The Governor’s Health Care Reform Plan and the Goldilocks Factor

Whether it was intentional or not, Assembly Speaker Fabian Nunez and Senate President Pro Temp Don Perata did Governor Arnold Schwarzenegger a huge favor in pushing Assembly Bill 8 through the Legislature last week. They positioned the Governor’s health care reform plan as both more the more moderate and more comprehensive alternative. The result increases the Governor’s political momentum and his negotiating leverage.

Supporters of AB 8 claim the legislation will bring nearly 70 percent of the state’s current uninsured into the system. It’s primary source of funding is a fee on every business in the state equal to 7.5 percent of their Social Security-adjusted payroll. It gives an unelected state agency the ability to raise this fee by any amount once a year (yes, by any amount). Many in Sacramento believe the agency would need to invoke that power almost immediately.

Speaker Nunez and Senator Perata claimed there’s was the reasonable compromise between the Governor’s proposal and the single-payer approach championed by Senator Sheila Keuhl. However, their context was political. Yes, the Governor’s plan needs a two-thirds majority and with Republicans holding back support that was not going to happen. Yes, the Governor vetoed Senator Keuhl’s bill, SB 840, last year and he’d do it again. Yes AB 8 only requires a majority of Legislators to pass. All of this positions AB 8 as the politically viable alternative.

Yet politics is not positioning. Consider things from Goldilocks point of view. Like most Californians outside Sacramento County and a few newsrooms scattered across the state, Goldilocks doesn’t think politically. She does, however, instinctively understood positioning. SB 840, the Papa Bear of reform, represents a government takeover of health care. That sounds scary (or too hot as Goldi would say). AB 8, the Mama Bear, fails to deliver on universal coverage and is expensive to boot. Too cold.

Then there’s the Governor’s plan. Universal coverage and no government takeover. It even spreads the cost of expanding health care beyond business which seems just right.  Meet the Baby Bear.

With this kind of positioning it’s not surprising that the Governor’s proposal is gaining support. For example, last Friday a broad coalition representing business, labor, doctors, insurers, hospitals and consumers endorsed the Governor’s plan. Yesterday the Los Angeles Chamber of Commerce lined up behind it. While possible, it is unlikely the Chamber would have endorsed a plan imposing a four percent tax on their members if it were not for the specter of AB 8’s 7.5 percent tax looming in the background, especially since AB 8 accomplishes less. No doubt more supporters will be joining the Governor in front of the cameras in the next few weeks.

As in the fairy tale, there is a danger here for health care reform Goldilocks. Governor Schwarzenegger’s health care reform plan is just that: a plan. It’s not legislation yet. The coalition forming behind it are endorsing a concept. In the next few weeks as the details emerge in that devilish way details do, some members of the coalition may start squirming. After publicly standing beside the Governor of the California it’s tough to walk away. The last thing anyone wants is the Governor publicly calling them  or their group “lying, backstabbing cowards,” or, in more politically acceptable language, “undependable and disappointing.” This is especially true if you’re a business, labor, doctor, insurer, hosptial or consumer who needs something from the state government in the next two years or so.

The Governor, whose political skills should never be underestimated, got a double win from the Legislature’s passage of AB 8. His health care reform plan looks moderate — even post-partisan. And he gains substantial negotiating leverage across a broad spectrum of stakeholders.  Which means he’s another step closer to living happily ever after.

A Health Care Reform Initiative May Be Unprecedented, But Its A Sound Idea

I have a great deal of respect and admiration for George Skelton, the veteran Los Angeles Times journalist. Yet I have to take issue with his September 13th column in which he takes Governor Arnold Schwarzenegger and the Democratic Legislative Leadership to task for contemplating an initiative to fund the health care reforms expected to come out of the upcoming legislative special session.

Mr. Skelton claims the initiative would “confirm many people’s view that the Legislature is indecisive and irrelevant.” He also warns that by backing an initiative, Governor Schwarzenegger “would further alienate Republican legislators. He would be shunting them aside again, signaling that they’re not needed.” He goes on to question the timing of an initiative. It would likely be on the November 2008 ballot — more than a year after the special session adjourns and shortly after a bruising budget battle which is likely to be worse than what we endured this year.

Much of what Mr. Skelton says is true. People do hold the Legislature in low regard. Republican lawmakers are increasingly marginalized (and will likely continue to be until the way we draw legislative districts in the state is changed so as to make more of them competitive). The timing of the initiative is unfortunate.

