Governor to Offer Health Care Plan : Insurance: Draft proposal would require all businesses to cover workers. Program would be one of the most ambitious in the nation.

In a far-reaching departure from past policy, the Deukmejian Administration is circulating a draft proposal that would require every business in California to provide health insurance to its workers.

The proposal, prepared by Republican Gov. George Deukmejian’s Health and Welfare Agency, goes far beyond a plan offered last year by Assembly Speaker Willie Brown, a liberal Democrat, and would give California one of the most ambitious state-mandated health insurance programs in the nation.

The plan, a copy of which was obtained by The Times, includes elements to subsidize the cost of insurance for low-wage employees and low-profit businesses, contain skyrocketing medical costs and curb the expense of medical malpractice lawsuits and insurance.

About 4 million of the estimated 5 million Californians currently without insurance--mostly low-wage workers and their dependents--would be covered by the plan. The homeless, the unemployed, retired people, some disabled people and students who are not dependents of their parents would be left out. These groups would continue to depend on county-run health care programs and “charity care” provided by private hospitals.

Politically, the proposal would allow Deukmejian, long criticized for failing to tackle some of the state’s most vexing problems, to take the lead on a dilemma that has confounded the Legislature, county governments, business, labor, consumers and the health care industry for years.

The cost of the program, so far unspecified, would be funded mostly out of existing tobacco tax revenues, Medi-Cal funds and money now going to the counties to care for the working poor. Some new federal money and a new tax, payable by employees, on certain health insurance benefits would also be used to fund the program.

An outline of the proposal was presented to Deukmejian at a Cabinet meeting Wednesday. The draft is to be reviewed by a task force of legislators and special-interest representatives for a month before it is released in its final form. Then, presumably, it will go to Deukmejian for final approval, be crafted as legislation and subjected to hearings in the Assembly and Senate. It may require action from Congress before it can be put into place.

Depending on how it would be implemented, the Administration plan could in the end provide much of its health coverage by expanding the state’s Medi-Cal program--a potential pitfall for the proposal. Medi-Cal is already criticized for underpaying physicians to the point that ever fewer doctors will care for the poor.

However, the plan would increase Medi-Cal reimbursement rates by an average of 15%, an action considered necessary to entice more doctors into providing service to the poor.

Skeptical Reaction

The plan’s possible reliance on the Medi-Cal system provoked skepticism from Lois Salisbury, chairwoman of Health Access, a statewide coalition of consumer and labor groups that supports a much more expansive program to guarantee health care to every resident of the state. Even with subsidies included in the plan, most families earning less than $30,000 still would not be able to afford health insurance, she said.

“The Administration is to be commended for wanting to achieve such a broad goal,” Salisbury said. “But this is a massive effort to make a silk purse out of a sow’s ear.”

Others familiar with the proposal suggested that the plan would make a credible start on what would probably be months of negotiations in the Legislature.

Karen Coker, a health care expert for the County Supervisors Assn. of California, described the proposal as “intellectual.”

“They have given enough to everybody but at the same time taken something away,” she said. “I don’t think anybody will embrace it. But anybody who just summarily rejects it will be foolish.”

Steve Thompson, Speaker Brown’s top aide on health care issues, was supportive. “In principle, I endorse it,” he said. “It is a very major policy step. In many ways, it goes beyond what we tried to accomplish a year ago.”

The Administration proposal would apply to every business--extending even to the self-employed--and would cover the dependents of working people.

The proposal does not mandate that companies offer health insurance, but it contains a provision designed to compel the same result. Under the plan, any business that did not provide insurance for its workers would be liable to pay every dollar of medical expenses incurred by its employees and their dependents.

The minimum benefit package would include doctors’ visits, hospital care for up to 30 days per year, drug prescriptions, prenatal and maternity services, limited mental health coverage and preventive health and dental care for children, including immunizations.

This package is expected to cost an average of about $105 per month for each employee served by a health maintenance organization, or HMO, and $128 for private, fee-for-service insurance coverage.

Of that amount, employers would have to pay 75%, while workers would provide the other 25%. The cost of insurance for dependents of employees would be split evenly between the firm and the worker.

Nothing would stop a company from providing more generous coverage or paying more than its minimum share of the premium. But employees would have to pay tax on a portion of any employer contribution beyond the minimum required package of benefits. The new tax might generate as much as $150 million a year.

Part of the cost to small businesses would be offset by a tax credit of $15 per month per employee for companies with 25 or fewer workers. Further subsidies would be provided for companies with profits of less than $2,000 per employee.

For workers earning less than twice the federal poverty rate--$24,200 for a family of four--the government would subsidize insurance premiums at a rate equal to 40% of what it would cost the state to insure the workers under the Medi-Cal program.

In addition, the proposal would:

- Provide that, if health care costs increase at a rate greater than the consumer price index, any employer or employee could voluntarily enroll in the state-run Medi-Cal program, now reserved for the poor. Because doctors under Medi-Cal are paid significantly less than they charge on the open market, this provision is seen as an incentive for physicians to hold down costs, keeping as many patients as possible in privately paid health insurance plans.

- Require that all patients treated under Medi-Cal agree to submit claims of medical malpractice to binding arbitration rather than going to court. In addition, physicians who provide emergency care with no expectation of being paid for their services would be immune from legal liability.