San Diego Union-Tribune (California)

SACRAMENTO, CA — Last year, Nancy and Todd Warrington spent nearly 10 percent of their income on a health insurance policy.

But the policy didn’t buy the Pacific Beach couple a sense of security. When Nancy Warrington was sick with excruciating stomach pain, she refused treatment all day, fearing huge medical bills because of the high deductible and the cost-sharing provisions of her policy.

Eventually, she had her appendix removed. She recovered quickly, but her family finances are still ailing: With an income of $41,000 a year, the Warringtons will spend years paying off $5,000 in medical debts.

“We thought we would have a portion to pay that was within our means,” said Nancy Warrington, “but it was just too much for a family with one income and three people.”

The Warringtons are among thousands of low-and moderate-income California residents who have struggled to pay the high premiums of individual health insurance only to be buried under an avalanche of medical bills when they use the coverage.

Under Gov. Arnold Schwarzenegger‘s sweeping health care plan, people like the Warringtons — whose incomes amount to less than 250 percent of the federal poverty level — would get some help in the form of limits on premiums, deductibles and out-of-pocket expenses.

But they would still end up spending a significant portion of their income on health insurance.

The Schwarzenegger plan requires everyone to buy insurance. Although that mandate hasn’t received the same amount of attention generated by other parts of Schwarzenegger’s proposal, it is a crucial component.

Schwarzenegger argues that the best way to cut costs is to eliminate what he calls the “hidden tax” — higher premiums that insurance companies charge to cover the higher fees of hospitals struggling with losses from treating the uninsured, including expensive emergency room visits.

At least 15 percent of Californians don’t have health insurance

Critics of the Schwarzenegger plan say requiring everyone to buy insurance will force people — especially those who don’t qualify for subsidies — to pay too much for too little. Their deductibles would be so high that they wouldn’t see much economic relief and they still would have a strong incentive to stay away from the doctor.

“My fear is that you are forcing people to pay a lot of money for something they aren’t going to use,
” said Assemblywoman Mary Salas, D-San Diego.

Moreover, opponents argue that the mandate would amount to a semantic fix. They say the proposal would turn the problem of the uninsured into a problem of the underinsured.

“The vast majority of people will not see a benefit, and they will be discouraged from getting the preventive and ongoing chronic care they need,” said Anthony Wright, executive director of Health Access, a consumer group.

Under Schwarzenegger’s plan, most of California’s 6.5 million uninsured people would gain coverage through expanded public insurance and a new purchasing pool for low-income workers, including people like the Warringtons.

But up to 1 million residents would have to buy insurance on the individual market, which currently serves about 2.1 million Californians.

People with incomes of more than 250 percent of the federal poverty level wouldn’t get subsidies. For example, a family of three earning more than $43,000 a year would be over the income limit.

The family would still have to buy a $5,000-deductible policy, which frequently costs more than $250 a month for those older than 40.

Schwarzenegger and his top aides say cost-cutting components of his plan, combined with new regulations, could lower these prices.

With up to 1 million new customers in the mix, they say, insurers should be able to cut costs by spreading risks among more people.

The governor’s plan would also require insurers to guarantee coverage for all, regardless of health history, and make insurers spend 85 cents of each premium dollar on patient care.

Currently, California is the Wild West of the individual market. Insurers are free to charge what they wish and reject anyone with health problems. By contrast, many other states place regulations on insurers serving the individual market.

Chris Ohman, president of the California Association of Health Plans, an industry trade group, said consumers benefit from light regulation in California’s individual insurance market because their premiums are up to 17 percent lower than the national average.

Consumer advocates have complained for years that the unrestricted market allows insurers to get rich selling policies to those least likely to need them — the young and healthy.

Schwarzenegger, a business-friendly Republican, now agrees. He frequently criticizes the industry for picking and choosing whom to cover.

Some consumer advocates want the governor to go further.

“There’s nothing in the governor’s plan that would require health insurance to be affordable. Consumers would have to pay what insurers charge,” said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights.

The foundation is sponsoring legislation that would regulate health insurance in the same way auto insurance is regulated. The state requires auto insurance companies to justify rate increases and sets standards for industry profits. But Schwarzenegger opposes that plan, saying he prefers a market-oriented solution.

