Santa Monica, CA — In either an inadvertent omission or a betrayal of core constitutiencies, legislation introduced by Assembly Speaker Fabian Núñez lacks any mention of the tax credits he promised to help middle-class families purchase mandatory health insurance that is otherwise unaffordable, said the Foundation for Taxpayer and Consumer Rights (FTCR).
FTCR also expressed concern that though the funding source for expansion of health coverage is to be approved by voters after the bill is passed, nothing in the bill appears to make the mandatory purchase of health insurance contingent on its passage. If a middle-class tax credit and other subsidies are to be left to an ensuing ballot measure, and the ballot measure does not pass, the individual mandate could still be put into effect.
In a letter to Núñez, available below, FTCR said:
“We have reviewed your bill and it fails on the key indicators of universal coverage. Health care is not guaranteed to be affordable, not guaranteed to be available, and choices for consumers are reduced, not increased.
“We realize that you are running out of time in the special session, and special interests are pushing you to deliver on their demands. Health care is too important, and the risk of making things worse in the ensuing haste is too great, to put getting it done ahead of getting it right.”
FTCR urged Núñez to push immediately for an expansion of the state’s Children’s Health Insurance Program, and leave broader reforms, the details of which are just becoming public, until early next year when they can be rationally considered.
Most families making under 450% of the poverty level would be unable to afford the average cost of $12,000 in yearly premiums for a family of four. AB 1X1 virtually assures that workers will bear more of the cost burden because the bill significantly reduces the amount that employers must contribute to health insurance. The tax credit that Núñez promised would have applied to families making from 300% to 450% of the federal poverty level, starting at $62,000 annual income for a family of four.
The special session bill, AB 1X1, is a false promise unless it states clearly that the individual mandate will not go into effect unless the ballot measure providing funding is passed, said FTCR. Even low-income families will not get the subsidized coverage they are promised if the insurance industry mounts a multimillion-dollar campaign to defeat a ballot initiative containing the bill’s funding.
“The current compromise bill is so sloppy and lacking in key information that a Legislature under pressure just to do something risks a disastrous mistake,” said Jerry Flanagan, health policy director of FTCR. “At this point, lawmakers should take the strong first step of insuring more children, and leave the rest of this dangerously hasty plan for next year.”
FTCR’s analysis of the bill found numerous significant errors and omissions:
– Affordability — no middle-class tax credit. It was widely reported that middle-income individuals forced to buy coverage would receive a tax credit for the portion of premium costs that exceed 5% of their incomes, but the provision of that tax credit appears to be missing from the new bill.
– Affordability — Funding contingency. If a middle-class tax credit is to be left to an ensuing ballot measure, and the ballot measure does not pass, it appears the individual mandate could still be put into effect.
– Guaranteed issue — but no real guarantee? AB 1X1 calls for guaranteed issue of private insurance to all comers. Yet a related bill, Assemblyman Dymally’s AB1X3, appears to allow insurers the option of refusing to offer coverage to whomever they choose. AB 1X3 was reportedly pulled from the schedule for Wednesday’s hearing late Tuesday night, but this section of Dymally’s measure, or similar exclusions in Núñez’s AB 8, will likely be amended into the final bill.
– Affordability — lack of price controls. Unlike the auto insurance market under Proposition 103, AB 1X1 does nothing to limit insurer’s rate increases, an omission that is already undercutting Massachusetts’ health care reforms. During the last seven years health insurance premiums have increased three to four times faster than medical inflation.
– Guaranteed issue — no true community rating. AB 1X1 purports to limit an insurance company’s premium cost variation for individual policies to “age, family status, and geography,” but unlike rules in the employer market, nothing further is provided to define those categories. This is particularly important to older consumers. Under the current wording, insurers could impose annual, bi-annual, or even quarterly premium increases based on age.
– Universality — no defined benefit. Promising comprehensive coverage while guaranteeing none is not something voters will accept. AB 1X1 punts the key decision about what Californians will receive when they buy health policies until after the bill is passed, leaving tough choices to state bureaucrats more likely to settle for less than legislators, because they are insulated from voter outrage. The required coverage could exclude essential services including emergency care, hospital and physician coverage, vision and dental.
– Universality — no defined benefit. By exempting from the mandate those who would have to spend more than 6.5% of family income, AB 1X1 all but assures that regulators will define a policy that fits the 6.5% rule, but provides only an illusion of coverage. This has been the experience in Massachusetts, the only state to adopt a mandatory purchase requirement. If not forced to buy a cheap “junk insurance” policy, the alternative for such families would be to remain uninsured.
