California Health Care Reform Legislation a Framework for Real, Positive Change

Second, it would create a purchasing pool that Californians otherwise unable to access group coverage could buy into. The pool is predicted to have three million or more enrollees , which will give it substantial negotiating clout when it bargains with insurers. And Californians up to 400% of the poverty line (again, around $80,000 for a family of four) will get assistance in paying their premiums through the pool, either through subsidies or an advanceable, refundable tax credit. So too will early retirees, who face huge premium costs before they qualify for Medicare. Instead of being left to deal with the tender mercies of the insurance companies by themselves, Californians will be able to band together and demand a fair deal. Combined with the public program expansions discussed above, this would help around three-quarters of California’s uninsured get coverage.

Third, ABX1-1 will prevent insurers from denying coverage to the sick, or from jacking up the premiums they pay. Everyone will have access to coverage, and the sick and healthy will pay the same, fair rate. Insurance companies bent only on protecting their bottom line have denied coverage to millions of Californians because they had so-called “pre-existing conditions” – or, just as bad, the insurers refuse to cover their sick enrollees’ most important health needs or charge them exorbitant premiums. ABX1-1 would end this practice in one fell swoop, forcing insurance companies to compete on quality, rather than by choosing to cover only those who don’t need insurance..

Fourth, the bill has numerous elements that would contain the rising costs of health care, through a bulk purchasing program that would trim the exorbitant profits pharmaceutical companies make off of prescription drugs, transparency provisions that help consumers know whether they’re getting the care they pay for, and a requirement that insurance companies spend premium dollars on care, not excess profit-taking. Plus, as more people are covered, the invisible subsidy those with insurance pay to cover the treatment of the uninsured will decline.

Those are four incredibly compelling reasons to support ABX1-1 – there are many Californians who either don’t have access to or can’t afford health insurance today, who would be able to after the bill comes into effect. For those Californians, ABX1-1 is the difference between sickness and health. And for those who do have insurance, ABX1-1 means security from the fear that losing your job or getting divorced or getting sick or old will also mean losing your insurance. This is what’s at stake in the current debate, and if the bill doesn’t ultimately pass the Senate and succeed at the ballot box, we’ll be left with a status quo in which 20% of Californians are uninsured, the public safety net is fraying in the heat of budget woes, and workers held hostage to the shrinking number of jobs that come with health insurance.

There are still question marks. This is an ambitious program, with a price tag of over 14 billion dollars. It’s simple common sense to want to make sure there’s enough money to cover it. But the ABX1-1 framework does a good job of spreading out the costs of reform – I’ve counted no less than eight different funding streams, including employer contributions, federal matching funds, and a tobacco tax – and in light of the looming budget deficit, bringing in more money for health care is a good way to put it on an even keel (it’s worth noting that many of ABX1-1’s funding sources, such as federal matching funds and the employer contribution, wouldn’t be available to plug the hole in the general fund). It’s important to be sure that the numbers balance in the end, but details like the difference between a tobacco tax of $1.60 and $1.70 a pack can’t justify refusing to pass these much-needed reforms.

Some have also pointed out that there’s no direct regulation of the rates insurers can charge in the bill, conjuring up the specter of back-breaking premium increases throwing the whole system out of whack. It’s true that there are no direct controls, despite our efforts to enact rate regulation legislation this year, but all of the cost-containment measures discussed above would act to limit how much premiums go up every year, and the expanded subsidies would help Californians cope with rate increases much better than they do now. Plus, there’s every reason to think that the large purchasing pool would have the power to bargain insurers down and keep rate hikes under control – which is exactly what’s happening in Massachusetts, which recently enacted reforms along ABX1-1’s lines. The affordability of insurance in years is an important issue, and one that we at CALPIRG have worked to make sure is addressed. There will be more work to do on it in the future, and we’ll surely need to revisit rate regulation in the future. But ABX1-1 sets out a solid framework for addressing the issue.

Finally, there’s the individual mandate, which requires all Californians who don’t qualify for an exemption to have insurance. Forcing people to buy insurance with money they don’t have isn’t real reform, of course – but ABX1-1 doesn’t do that. As discussed in detail above, it offers broad subsidies – and if those subsidies fail to come through, the people who would have gotten them won’t be on the hook for the state’s failure, since they’ll be exempted from the mandate. Similarly, individual hardship and affordability exemptions will be available, and low-income people who would have to pay more than 5% of their incomes on coverage also wouldn’t be subject to the mandate.

But more broadly, the mandate acts as an important cost containment measure. It makes sure that healthy people as well as sick people all have insurance, which keeps rates affordable and spreads out risk. The details here are critical, and there are changes that could be made to make ABX1-1’s affordability protections better. But almost everybody in their right mind wants to have health insurance, and if they don’t have it, it’s almost always because of the cost – so long as it’s affordable, the requirement isn’t a burden.

There’s a lot more that can be said about ABX1-1. There are a lot of ways it can be improved. But it’s impossible to discount the real difference these reforms will make to all Californians, those who have insurance and those who don’t. And it fundamentally reshapes the regulation of California’s insurance companies, forcing them to play by common-sense, fair rules. ABX1-1 sets out an entirely new framework for health care in this state, and it’s critical to focus on making that framework the best it can be, rather than rejecting it for an unsustainable, intolerable status quo.

Mike Russo is the Health Care Advocate and Staff Attorney for the California Public Interest Research Group (CalPIRG). He has worked with other public interest organizations on human rights and First Amendment issues. Russo received his law degree from Columbia Law School in 2007. CalPIRG is a statewide membership-based public interest group that stands up to powerful interests, working to win concrete results for Californians’ health and well-being. With researchers, advocates, organizers and students , it advocates on behalf of consumers and all California’s residents.