Plan Would Provide Health Insurance for All in State

With little notice, a proposal is taking shape here that would provide basic health insurance to every resident in California--and at a cost that its proponents say would be less than what the average family now spends on health care.

The plan’s details are still being hammered out, and they are sure to be controversial. Therefore, its adoption is far from certain, at least in the foreseeable future, most knowledgeable observers agree.

As currently drafted, the plan would offer benefits that cover all diagnostic, therapeutic and preventive services considered necessary by a physician--as well as payment of all hospital and nursing-home care ordered by a doctor.

The plan, called the California Health Insurance Program, or CHIP, would make available to every California resident an approved health insurance plan. And it would require all employers with one or more employees to pay at least 50% of their employees’ insurance premium. The premium would be regulated by a state commission.

In most cases, those already insured would be able to continue with their present plan--provided that the insurer’s coverage meets the basic requirements, as most already would. More comprehensive benefits could be had for a larger premium, although who would pay for this is not yet clear.

Extend Coverage

A special feature of CHIP is that it would extend coverage for the first time to about 3 million Californians who have no private insurance and who are ineligible for government programs such as Medicare, the federal health program for the elderly, or Medi-Cal, the state program for the indigent.

Currently, this group is largely responsible for overburdening public hospitals and other facilities--and at a cost of more than $500 million a year. But about 2 million of these Californians are marginally employed and would come under the plan’s employer-paid programs, thus relieving a significant burden on county health facilities, according to Dr. Milton Roemer, a UCLA public health expert and one of the drafters of the CHIP plan.

The other million would have their premiums paid by the state and counties.

People who are eligible for Medicare and Medi-Cal would be enrolled in CHIP along with everybody else. Their premiums would be paid with funds from those two programs.

CHIP’s proponents predict that, in the long run, the plan would save private spending on health care but may add to the public cost. They have no precise estimates, however, and a study to assess such costs is expected this year. But they say the plan would result in total expenditures that are less than under the current system.

CHIP, which would be administered by the state Department of Health Services, would have the authority to approve any existing health insurance plan--such as Blue Cross, Blue Shield or a health maintenance organization--that offers the minimum package of medical benefits.

Roemer and a UCLA public health colleague, Dr. Richard Brown, unveiled the basic features of the plan Thursday at a meeting of the state Commission on Aging in Sacramento. And Assemblyman Dan Hauser (D-Del Norte) is expected to incorporate their recommendations into a bill to be introduced into the Legislature this session.

Last year, Hauser authored a similar bill, which was strongly supported by senior citizen groups. But it was so vague that many interest groups did not know whether to support or oppose it. And it became nothing more than a legislative recommendation that the Office of State Health Planning study health systems in other countries to get ideas for designing a California program. That report is expected to be ready in the spring.

This time, the CHIP proposal is likely to arouse considerable opposition, especially from physicians, because Roemer and Brown’s blueprint is considerably more detailed.

“Getting a statewide plan will be a long, rocky process. But somebody has to address it,” said Dr. M. L. Strohbehn, a retired Ojai dentist who is a member of the California Senior Legislature, a voluntary group that makes recommendations to the state Legislature. In interviews, several members of the Commission on Aging who favor the bill said it may take four or five years to get it passed.

“We’ll never get it through until the California Medical Assn. stops opposing it,” one commissioner said.

Last year, the California Medical Assn. opposed a similar bill because it said it did not think the plan would work, said George Cate, associate director for government relations for the California Medical Assn.

One potential obstacle, Cate said, is a federal law known as ERISA (Employees Retirement Insurance Security Act), which exempts from state mandate all self-insured employer health programs. In California, such programs cover perhaps 25% of all workers. For Hauser’s bill to take effect, a congressional waiver may be required.

Industry Leery

The health insurance industry is also traditionally leery of plans that create new bureaucracies to regulate premiums. But Lou Keller, a spokesman for the Assn. of California Life Insurance Companies, said his organization will have no opinion on the upcoming bill until he has studied it closely.

Roemer, in an interview, said a basic strength of the new proposal is that it is built on the present network of private insurance plans and does not set up a new state system that could provoke the kind of opposition that killed national health insurance proposals in the 1970s.

Hawaii in 1975 became the first state to require all employers to pay for workers’ health insurance. The state requires employers to pay at least half of the premium for all employees who work 20 hours a week or more for four consecutive weeks. In California, no employer is required to provide health insurance for workers, according to the state Department of Insurance.

Ray Norris, vice president of Hawaiian Medical Services Assn., the Blue Shield plan there, said little opposition came from employers when Hawaii’s law went into effect because 90% of them already insured their workers. But he said the opposition could be strong in states where there are a large number of small employers who do not now insure workers.

Although Hawaii’s law ran up against the ERISA barrier, the state managed to get Congress to authorize a waiver.

Another potential, and even likely, opponent of CHIP is the Deukmejian Administration--especially if it had to come up with extra financing to help cover care for the 1 million residents who still would not be covered by employers under CHIP. The Administration already is faced with a $900-million budget deficit--including $260 million for health.

CHIP bears some resemblance to a program in British Columbia, but with an important differences: In British Columbia it is the provincial government, rather than private insurance companies, that acts as the insurer. In the 1970s, there was an effort to build interest in a British Columbia-type plan in California, but it went nowhere.

Under the emerging CHIP plan, doctors and other providers would be paid by fee schedules negotiated with each approved health plan or by other agreed-upon methods. Hospitals would be paid a lump sum each month by a specially created Hospital Financing Commission.