Governor’s Proposed Coverage Mandate Faces Skepticism

Gov. Arnold Schwarzenegger's (R) proposal to require all California residents to obtain health care coverage is facing criticism from consumers and health care advocacy groups for not guaranteeing affordable prices, the San Diego Union-Tribune reports.

Under the governor's plan, up to one million residents would be required to purchase individual coverage. Other residents would obtain coverage through employers or federal subsidies.

Schwarzenegger's plan would provide subsidies to residents whose incomes do not exceed 250% of the federal poverty level. The policy for such residents would include a $5,000 deductible.

The governor says his plan could reduce prices for individual coverage because insurers should be able to spread the risk among more people.

However, Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights said, "There's nothing in the governor's plan that would require health insurance to be affordable." FTCR is supporting legislation that would regulate how insurers increase rates and set other standards.

Schwarzenegger's proposal would require insurers to provide coverage to everyone, but the proposal does not regulate the insurance industry's rates.

Adam Mendelsohn, a spokesperson for the governor, said, "You don't solve the problem unless everybody has health insurance." He added, "A lot of the problem is people who are leaving hospitals and doctors with unpaid bills. The system doesn't work without universal coverage."

Richard Figueroa, health adviser to the governor, said the proposal would cover preventive care before the deductible is reached.

However, Anthony Wright, executive director of Health Access, said, "The vast majority of people will not see a benefit [under Schwarzenegger's proposal], and they will be discouraged from getting the preventive and ongoing chronic care they need."

Wright said the governor's plan does not cover chronic disease management programs, designed to keep patients with chronic conditions out of emergency departments (Ainsworth, San Diego Union-Tribune, 5/29).

The governor says his plan would eliminate a "hidden tax" that insured consumers currently are paying to cover health care costs for the uninsured (Herdt, Ventura County Star, 5/28).

In a study last year, the New America Foundation estimated that the "hidden tax" results in premiums in California that are about 10% higher than average.

However, a new study released last week by Stanford University's Hoover Institution indicates that the New America Foundation study "contains several errors that inflate its estimate of the hidden tax," Dan Walters writes in his Sacramento Bee column.

Hoover researchers write that even if the "implausible assumption that all uncompensated care costs are passed on to the privately insured," the "hidden tax" is only 2.8% of health insurance premiums, not the 10% that New America estimated, according to Walters.

The Hoover study also noted that "because it is more likely that the costs of the uninsured are shared among all participants in the health care market, the true magnitude of the hidden tax is likely to be even lower."

According to Walters, the Hoover researchers do not say their study is conclusive and call for additional research on the issue. However, Walters notes that the New America Foundation released its own critique of the methodology used in the Hoover study (Walters, Sacramento Bee, 5/29).