The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Reaction to Governor Schwarzenegger New Health Care Reform Plan

Posted by Alan on October 9, 2007

Governor Arnold Schwarzenegger held a press conference today (October 9th) to announce changes to the health care reform plan he originally introduced in January. (Here’s a link to the press release and a comparison of the new and original plans).  The new proposal is laid out in an update to the legislative language first made public on September 28th.  Whereas the Governor’s staff made clear then that this earlier version was to enable input from interested parties only, the new version is now the Governor’s official proposal.

I’ll be writing later about the details of the new health care reform proposal soon. What’s clear at first glance, however, is that requiring all residents to obtain health care coverage remains central to the Governor’s reform plan. Further, the legislation is likely to have a limited impact on the group health insurance, but would make substantial changes to the individual market segment.

This version provides more details on how the plan might be funded, too. For example, the Governor is backing away from seeking a two percent tax on the gross revenue of physicians. And he caps the payroll fee on employers at four percent (Democrats in the Legislature had proposed 7.5 percent) with the percentage reduced to zero for firms with payrolls of less than $100,000. The Governor proposes to make up for these foregone revenue sources by leasing the lottery to a private firm (the percentage of lottery revenue directed to education would apparently not be impacted by this arrangement).

While future posts will focus on the public policy aspects of what the Administration has now placed on the table, for now I thought it might be interesting to see what the initial reaction to the press conference has been.

The Associated Press initially posted a brief story, reprinted here as it ran in the San Jose Mercury News:
SACRAMENTO—Gov. Arnold Schwarzenegger has announced a health care reform bill that he wants lawmakers to consider as they meet in special session.

Schwarzenegger laid out his health reform ideas in January, but Democrats ignored his plan. Instead, they passed a health reform bill the governor says he will veto.

Schwarzenegger hopes his latest effort will lead to a deal with Democratic leaders. But organized labor has been negative about the governor’s approach and may pressure Democrats to vote no.

Well, you have to admit, that’s to the point. Of interest is that the AP leads with a reminder that the Governor was unable to get any Democratic support for his “post-partisan” plan. What’s unstated is that he was unable to get Republican support either. However, as noted here months ago, this is Governor Arnold Schwarzenegger we’re talking about. He didn’t need a bill before. And my guess is he’ll get one now.

A few hours later, AP reporter Laura Kurtzman wrote a longer piece with a lead that focused on the Governor letting doctors off the hook for helping to finance reform and the proposal to lease the lottery. After highlighting several of the changes in the Governor’s health care reform approach since January, Ms. Kurtzman notes organized labor’s concern over the challenge of making required health insurance premiums affordable.  She reports on organized labor’s preference for premium for families of up to 500 percent of the Federal Poverty Level — over $100,000 for a family of four (compared to the Governor’s proposal to provide such assistance to households up to 350 percent of FPL — about $72,000).

In it’s story, the Sacramento Bee emphasized the Governor Schwarzenegger’s proposal to lease the lottery to a private firm in lieu of taxing doctors. Again, the emphasis is on the Governor’s failure to build a bi-partisan coalition for his plan.

Tom Chorneau, writing for the San Francisco Chronicle, also emphasized the concerns of Democrats and Labor with an individual mandate. He quotes Speaker Fabian Nunez as saying, “I have been strongly committed to ensuring affordability, and I will be examining the governor’s bill in that light, along with how it addresses prescription drugs for Californians and fair participation by employers.”

So, what to make of all this?

Remembering that we’re still dealing with just tea leaves here, the critical issue is beginning to emerge. The Governor will not back down from requiring all residents to obtain coverage. He’ll acknowledge this means health insurance must be affordable. He’ll maintain that expanding eligibility for Healthy Families and premium subsidies for households with incomes of up to 350 percent of the Federal Poverty Level, combined with a mandate that carriers spend 85 percent of their premium on health benefits, meets this requirement. The Democratic Leadership and their allies will claim it’s not enough. They’ll want to increase both the amount of the subsidy and expand who is eligible for it. This will require more revenue which they’ll want to extract by increasing the maximum health care coverage payroll tax on businesses from the Governor’s four percent to closer to eight percent or more. This, in turn will be problematic for the Governor.

