The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

How to Make A Compromise Without Compromising

Posted by Alan on November 9, 2007

When the Democratic Leadership agreed to require all California residents to obtain health care coverage, they wanted to make sure they weren’t creating a financial hardship on the state’s citizens.  So they created the “6.5 percent” exemption. If health insurance costs were in excess of 6.5 percent of a family’s income, they would not need to buy coverage.

In an earlier post I calculated the impact of this exemption based on two assumptions of which costs would be counted toward determining the 6.5 percent threshold. The short version is, if only premiums were considered, many of those eligible for the exemption would also be eligible for premium subsidies, meaning they would be likely to comply with the requirement. If, however, out-of-pocket expenses were also included in the calculation, some households earning upward of $200,000 would be exempted, undermining the requirement to obtain coverage. 

Which definition is used in ABX1-1, the Democratic Leadership’s bill? The premium plus out-of-pocket costs.

Without knowing what minimum coverage will be required it’s tough to know how many Californians would be exempt from the mandate to have coverage. The way the math seems to work out is that older and larger families are more likely to be exempt than younger individuals. I suppose one could argue this is a good thing as it’s younger, healthier people who currently don’t buy insurance. Again, however, without knowing what qualifies as minimum coverage plan there’s no way of knowing if most Californians will be exempted.

So, let’s review:

  • Speaker Fabian Nunez and Senate President Pro Tem Don Perata hold a press conference on health care reform.
  • After criticizing the Governor’s proposal to require all residents to obtain medical coverage they agree to accept this approach, subject to the 6.5 percent exemption.
  • ABX1-1 does not define the minimum benefit package so it’s impossible to calculate what it will cost.
  • If the premium and out-of-pocket costs of whatever minimum benefit package eventually is defined totals $6,500, it means families earning less than $100,000 would be exempt from the requirement to buy coverage. For some older families the total medical expense exposure is likely to be twice this amount, meaning those earning under $200,000 would be exempt.
  • It’s impossible to know for sure, but it appears many Californians will be exempt from the requirement to obtain coverage.

So Legislative Leaders offer a compromise which may not require them to change their position. Instead, they adopt the language of the Governor’s proposal, add an exemption that may nullify much of the purpose of that language, and declare it’s a compromise.

If I’m missing something here, someone please tell me. But if I’m right it looks to me like Speaker Nunez and Senator Perata pulled off a compromise without compromising.

Note: This post was revised significantly on November 10, 2007.


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