schwarzenegger and Nunez have been negotiating with the tobacco companies to see if they can craft the provision in a way that will win their acquiescence, if not their support. But aides said they are also still discussing whether $1.50 a pack will be enough to fund the plan, or whether they will need $2 a pack -- an amount tobacco industry leaders say they will oppose.

We “don’t think funding expanding programs with a declining revenue source makes sense,” said David Sutton, a spokesman for Philip Morris USA in Richmond, Va.

Perata also expressed major reservations about the tobacco tax, and said that provisions being insisted upon by the tobacco industry, including immunity from civil and criminal lawsuits, would doom the deal.

The California Nurses Assn., which has favored replacing private insurers with a state-run provider of medical coverage, said the bill was being pushed through the Legislature. “Just as with the energy deregulation fiasco, legislators are being rushed into voting in the dark on a sweeping bill with massive loopholes and serious financial ramifications that no one has adequately reviewed,” said Donna Gerber, the union’s chief lobbyist.

Even some supporters of lawmakers’ efforts were worried that the broader political climate would be insurmountable.

Bob Ross, president of the California Endowment, a Los Angeles-based foundation that favors expanded healthcare, cited as obstacles the state’s weakening economy, the budget gap and the continued standoff between President Bush and the Democratic-led Congress about expanding federal health insurance for children.

“When you do the math on that set of realities, it doesn’t bode well,” Ross said. “So it comes as welcome news that the governor and the speaker are fighting and trying to get something done.”

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jordan.rau@latimes.com

Times staff writer Nancy Vogel contributed to this report.