Schwarzenegger Health Care Plan Mix of Good and Bad

California Health Care Plan is Comprehensive -- but Places too High a Price on Working Families with an Individual Mandate while Exempting Many Businesses from Responsibility Missoula, MT ”“ Responding to universal health care initiatives from the state legislature, Gov. Arnold Schwarzenegger's proposal for expanding health care coverage in California would create one of the most comprehensive health care plans of any state in the country, according to an analysis by the Progressive States Network, through a mix of new rules and requirements targeting employers, insurers, and individuals. "The proposal offered by Governor Schwarzenegger is a serious proposal," said Joel Barkin, executive director of the Progressive States Network. "However, while we applaud the fact that the governor requires some employers to contribute to health care costs, his plan includes a burdensome individual mandate that is the wrong approach to health care reform." The proposal offered by Gov. Schwarzenegger hinges on several features, including a mandate on employers to either cover employees or contribute to a state fund, cost control measures targeting insurance companies, regulations to ensure that pre-existing conditions do not prevent coverage, and expansion of state programs to cover children. The proposal also includes a mandate on individuals to buy insurance and tax breaks for Health Savings Account, an innovation more useful as a tax shelter for wealthy individuals than as a means of promoting better health. "Many aspects of the Governor's plan are praiseworthy, but the individual mandate and the plan's tax breaks for the wealthy should be rejected by the legislature," said Nathan Newman, policy director for the Progressive States Network. "These proposed measures come shortly after the Governor called for deep cuts to welfare that will impact children. Shifting spending from the basic needs of poor children while handing out tax breaks to the wealthy is cynical politics and poor public policy." Specifically, the Schwarzenegger proposal contains the following:
  • An employer mandate requiring coverage or a minimum contribution of 4% of payroll to the state. The employer mandate applies to all businesses with 10 or more employees, will help prevent irresponsible employers from dropping coverage, and provide funding for health insurance so that taxpayers don't end up picking up the tab for these irresponsible employers. The payroll assessment is more far-reaching than the flat $295 per year assessment in the recently adopted Massachusetts plan. In comparison, an uncovered employee earning $40,000 per year in California would result in an employer assessment of $1,600 under Schwarzenegger's plan. "A serious concern is what the minimum package required by the state will be to avoid the assessment is a critical variable. Merely requiring high-deductible coverage will do little to improve health outcomes." - Nathan Newman, Policy Director, Progressive States Network
  • Regulations on insurance companies to ensure fair and efficient coverage. First, the plan denies insurers the ability to discriminate based on pre-existing conditions, a problem that has recently reached crisis levels in California. Second, it requires that insurers and HMOs spend no more than fifteen cents on the dollar on administrative costs and overhead so that more money is going to patient care. "The first regulation ensures equitable coverage. The second promotes more efficient coverage." - Nathan Newman, Policy Director, Progressive States Network
  • Expansion of state programs to cover children. The Governor's plan expands the state's Healthy Families program so that families earning up to three times the poverty level are eligible for coverage.
  • An individual mandate that requires that Californians not covered by their employers still purchase coverage. "Failing to provide adequate subsidies to low-income Californians or imposing high fines for individuals too poor to purchase health insurance policies is a recipe for failure and increased cynicism in the political process." - Nathan Newman, Policy Director, Progressive States Network
  • Tax breaks for wealthy Californians to place money in Health Savings Accounts. Allowing tax deductions or non-refundable tax credits for individuals to contribute to their Health Savings Accounts will do little to increase health care coverage, but will help wealthy Californians shirk their tax burden while helping the financial services industry. Low-income Californians who pay little in taxes will see an insignificant benefit from these accounts, even as they face a new mandate to purchase coverage. "The result of HSAs would be a high cost to the state's budget and little if any impact on the number of uninsured. California would be wise to steer its finite resources elsewhere." - Nathan Newman, Policy Director, Progressive States Network
"Thankfully, Governor Schwarzenegger has said that this proposal is merely the beginning of the discussion and that he welcomes all ideas to the table," said Joel Barkin. "California's legislature should reject measures like Health Savings Account tax deductions that only benefit the already-covered and the individual mandate that would be an onerous burden on working families. Luckily, a number of legislators have proposed better and more progressive health plans as their part of California's debate on health care reform." The Progressive States Network was founded in 2005 to drive public policy debates and change the political landscape in the United States by focusing on attainable and progressive state level actions. It recently changed its name from the Progressive Legislative Action Network (PLAN).