California Assembly Approves Health Care Expansion Legislation

The California General Assembly on Monday voted 46-31 along party lines to approve legislation proposed by Gov. Arnold Schwarzenegger (R) and Assembly Speaker Fabian N ez (D) that would require most state residents to obtain health coverage, the San Jose Mercury News reports. The $14 billion measure aims to cover more than 70% of the state's 6.6 million uninsured residents.

Under the bill, residents with incomes up to 250% of the federal poverty level would receive state subsidies for coverage, and residents with incomes up to 400% of the poverty level would receive tax credits to ensure that health care premium costs do not exceed 5.5% of their incomes. Low-income residents would be exempt from the coverage mandate if they would be required to spend more than 5% of their income on minimal coverage and do not qualify for public programs (Zapler, San Jose Mercury News, 12/18). In addition, insurers would be prohibited from denying coverage to residents because of pre-existing medical conditions and required to spend at least 85% of premiums received on medical care (Rau/McGreevy, Los Angeles Times, 12/18).

The legislation does not include financing mechanisms because there is not enough Republican support for the measure to reach the two-thirds majorities required in both chambers to pass tax increases, according to the New York Times. New taxes and fees to support the overhaul would appear as a voter referendum on the November 2008 ballot.

Ballot Measure

Funding mechanisms would include a $1.50 to $2 increase to the state's 87-cent-per-pack cigarette tax, which would generate about $1.5 billion, and a 4% tax on hospital revenues, which would generate $2.3 billion and help net an additional $4.6 billion in federal matching funds (Los Angeles Times, 12/18). In addition, employers would be required to spend between 1% and 6.5% of their payrolls on health insurance for workers or pay the same amount into a state insurance pool that provides subsidized coverage (Sack, New York Times, 12/18).

Senate

State Senate President Pro Tempore Don Perata (D) on Monday reiterated his statement that he will not allow the chamber to vote on the proposal until after the state's independent legislative analyst examines the legislation's long-term impact on California's estimated $14 billion budget deficit, according to the Mercury News (San Jose Mercury News, 12/18). According to Perata, "This analysis, combined with the governor's proposed budget, will help determine how we can move forward in a fiscally responsible manner" (Reuters, 12/17). Perata has said he will not call state senators back to the capital until the 2008 session begins on Jan. 7 (New York Times, 12/18).

Schwarzenegger has said the plan is "revenue neutral," meaning it would have no impact on the state budget (San Jose Mercury News, 12/18). Aides to Schwarzenegger and N ez said it was critical for the Senate to quickly approve the bill because it can take months to collect the 700,000 signatures needed to qualify a revenue measure for the ballot (New York Times, 12/18).

Reaction

Schwarzenegger on Monday said, "California has taken a giant step forward today on something that many people thought could not be done" (Los Angeles Times, 12/18). N ez said, "Make no mistake about it; this is truly a historic effort" (Young, AP/Miami Herald, 12/17). Andy Stern -- president of the Service Employees International Union, which supports the bill -- said, "It is precedent-setting, because California, the most populous state and diverse state in the nation, can make health care happen and show this country that it can be done" (Los Angeles Times, 12/18).

However, the bill is opposed by state Republicans who believe it will be too costly. Assembly member Chuck DeVore (R) said the long-term expenditure combined with a questionable revenue base could cause a "fiscal meltdown in California" (AP/USA Today, 12/17). Assembly member Roger Niello (R) said, "We are in a budget hole. And the first rule when you find yourself in a hole is: Stop digging" (San Jose Mercury News, 12/18).

Allan Zaremberg -- president of the California Chamber of Commerce, a leading opponent of the bill -- said, "It's a mistake to push through half a proposal," adding, "Too many questions remain unanswered to understand how this bill will affect California employers, the state's economy and the gaping budget deficit" (Chorneau, San Francisco Chronicle, 12/18). Blue Cross of California claims the requirement that all applicants be accepted would result in higher premiums to millions of people in the individual insurance market (San Jose Mercury News, 12/18).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.