Democrats merge health plans

Times Staff Writer

California employers would be required to spend 7.5% of payroll on the health of their workers, and the state could increase that rate without legislative approval, under a plan announced Thursday by the Capitol’s two top Democrats.

The proposal, a merger of two measures that recently passed the Assembly and Senate, would rely on businesses to reduce the number of Californians without insurance. It lacks any requirement that people obtain insurance -- a cornerstone of Gov. Arnold Schwarzenegger’s proposed approach.

Republicans and business leaders have objected to the Democrats’ approach all year. But the leaders do not need their support to move the new bill through the Legislature.

The bill would demand more of businesses than either the previous Senate or Assembly measure. Companies that did not spend the requisite amount would have to pay into a state fund that would provide insurance to their workers. Assembly Speaker Fabian Nunez (D-Los Angeles) agreed to drop an exemption for small businesses and start-ups that the Assembly had approved.


“The Democrats in this building are now united,” said Senate President Pro Tem Don Perata (D-Oakland), speaking at a Capitol news conference.

The employer requirement would be nearly twice the 4% of payroll that Schwarzenegger suggested in January. And the new bill would make it easy for the rate to be increased above 7.5% without legislative approval; it would empower an independent panel dominated by gubernatorial appointees to make adjustments to keep up with rising medical costs.

“This plan will do nothing to address the rising costs of healthcare and will only devastate our state’s small businesses,” said the leader of the Assembly’s Republicans, Michael Villines of Clovis.

Health insurance premiums rose 8.7% in California last year, according to the California Health Care Foundation, an Oakland-based nonprofit group. The average annual cost for employer-provided coverage for a family was $11,860, the group says.

The Democrats’ plan reflects confidence that they can prevail in negotiations with Schwarzenegger as they seek to refine the measure into one he will sign. The governor has promised a major healthcare overhaul this year, and many Democrats believe that he will be reluctant to veto what they place before him.

The governor’s proposal, outlined in January, aims to spread the financial burden of universal health insurance among employers, hospitals and doctors through $4.4 billion in assessments -- fees, the governor says -- on those industries.

Republican legislators have balked at that approach as well. And no one in the business lobby or the healthcare industry has endorsed the governor’s plan, although Schwarzenegger has received international praise for wanting to insure all Californians.

Further complicating Schwarzenegger’s approach is an opinion from the Legislature’s nonpartisan lawyers that the levies on medical providers are a tax, not a fee. The governor campaigned for reelection last year on an anti-tax platform. And tax measures require some Republican support to pass the Legislature.


But at his own news conference in a Sacramento neighborhood Thursday morning, Schwarzenegger dismissed the significance of the legal opinion.

“I don’t get caught up in these details,” he told reporters. “I want to create healthcare for the people, and to me I look at it as a fee, I stick with that. And if someone else wants to call it something else, they can figure that out later on.”

Schwarzenegger contended that “the only way that the healthcare reform is going to work is if you have mandatory healthcare insurance” coupled with a mandate that insurers not exclude anyone from coverage.

He praised “a great mood in the Capitol of working together” and predicted a satisfying compromise before the Legislature adjourns in September.


“What you see now is not really what counts,” he said. “Always what counts is, what is the outcome? And as you know, it can turn very quickly ... because in the end, like I said, everyone wants to make this work.”

Business lobbies faulted the Democratic plan for not doing enough to keep healthcare costs down and for placing the financial onus on employers to cover 3.4 million Californians who currently have no health insurance.

The National Federation of Independent Business headlined its statement objecting to the plan: “Merging of healthcare bills tightens noose around necks of small-business owners.”

The Coalition to Advance Healthcare Reform, a group of insurance companies and large employers that already offer worker coverage, issued a statement expressing “concerns” about the Democrats’ reliance on employers to fund their plan. They also said the plan does not do enough to keep medical costs down.


In many ways, the Democratic proposal is a more comprehensive version of California’s last stab at healthcare reform, a 2003 law that required employers to provide insurance.

It was narrowly repealed the next year. Schwarzenegger supported the repeal, saying the law -- which would have applied only to companies with at least 50 workers -- was too burdensome to business.

This year, Schwarzenegger has said he would support requirements on business as long as other players in the healthcare industry were required to share the cost of expanding coverage.

On Thursday, the Democrats said their bill, AB 8, does place some burden on groups besides employers. Insurers would no longer be allowed to deny policies to individuals, except those with the most serious medical conditions. They would pay into a state pool to take care of the sickest.


The bill also would ensure that all children in poor and working-class families have health insurance, something the governor included in his proposal.

“I think our bill is pretty consistent with [the governor’s] concept of shared responsibility,” said Nunez. “Everyone’s got a role to play here. Everyone’s got to tighten their belt.”

Times staff writer Evan Halper contributed to this report.




Democrats’ plan

A healthcare plan announced by Democratic legislative leaders Thursday requires:


Employers to spend 7.5% of payroll on worker health

* Insurers to sell coverage to all but the sickest

* Insurers to spend at least 85% of premiums on medical care

* The state to subsidize insurance for children and the poor


* Insurers to subsidize coverage for the very sick


Los Angeles Times