Yet, it also is the right thing to do. What makes the initiative route worth traveling is that it holds out the promise of making comprehensive health care reform a reality. The Legislature is impotent any time a two-thirds majority vote is required. The Governor, Speaker Fabian Nunez and Senate President Pro Tem Don Perata could ram there heads against that wall, lose and slink away. Instead, they’re taking the only path the current political reality in California leaves them.

Is the need for an initiative an example of a healthy state government? No, in fact it’s evidence of just how dysfunctional state government has become. Will it bring the state meaningful health care reform? It certainly holds out that promise. The key, of course, is whether the framework of reform, including the elements that don’t require passage by a two-thirds vote, will actually make California’s health care system better. Based on the version of Assembly Bill 8 passed by the Legislature, the answer is no. Hopefully the special session will produce more responsible legislation, something worthy of being financed by the very necessary initiative.

Health Care Reform Compromise: Unsolicited Advice Part II

Not only is this advice offered in this post unsolicited, it’s self-serving. While this blog is meant to be of interest to everyone interested in health care reform, its primary audience is health insurance agents. So what I’m about to suggest is clearly in their interest. And, as an insurance agent, in mine. Because it’s self-serving doesn’t mean it’s not good advice, it just means, it’s, well, self-serving. But hey, enough about me. <g>

One virtual certainty is that if a compromise emerges from the current negotiations between the staffs of the Governor and the Legislative Leadership it will include a cap on the percentage of premium carriers can spend on administrative costs and profits. The only thing still uncertain is what will be considered medical related expenses and what will be treated as administrative costs. The health plans are busily pushing to have such consumer-friendly items as disease management, wellness programs and the like treated as medical related. Hopefully they’re finding a receptive audience. These activities are a great benefit to consumers and help to lower overall health care spending. It would be a terrible consequence of a legislative compromise if they were to become too burdensome for health plans to continue with them.

The primary health care reform bill in Sacramento, Assembly Bill 8 (Nunez), explicitly defines distribution costs as administrative. This could mean that all agent commissions will be treated as applying toward the 15 percent cap on non-medical spending percentage. This would be bad news for agents as, especially in the individual and small group markets, their commission as a percentage of premium is not insignificant (neither is the services they provide, but we’ll get to that). Some carriers have gone so far as to suggest that if AB 8 passes with the administrative cost cap, agents would not be paid any commission for selling individual policies.

However, agents are paid a commission not just for selling a case, but for servicing it. Agents act as consumers’ advocates and counselors — at least the good ones do. Yes, they help consumers select the carrier and benefits package that best fits their unique needs and circumstances.  They help with the application process, often conducting numerous employee meetings even for smaller groups. And they help consumers navigate the underwriting process when that’s required. At renewal time, agents help consumers reevaluate their plan, compare it to others on the market and either re-up with their current coverage or enroll in a new plan. All of these are clearly sales related and should be treated as administrative expenses.

Agents also help their clients work through billing problems. It may be a snafu in accounting or the failure of the plan to acknowledge the arrival or departure of an employee from the group. Agents help families prepare when a child is no longer elgible to be insured as their dependent. When an insured is ready for Medicare an agent will help with that transition, too. These “customer service” type activities are also administrative in nature.

One of the most important service agents provide is helping their clients get the benefits they’ve paid for. When a claim is denied or the client feels they are getting the runaround from the carrier, agents step in and try to resolve the issue. This consumer claims advocacy role is critical. Clients are at a disadvantage to the carriers when claims problems arise. They’re dealing with the illness or accident that caused the problem in the first place. The terminology is new to them as are the standard operating procedures at the carrier and in the industry. They have jobs and family responsibilities, whereas the folks in carrier’s claims departments have little else to do eight hours a day other than deal with claims.

Often agents get involved in the claims process before a medical expense even occurs. They help their clients understand what treatments or medications are covered and which are not. They may assist with the pre-approval processtes (especially if the treatment is initially denied approval). In short, a significant portion of an agents value to their clients is help with claims. And these activities should not be counted as administrative, as they are part and parcel of consumers receiving the benefits they are entitled to — in other words, they are claims related.

So commissions should not be viewed as solely sales compensation. It’s also compensation for performing service, including claims related services. AB 8 should recognize this. The simplest method would be to include language that allows carriers to treat a percentage of agent commissions as claims related. What percentage?