Does this mean health care reform is dead for 2007? Nope. It’s always been an iffy proposition, certainly no more than a 50/50 chance. But keep in mind, Governor Schwarzenegger is an adroit politician. When some Democrats thought they had boxed him into a position in which he would have to sign AB 8, he nimbly escaped without breaking a sweat. He accomplished this in part by taking negotiations public; which has now done again.  The burden is now on the Democratic Leadership to put something as detailed on the table. They may fall back on Assembly Bill 8, but that’s so September. My guess is they’ll decide to put on the table a package which offers some concessions toward the Governor’s plan, but with subsidies which greatly increase the cost. I also wouldn’t be surprised if Speaker Nunez introduces both, the Leadership’s and the Administration’s health care reform proposals in bill form. And then we’ll see if a compromise this year is really possible.


7 Responses to “Reaction to Governor Schwarzenegger New Health Care Reform Plan”

  1. Holly Hail said

    Michael, one final note: FYI — for your wife! Starbucks does offer family health insurance, even if you work part-time. Check it out, if you have not done so…

    Holly Hail
    Peoples Health Insurance, LLC

  2. Holly Hail said

    Hi, Michael:

    I am an agent / broker in Florida and I crunched the numbers on your family. Not knowing exactly the ages of all folks that would be on the plan or knowing the exact zip code of where you live, it appears that your family would be paying at least $330 a month, and this premium figure is based on taking a high deductible plan. When I say high deductible, I mean $5,000!

    California is a very expensive state in which to live. I think that all folks should be required to have health insurance and pay something for their coverage. But, in my own case, my individual health insurance premiums have increased 38% in the last two years! At this rate of increase, in a about 10 years, I will be paying $1,000 a month for my coverage…this is an outrage! Since our health care system was built on 1950’s concepts, we need many changes.

    We feel that the governor of your state is not on the right track! Universal health care means that someone pays, and it usually means higher taxes. Not sure where our own health insurance agency will be in the next few years. But, at least I have health insurance; I am 46 years old, have an HSA with a $5000 deductible, and I am paying $178 a month…again, an outrage!

    Hope this helps you, all the best in finding coverage for you and your family.


    Holly Hail
    Peoples Health Insurance, LLC

  3. I thank you for the reply to my situation. To give some more info, I am 37 and my wife Asha is (….an undisclosed age due to my liking life but she is older then our children and younger then our house….) and we have looked at the cost of insurance for the really bad situations and I made a “mandate” around our house: no one is to get sick. So far it seems to work and I do not expect our situation to last much longer, there is an end in sight for me. If we are to use my figures of $240 per month for the last four years that we have been without health insurance, by not getting sick we have saved $11,500 in insurance premiums that would have been wasted.

    I understand that the Governors plan may work for some people, but as shown above it does not work for my family. We live on the razors edge of what we can afford and still give my children a full time mother at home. Quite frankly I don’t care that others are paying a “hidden tax”, they are certainly not paying for me or my children, my family and I have cost zero. Yet under the Governors plan I will have to loose 48% of my food and gas money because someday I MIGHT cost something.

    If, and it’s a big if, my wife or I get sick then we will in all likelihood lose our home, we have a bit of equity even in this down market. We have decided that our home is less important to us then having that 1970’s style family that we both grew up in and I do not like the fact that the Governor will try and take that away without so much as a “Thanks”. I spent a bunch of time working to make sure the man would get elected over Gray Davis, I have numerous photos from news paper clippings showing me holding Arnold signs. I really like the guy but this bill does not fix the system.

    I frankly think that both the Governors plan and Nunez’s plan stink. One gives me insurance that I will not use and forces me to pay for it and the other forces employers to pay for insurance that no one will use. Thank God there is a ground swell movement for the 1% sales tax increase to fix our health care system. Even if I end up paying the same amount as under the Governors plan I know that everyone is sharing the cost of health care, from employers to employees, corporations to non-profits, everyone. Now that is a system I can get into.