– Rigidity of Choice — locking patients in low-benefit coverage. Five different plans may be an adequate overall number of choices, but consumers are allowed to raise their coverage by only one level, once a year. This stranglehold on choice appears to be aimed at propping up low-benefit plans that people will not want to buy if they could afford better.
FTCR LETTER TO NUNEZ:
Monday, November 12, 2007
Assembly Speaker Fabian Núñez
State Capitol
Sacramento, CA 95816
RE: AB 1X1 — OPPOSE
We have reviewed your bill and it fails on the key indicators of universal coverage. Health care is not guaranteed to be affordable, not guaranteed to be available, and choices for consumers are reduced, not increased.
We realize that you are running out of time in the special session, and special interests are pushing you to deliver on their demands. Health care is too important, and the risk of making things worse in the ensuing haste is too great, to put getting it done ahead of getting it right.
We have identified several key areas in the bill that are either drafting errors driven by speed, or deliberate gaps in promised protections. These include:
– Affordability — where is middle-class tax credit? It was widely reported that middle-income individuals forced to buy coverage would receive a tax credit for the portion of premium costs that exceed 5% of their incomes, but the provision of that tax credit appears to be missing from the new bill. Where is it?
– Affordability — Funding contingency. If a middle-class tax credit is to be left to an ensuing ballot measure, and the ballot measure does not pass, it appears the individual mandate could still be put into effect with minimal state funding, a betrayal of your affordability promise.
– Guaranteed issue — but no real guarantee? Your bill calls for guaranteed issue of private insurance to all comers. Yet Mr. Dymally’s AB1X3 appears to allow insurers the option of refusing to offer coverage to whomever they choose. It seems likely that you anticipate joining at least parts of these two bills. If these bills are joined, even patients with minor health conditions like allergies and asthma could be pushed into the state’s high-risk pool. This pool currently provides very limited benefits at a high cost and the Dymally bill does not appear to change this unfair system.
– Affordability — lack of price controls. Unlike the auto insurance market under Proposition 103, your bill does nothing to limit rate increases. You have argued that a 15% cap on profits and overhead will control the excesses of insurers but you have not explained how. In fact, capping profits and overhead at 15% of premium revenue will provide a perverse incentive for insurers to raise monthly premium costs so they may keep more money for themselves. During the last seven years premiums have increased three to four times faster than medical inflation. Of course insurers are willing to sell to all if all are required to buy under these conditions.
– Guaranteed issue — no true community rating. Your bill purports to limit an insurance company’s premium cost variation for individual policies to “age, family status, and geography,” but unlike rules in the employer market, nothing further is provided to define those categories. This is particularly important to older consumers. Your bill could allow annual, bi-annual, or even quarterly age-related cost increases based on age, quickly pushing policies into unaffordability for those most likely to need health care.
– Universality — no defined benefit. Promising comprehensive coverage while guaranteeing none is not something voters will accept. Your bill punts the key decision about what Californians will receive when they buy health policies until after the bill is passed, leaving tough choices to state bureaucrats more likely to settle for less than legislators, because they are insulated from voter outrage. The required coverage could exclude essential services including prescription drugs, emergency care, hospital and physician coverage, vision and dental.
– Universality — no defined benefit. By exempting from the mandate those who would have to spend more than 6.5% of family income, you all but assure that regulators will define a policy that fits the 6.5% rule, but provides only an illusion of coverage. This has been the experience in Massachusetts, the only state to adopt a mandatory purchase requirement.
– Universality — unaffordable mandate. If instead bureaucrats do require individuals to buy comprehensive coverage, that coverage, which now costs $12,000 a year for a family of four, exceeds 6.5% of an average middle-class family’s income ($4,030 for a family of four making $62,000). Those families would be exempted from the mandate but left uninsured.
– Rigidity of Choice — locking patients in low-benefit coverage. Five different plans may be an adequate overall number of choices, but consumers are allowed to raise their coverage by only one level, once a year. Even if a patient won the lottery and could afford comprehensive coverage, under your bill they would have to wait up to five years to get it. This stranglehold on choice appears to be aimed at propping up low-benefit plans that you believe people will not want to buy if they could afford better.
To believe that the legislature could restructure the entire California health care system in a manner of weeks without unintended consequences is a fool’s errand. The details of the bills are just becoming available and there are too many unanswered questions to proceed quickly. The legislature may be able to fashion a proposal on universal health care for kids. That would be a major victory for California and a step forward on health care reform. But to do more now risks losing more than we will gain.
We urge you to be cautious and careful and “do no harm” by approving a health care bill that is less affordable, universal, and provides less choice then the current system.
Sincerely,
Jamie Court
Judy Dugan
Jerry Flanagan
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FTCR is California’s leading public interest watchdog. For more information, visit us on the web at: www.ConsumerWatchdog.org.