Here’s a formula (for those too bored to follow it through, the result is “at least 35 percent of commissions should be treated as payment for client claims advocacy).

In the individual and small group market segment, commissions are not paid only at the time of sale (as it is for, say, a real estate agent). It’s paid out over time, usually on a monthly basis. And health insurance agent commissions continue to be paid out so long as the case remains in force.

The initial sale of an individual or small group medical plan takes, on average, two-to-three months in the individual and small group market segments. Renewals may require less time, but not always.  This means roughly 16-to-25 percent of agent compensation is sales related. Let’s use the higher number: 25 percent.

Talk to 10 agents about how much of their time is spent on “administrative-related” customer service and how much on “claims-related” customer service and you’ll get 10 answers — maybe 15. So let’s assume a 50/50 split. This means 37.5 percent of agents’ compensation is claims related, but let’s round down to 35 percent. 

So there you have it: if an administrative cap is going to be part of the compromise, well, so be it. I’ve written extensively about the unintended conseuquences such a cap will have, specifically, increasing the cost of coverage. If legislators are not intending to put the thousands (tens of thousands, actually) of agents out-of-business, then they should draft AB 8 to recognize the claims-related services provided by those agents. This means inserting language allowing carriers to allocate up to 35 percent of agent commissions to customer claims advocacy activities.

Of course, it could be negotiators and lawmakers want to eliminate agents from the system. In which case they could just say so. Or they could fail to recognize agents’ claim-related services. After all, actions do speak louder than words.

Health Care Reform Compromise: Unsolicited Advice Part I

As noted in my previous post, there’s rumor of a compromise on health care reform swirling around Sacramento. One element of the purported package is to require carriers to accept all applicants regardless of their health condition (something called “guarantee issue”). Assembly Speaker Fabian Nunez and Senate Pro Tem President Don Perata are willing to enact guarantee issue without a corresponding mandate that all Californians buy coverage (a “buyer’s mandate”). This position is shocking in light of the experience of other states that have done something similar. Those states have all experienced substantially higher insurance premiums and an erosion of competition in the marketplace (for example, see this earlier post on the topic).

Meanwhile, the Governor’s staff claims they will agree to legislation only if it includes an “enforceable” buyer’s mandate. Of course, what’s enforceable is open to debate. And while the staff is extremely bright, the fact is that what looks good on paper often disappoints in reality. (For example, only about 75 percent of drivers comply with the “enforceable” mandate to have auto insurance or post a bond.) Nonetheless, the Governor is likely to hold out for guarantee issue with a program aimed at achieving a buyer’s mandate.

No one asked for my opinion, but here’s how to get guarantee issue right: prove the buyer’s mandate is working before implementing guarantee issue.

We already have a program in place to insure the “uninsurable.” It’s called the Major Risk Medical Insurance Plan (“MRMIP”). At times it’s been plagued by long waiting lists. And coverage through MRMIP isn’t cheap. So create subsidies for low- and middle-income Californians. Then implement a buyer’s mandate. If an individual is turned down for coverage, the subsidy can be applied to the MRMIP coverage. At the same time, expand the number of Californians eligible for existing state programs like MediCaid and Healthy Families. And spend the time and creativity necessary to create an effective outreach program for those programs (today as many as one million Californians eligible for the programs fail to enroll). 

These efforts, along with a package of incentives and penalties to encourage enrollment in health insurance, should dramatically increase the number of insured in the state. Once the state can document 90 percent compliance with the buyer’s mandate then carriers should be required to guarantee issue coverage. This means the need for the MRMIP program will go away, freeing up more money for subsidies or other important health programs.

Even after this 90 percent threshold is reached, there will be some folks who fail to meet the requirement to purchase coverage (by defintion, 10 percent, initially). If these individuals are permitted to buy coverage on their way to the doctor’s office or hospital, without a penalty, the result will be higher premiums for those who have played by the rules. So carriers should be permitted to apply pre-existing condition exclusions and premium adjustments for a limited time. The amount of time these penalties, and the amount of the premium adjustment, should be proportional to how long the individual has gone without coverage. If these individuals qualify for a state subsidy they should still receive it.

The guarantee issue and the buyer’s mandate provisions could be approved by the Legislature by a majority vote. The funding for premium subsidies and expansion of MRMIP would be part of the funding intiative. The implementation of the guarantee issue and buyer’s mandate provisions would be contingent on passage of the initiative. In this way, the resources and the legal framework must both be in place before the state can honestly claim to be on the road to true universal coverage.