    Michael Kassing (p.s., I still love you big guy, but you need to look at a different road)

  4. I think Health Insurance is just as imporant as Car Insurance. If you drive a vehicle than you must buy car insurance. If you live in California, the governer is saying you must buy Health Insurance. Why put the burden on everyone else? I am not saying the governers plan will work. I am just saying it is a very important issue that needs to be addressed, not ignored.

  5. Michael

    You did not mention your age, but if you and your wife are around 35 years old, a current free market private Blue Shild plan would cost the two of you $128 per month.

    Please note the other “Poster”, Richard Figueroa, is the Governor’s right hand man on the health insurance issue.

    Is $128 per month for you and your wife an unfair price to pay for major medical, comprehensive health insurance? I do not think so. Don’t we all need to take responsibility for our own selves?

    I would think $128 per month is a good investment against losing your house to a large medical bill you could not pay without the help of a free market, private company like Blue Shield. We have way too many entitlements in California already !

    But I completely agree with you on your main point…If you do not want to buy health insurance and take your chances, nobody sould make you buy it. The State Government needs to stay out of our checkbooks and quit making up facts about this so called “hiidden tax”. The statistics just don’t back it up !

  6. Richard Figueroa said

    I read your post with great interest. The Governor’s health care reform plan has been greatly informed by input such as yours. The plan the Governor announced yesterday, includes a new premium cap for families such as yourselves that wish to enroll in a state purchasing pool at a maximum of 5% of the gross family income, or up to $200 per month for the entire family (including dependents). Your new net cost would even less than that because you would subtract the amount you are already paying for your children. Your family would have comprehensive coverage that would protect your family against the kind of health care costs that bankrupt too many Californias without health coverage. You are already paying for coverage for your children so you understand the importance of having insurance. Unfortunately, large medical costs for those who do not purchase insurance are passed along to everyone else in the form of a “hidden tax”. We understand that the cost of health insurance market is unaffordable for many and unavailable to others due to their medical condition. That is why are proposing a purchasing pool and guaranteed access to coverage and hope you avail yourself of such an enrollment opportunity.

  7. Alan,

    The Governor’s staff never looked at the reality of the financial situation when they wrote the latest health care document. Let me give you an example of how this bill would affect a family, mine:

    I graduated law school and am waiting for my bar card, I earn about $4,000 per month as an independent contractor and support myself, my wife Asha, daughter Erika, daughter Bryce, and baby boy Ryan. I have an adjustable rate mortgage that is sitting at $1,800 per month on a house that is too small, $800 per month on $120,000 worth of student loans, $250 per month on one car (the other is paid off), $200 per month on auto insurance, $250 per month on utilities and cable, $200 per month to help with taxes at the end of the year leaving $500 for food, gas, health insurance for the children, and mad money.

    The Governor’s bill would make me pay 48% of my “discretionary income” or $240 per month on redundant (the kids are covered) health insurance that I would purchase now if I could afford it.

    Does the Governor think I go to sleep every night thinking how lucky I am that I don’t have health insurance? No, I go to sleep every night and think how lucky my son and daughters are to have their mother at home being a mother. I go to sleep every night and think that things will be better for my family and we have to make some sacrifices now that will lead to well adjusted children that will someday turn into well adjusted adults. I go to sleep every night and tell myself that now is not the time to get sick or injured, that can come in the future when we are covered.

    This letter comes from the many Californians that are in my situation, working hard to get by. We do not have health care because we can not afford it without extreme sacrifice, in my case sending my wife, the children’s mother, back to work. The Governor’s bill does nothing to address the problem for people like me, rather it creates a larger problem; creating another tax burden for me to cover, 6% of my gross income or 48% of my net after living expenses.

    I urge you to not support the Governor’s bill and if you do I would like you to meet the family you are going to burden with a 48% tax.

    Yours truly,

    Michael Kassing, JD

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