Serious Health Care Gap for California’s Uninsured

More than 3 million Californians lack health insurance. That’s both a potential human tragedy and a threat to the state’s well-being, for when the uninsured become ill and are unable to pay their medical expenses, they will turn to public programs, which already are in poor shape. We must confront this Sword of Damocles--and soon.

Some of the uninsured work only part time and don’t qualify for the health insurance plans provided by their employers. Others are unemployed or self-employed or hold jobs that don’t offer health benefits.

While some people without work-related health plans purchase insurance on their own, there is a large category of people who can’t get coverage at any price. They are medically uninsurable--people who have health conditions that make them bad insurance risks.

All this adds up to a serious gap in our health-care system. Even those now comfortably enjoying the security of employer-provided health insurance are in jeopardy. Loss of a job, a disabling accident or deteriorating health could land them right in the middle of that void.

Several efforts to address this problem over the years have run into dead ends. In 1985, for example, then-Assemblyman Alister McAlister (D-Alameda) introduced legislation that would have made coverage available to medically uninsurable people and some others who were willing and able to pay the premiums. The bill was overwhelmingly approved by the Legislature last August, but Gov. George Deukmejian vetoed it. That left the uninsured in the position of fending for themselves until they spend themselves into poverty.

And what are they to do for health care then? Well, there’s always Medi-Cal or the county health system. Or is there?

The governor is pressing for cuts in Medi-Cal funding and for changes that threaten programs at the local level as well.

Clearly, something has to give.

In December, state Sen. Alan Robbins (D-Van Nuys) introduced legislation (SB 6) that is the twin of McAlister’s effort.

It would pool the risk in order to offer coverage to the medically uninsurable and to others who have been excluded from employment-related health insurance.

The goal here is similar to the goal of assigned-risk automobile insurance. In both cases, legislation recognizes the fact that if insurance for the highest-risk individuals were based solely on actuarial factors, the premiums would be prohibitive. But here the similarity ends.

Whereas assigned-risk auto insurance spreads the risk among all auto insurers--and thereby among their customers--Robbins’ proposal uses a different mechanism for pooling the risk: a tax of 0.3% on the Disability Insurance wage base ($21,900). The proceeds would help keep policy premiums down.

Unfortunately, premiums still could be quite high--especially in the first years of the program, when rates would be set on an actuarial basis. As of 1991, premiums could be no more than three times the rate charged for comparable coverage for individuals with standard risk, but many uninsurables are still liable to be priced out of the market.

Why not simply follow the assigned-risk model and spread the risk among all health insurers?

The culprit here is the federal Employee Retirement Income Security Act of 1974 (ERISA), which prevents states from forcing self-insurers to participate in a risk pool. Since self-insurers--employers or trusts that provide health coverage that isn’t totally underwritten by insurance carriers--account for 40% or more of the health coverage in the state, any risk pool that excludes them would be unfair and/or unworkable. That’s why, although it contains some contingent provisions that would take effect if federal law is changed, SB 6 uses the tax mechanism to spread the cost of insuring high-risk individuals.

Another approach, the California Health Insurance Program (CHIP), has been proposed by Milton I. Roemer and E. Richard Brown of UCLA’s School of Public Health. It is embodied in legislation (AB 2020) introduced last week by Assemblyman Dan Hauser (D-Arcata).

Building on the existing system of public and private health insurance, CHIP would require all California residents to enroll in an approved health-insurance plan of their choice. Approved plans would have to offer certain minimum benefits at premiums regulated by CHIP. The premiums would be paid by employees, employers, the self-employed and, in some cases, by government subsidy. (For example, Medi-Cal would pay the premiums for Medi-Cal eligibles.) CHIP also may offer a new, state-sponsored health plan for financially and medically uninsurable persons.

In order to get around the problem posed by federal law, Hauser intends to seek a waiver from ERISA. Such a waiver already has been granted to Hawaii. Meantime, a background paper provided by Hauser’s office suggests, the state may be able to offer incentives to encourage the voluntary participation of self-insurers.

Both SB 6 and the CHIP proposal are positive signs. But converting them into concrete solutions will require the governor’s acknowledgement of the problem and his support for effective action.