Schwarzenegger’s communications director, Adam Mendelsohn, said requiring everyone to buy health insurance protects those who are now uninsured from the largest problems: bankruptcy, lack of access to care and denial of coverage based on medical history.

“You don’t solve the problem unless everybody has health insurance,” Mendelsohn said. “A lot of the problem is people who are leaving hospitals and doctors with unpaid bills. The system doesn’t work without universal coverage.”

Schwarzenegger hasn’t described how to enforce the requirement but has considered tax penalties or even garnisheeing wages.

Democratic leaders are promoting their own health care plans.

A proposal by Assembly Speaker Fabian Núñez, D-Los Angeles, doesn’t require everyone to have insurance. A plan by State Senate President Pro Tempore Don Perata, D-Oakland, requires people to buy insurance only if they earn above 400 percent of the poverty level.

Under Schwarzenegger’s plan, people like Robin Lewison, a San Diego resident who earned $48,000 a year at her last job, would be required to buy insurance.

Lewison wouldn’t qualify for subsidies but would have her out-of-pocket expenses limited to $7,500 a year.

Lewison said she pays $425 a month for an individual plan with a $2,500 deductible and cost-sharing after the deductible.

Her deductible is so high that she often puts off recommended preventive care measures. Instead of getting a yearly mammogram, Lewison, 51, waited 2½ years.

“It’s a huge percentage of my budget,” said Lewison, who is single. “But I feel like I’m paying for nothing.”

Richard Figueroa, health adviser to Schwarzenegger, said that under the governor’s proposal, preventive care — including recommended mammograms — would be covered before the deductible is reached.

“We want to establish a minimum benefit that has value for the consumer,” Figueroa said.

But Wright of Health Access said Schwarzenegger’s plan takes a narrow view of preventive care.

It doesn’t pay for chronic disease management programs, which are designed to keep people with conditions like diabetes out of emergency rooms, until the deductible has been reached.

“If you are unfortunate and have a health emergency, a catastrophic plan would help,” Wright said. “But it wouldn’t do any good for most people.”

Health Access arranged to make the Warringtons and Lewison available to provide examples about the difficulties of being individually insured.

Wright and others argue that the problem of high-cost insurance would go away if the governor adopted a single-payer plan, which seeks to save money by eliminating insurance companies.

The Clinton administration made a push for single-payer coverage in the mid-1990s, but the effort spearheaded by first lady Hillary Rodham Clinton collapsed under the weight of opposition, largely from Republicans and the insurance industry.

Such a plan is used by Canada and other developed nations, but Schwarzenegger has ruled it out, calling it “socialized medicine.”

Some Democrats in the Legislature have introduced a bill for a single-payer plan even though Schwarzenegger has vetoed such legislation in the past.

Under the governor’s plan, Nancy and Todd Warrington would have had their premiums capped at about 6 percent of their income, or about $2,460 a year instead of the nearly $4,000 they paid.

Their deductible would be limited to $500 and their out-of-pocket expenses capped at $3,000 a year.

The Warringtons sought private insurance five years ago after Nancy Warrington quit her job to be a full-time mom. At the time, Todd Warrington, now 41, worked for a company that was too small to afford health insurance for its employees.

Now the Warringtons believe they would have been better off without their individual policy.

They paid $330 a month for a policy that had a $2,500 deductible, and accumulated thousands of dollars in bills after needing a series of medical procedures, including the removal of a cyst from Todd Warrington’s back and the removal of a basal cell carcinoma from Nancy’s head and nose.

Last year, with their premiums set to go up, they opted to increase their deductible to $5,000 a year.

Dealing with the bills was stressful. Bill collectors called Todd Warrington at home. He put off treatment of his hernia. The couple considered bankruptcy.

“We were being buried,” said Nancy Warrington.

And then she got the stomach pain.

She refused treatment initially but finally went to an urgent-care doctor because she knew her co-pay would be only $45. The physician immediately diagnosed appendicitis and sent her to a hospital.

“I was going to lie there all day,” she said. “Taking care of your health shouldn’t be that way. You shouldn’t have to worry about bills all the time.”