Leaders’ New Proposals Narrow “Individual Purchase Mandate,” But Still Bow to Private, For-Profit Insurance Industry
Santa Monica, CA — New legislative health care proposals by California Assembly Speaker Fabian Nunez and state Senate leader Don Perata focus on covering more children and omit or narrow the “individual mandate” to buy insurance that marked Gov. Schwarzenegger’s proposal. The Foundation for Taxpayer and Consumer Rights (FTCR) praised the new plans for acknowledging that individuals should not be forced to buy private insurance, but faulted the proposals for their failure to keep health care affordable by regulating insurance rates.
FTCR expressed disappointment that the proposals continue to rely exclusively on the private insurance market instead of giving Californians access to the nonprofit public insurance pool already offered by the state employee benefit program through CalPERS.
“Both plans appear aimed at a worthy baseline of expanding the state Children’s Health Insurance program, but beyond that any progress will be incremental at best, as interest groups including businesses and insurers chip away at the complex legislation,” said Judy Dugan, research director of the nonprofit, nonpartisan FTCR. “It’s a far cry from the ambitious calls for universal health care that opened the debate on reform.”
Both measures call for an expansion of state-subsidized health insurance for children whose families are of low or modest income, though the state must acquire additional federal subsidies first. Both Nunez and Perata would allow children who are not in the U.S. legally to gain coverage, and would raise the income limit for participating families to 300% of the federal poverty level, using nearly identical language.
The proposals would fail to assure broad affordable coverage, because they bow to the medical industry complex in several ways:
– Both Perata and Nunez would allow employers or individuals to buy coverage from a state buying pool that relies on the private insurance market. FTCR has proposed allowing all Californians to buy coverage from the CalPERS “self-insured pool,” which largely bypasses insurance companies and pays hospitals and doctors directly. A pool run by CalPERS would save the state and consumers money by eliminating the waste of private for-profit insurers and HMOs.
– Both Perata and Nunez allow insurers to continue rejecting applicants for medical conditions, though they propose that a new list of such conditions be developed by regulators in conjunction with private insurers. In the current market, companies refuse to sell coverage, or charge individuals much more, for minor health conditions like common allergies. FTCR said no insurer should be allowed to deny coverage based on health condition or history.
– Under Nunez, rejected applicants would have to choose between a state “high-risk” program that currently charges nearly $1,400 a month for a 45-year-parent and one child in a Blue Shield HMO, or going without any health care. Under Perata, the rejected applicants would be allowed to buy only one low-level policy with fewer benefits and higher copays and deductibles than all of the company’s other plans. Thus those who need insurance the most will have less of it than anyone else. In both cases, the state will bear more cost because of insurer cherry-picking.
– Both plans say that employers would have to either offer health care assistance to employees or pay into a state fund that would then offer insurance to employees. Neither plan specifies a percentage of payroll or other amount to be paid, though setting the figure too low will simply encourage employers to drop health insurance, said FTCR.
– While requiring insurers to sell certain plans with some restrictions on who can be rejected, Nunez and Perata would allow insurers to continue selling additional plans outside state guidelines, enabling them to siphon off the healthiest applicants into the highest-profit insurance policies. This would increase the premiums and costs of the state-approved plans.
– Both plans, in identical language, say that insurers may spend no more than 15% of premium dollars on administration and overhead. This requirement is similar to current law for state HMOs, but it is unclear whether the new rules would address two key existing loopholes: That the 15% overhead cap does not include profit, and that insurers seek to define obvious overhead as “medical care.” For instance, phone-bank departments whose main task is to limit medical care would perhaps be counted as “medical care.” In addition both bills would allow insurers to use “non-premium” revenue, presumably including income from investment of their reserves (which are initially funded by policyholders) to go above the 15% ceiling.
FTCR supports a bill by Assembly member Dave Jones, AB 1554, which would require health insurers to publicly defend rate increase requests and seek approval from the state. Rate regulation is a necessary foundation for any broad health reform.
“We have argued from the beginning that any legislative reform must grapple with unregulated insurance companies that demand yearly double-digit premium increases and steadily diminished benefits for those who are able to buy insurance at all,” said Jerry Flanagan, health policy director of FTCR. “Rather than tackle insurance companies head-on, these proposals avoid confronting a private insurance industry wedded to fragmentation, waste and profit.”
Nunez’s bill will be heard Tuesday by the Assembly Health Committee, and Perata’s Wednesday by the Senate Health Committee.
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