California Labor Federation Supports Health Care Reform Bill With Changes to be Negotiated

If the comprehensive benchmark plan is available to an individual for a total cost (including premiums, deductibles, and out-of-pocket maximums) that is less than a specified percent of his or her income, that person would be subject to the mandate. If it is not, the individual should be exempted from the obligation.

If an individual is subject to the mandate, he or she should have the option to buy the comprehensive plan, or to buy a more or less generous plan, so long as the plan meets the minimum creditable coverage standard. Separating the affordability standard from the minimum creditable coverage standard guarantees that individuals will not be subject to the mandate unless there is a high quality, affordable product available to them, but still leaves them the ability to choose a less expensive plan to meet the mandate.

To ensure that these plans offer quality coverage, the benefits and cost sharing arrangements for these plans must be outlined in the legislation. Asking Californians to accept an undefined mandate is unreasonable and unwise.

We are also concerned about potential enforcement mechanisms for the individual mandate. First, the enforcement of the mandate should look prospectively at the ability of a family to afford coverage, but also include protections for serious life changing events.

While we appreciate the bill’s provision for future hardship exemptions, we believe it should list basic conditions that would qualify a family for exemptions. The language should explicitly exempt Californians facing serious financial setbacks such as job loss and natural disaster. MRMIB should have the discretion to add additional circumstances at a future date. Second, families should have protections, similar to those currently afforded the uninsured facing unmanageable hospital bills, that preclude the use of collections tactics such as wage garnishment and home liens.

Definition of Employer and Employer Fees

We can support the adoption of the proposed graduated fee because it addresses the needs of truly small businesses. The aggregate amount of employer fee dollars, however, must raise enough funds to purchase a quality benefit. Additionally, the graduated fee schedule could exacerbate employer incentives to evade their obligation.

The role and definition of employers in this proposal is fundamentally important, but thus far absent from the legislation. The employer provisions of this plan, whether included as an initiative or in legislation, must address several key issues with respect to the role and definition of employers.

First, the term “employer” must be defined to capture the variety of work arrangements in California and to prevent employers from evading their responsibilities. The definition must capture all workers under the control of a given employer, without regard to steps that such an employer might take to divide them into separate units or classify them as “independent contractors.” This provision is especially important in this proposal because, by allowing a graduated fee for employers, it increases the incentives for employers to subdivide their true payroll to avoid higher health care spending requirements.

Second, the definition of employer should clearly specify the county Public Authorities as the employer of record for California’s In-Home Supportive Services workers. These workers, like all others in California, deserve fair health care benefits from their employers. A clear definition, like that in AB 8, will help ensure they receive the same treatment as other workers under this proposal.

Third, the bill’s provisions regarding employer-offered coverage must be clarified. Under the current proposal, it is unclear whether all employer-offered coverage, no matter how skinny or unaffordable, would be presumptively considered an “offer,” potentially disqualifying Californians from public program eligibility. It is also silent with respect to whether employer-offered coverage will, as in the Governor’s plan, presumptively meet the standard for minimum creditable coverage. We would oppose such a provision, and believe the bill language should set an independent standard for minimum creditable coverage without automatically deeming that employer coverage meets that standard.

With health care costs rising at a far faster rate than wages, the employer fee established in the financing provisions cannot be static. A reform package must include a mechanism for adjusting that fee over time. Because fees are only subject to a majority vote in the legislature, such an adjustment mechanism cannot be tied to a super-majority vote requirement of any sort.

Within the context of the purchasing pool, the bill’s language needs further clarification about the benefits workers will receive as a result of their employers’ contributions. While we applaud the expansion of the state purchasing pool to include more Californians, to make the pool coverage option a real one for employers, the bill must specify that all workers of employers who choose to pay the fee will have a specified portion of their premiums covered. If every Californian in the pool is treated strictly by income without regard to employer contributions on their behalf, employers will have no economic rationale to contribute to the pool on behalf of higher income workers who will receive no benefit.

Finally, the level of the employer fee as a percent of payroll cannot be set at any rate lower than the affordability standard for working families. If employers are allowed to pay fees on a sliding scale that ranges from 2-6.5% of payroll, working families should receive a similar graduated affordability schedule. Workers should not be asked to contribute a higher percentage of their income than employers contribute of their payroll.

Cost Containment

Controlling the skyrocketing cost of health care is one of the most important priorities for working families in any health reform proposal. While we appreciate the provisions of ABx1 1 that tackle some cost control issues, the inclusion of an individual mandate to purchase coverage makes cost containment an even more pressing concern. To that end, the provisions regarding prescription drug purchasing and the creation of a public insurance option must be strengthened and clarified. Specifically, MRMIB should be empowered to directly negotiate with pharmaceutical manufacturers to obtain the lowest possible price for Cal-CHIPP enrollees. Additionally, the existing language regarding the possibility that public entities and other purchasers, including union trust funds, could access bulk prescription drug rates through Cal-CHIPP should be strengthened to guarantee that access. Only by directly tackling high drug costs and other health care cost drivers will this proposal deliver the cost containment that California’s working families need.

Safety Net Institutions

California’s public hospitals and clinics form the backbone of our health care safety net. The policy and financing provisions of this proposal must adequately account for the dramatic changes that will occur in these safety net institutions in the coming years. The hospital provider fee must adequately compensate public hospitals for the care they provide and the valuable role they serve in the community. Any discussion of a county share of cost must be predicated upon an actual and substantial reduction in county costs before any payments are owed to the state. Finally, we encourage continuing discussions on the local coverage option to ensure that it meets the needs of all public safety net institutions during the transition period following implementation of this legislation.

Structure

While we understand the need to separate several of the financing provisions from the remaining policy of the bill, we encourage the Legislature to pass as many reform components as possible in legislation. Many provisions of the bill, from cost and quality transparency to the creation of a public insurance option, should be accomplished by the legislature even in the absence of funding for other provisions. Other provisions, however, should be linked together to reflect the concept of truly shared responsibility.

Specifically, implementation of the individual mandate must be explicitly linked to passage of the employer fee on the ballot. Failing to tie these two provisions together could result in working families being subject to a mandate while their employers are relieved of any health care financing responsibility.

We commend the legislative leadership for their ongoing commitment to comprehensive health reform. With the inclusion of the aforementioned amendments in ABx1 1 and its financing package, we look forward to standing with them in full support of this legislation.

Art Pulaski is Executive Secretary-Treasurer of the California Labor Federation, AFL-CIO, which represents 2.1 million members of 1,200 manufacturing, service, construction and public sector unions.