This proposed compromise isn’t new. It’s actually a part of the California Association of Health Underwriter’s Healthy Solutions health care reform proposal and I first suggested it in a post back in March.

Like all compromises, this version of guarantee issue won’t please everyone. It will be called a cop-out by opponents who think carriers are being let off too easy. However, failing to demonstrate an enforceable buyer’s mandate will only lead to disasters of New York and New Jersey proportions. Other critics will claim the 90 percent threshold is unreachable. Yet nearly 80 percent of Californians are already insured by public or private programs. An effective outreach program could bring a million more people into public programs. Premium subsidies will help millions more obtain coverage. The fact is, the 90 percent target is well within our reach.

This compromise offers lawmakers to go beyond promising universal coverage. It allows them to actually achieve it. To me, that’s a compromise worth making. 

Health Care Reform Compromise Rumors

Here’s a post that could be out of date by Wednesday, if not sooner:

Rumor has it Governor Arnold Schwarzenegger’s and Speaker Fabian Nunez’s staffs are busy hashing out a compromise that could be brought before the Legislature early this coming week. (I assume Senate Pro Tem Perata’s staff is involved, too). The broad outline is that lawmakers would enact health insurance market reforms while pushing off elements of the reform package that require money to a ballot initiative in 2008. This allows them to both beat the deadline posed by the Legislature’s scheduled adjournment on September 14th and to avoid the political pain and agony of garnering a super-majority in support of their package in both houses of the Legislature.

Among the market reforms would be limiting the percentage of premium health plans can spend on administrative expenses and profit to 15 percent (referred to as an “administrative cap” and requiring carriers to accept all applicants for coverage regardless of the applicants health (“guarantee issue”). Also likely to be included in the market reform portion of the package is expanding small group health insurance regulations to groups of up to 250 employees and eliminating carriers ability to adjust their standard premiums to reflect the risk profile of the applying group.

The revenue-related issues would presumably include premium subsidies for low- and mid-income Californians and the revenue to support them, which could come from fees and/or taxes imposed on employers, hospitals, doctors and individuals.

What’s all this mean? Several things:

1. A Deal is in the Works: Whether this is an accurate outline of a proposed compromise or not, this rumor indicates that serious negotiations are under way and making progress. Rumors this detailed often have some tie to reality. Another indication of progress: Assembly Speaker Fabian Nunez postponed an expected vote on health care reform last week. He’d all but promised a vote on Assembly Bill 8 (the Legislative Leadership’s plan), the Governor’s proposal and others by Friday, August 31st. Pulling back is an indication that there’s likely to be something more substantive to vote on this coming week.
2. Don’t Underestimate the Governor: It wasn’t that long ago that pundits at the Wall Street Journal and elsewhere were saying Governor Arnold Schwarzenegger’s health care reform plan was dead (“doomed” is the word the Journal used). Meanwhile, politicians as bright and savvy as Senate President Pro Temp Don Perata were on on record with the claim the Governor would have to sign virtually any bill the Legislature put on his desk. In my post on the topic, I described the Governor as an adroit politician who may have backed himself into a political corner. Anyone who doubts Governor Schwarzenegger’s political savvy should pay attention. This is a politican who knows his strengths and how to put them in play. In an editorial board meeting with the Sacramento Bee the Governor threatened to veto AB 8 unless it is amended to more closely resemble his own proposal. He follows that up with a hallway chat with several reporters reiterating and clarifying his position. No longer in a corner of any kind, the Governor is now shifted the discussion. He is now controlling the public dialogue on health care reform.
3. Don’t Underestimate the Legislative Leadership: The Governor’s action puts the Legislative Leadership on the defensive, but not for long. Speaker Nunez and Senator Perata could have backed off and let the Governor continue to control public perception of the debate. Instead, Speaker Nunez announces he’ll put the Governor’s proposal into a bill and bring it to the floor of the Assembly for a vote. In the process he challenges the Governor to produce Republican votes for the Administration’s plan (which requires a two-thirds majority vote to pass) or to accept that only AB 8 can muster the votes to become law. The result, the Governor now must muscle a two-thirds vote out of the Legislature or admit his proposal really is doomed.
4. Creativity Trumps Gridlock: Getting Republican legislators to support the Governor’s proposal would be a Herculean task. While the Governor may have played Hercules in the movies, Sacramento is no Hollywood set. One result of all this could have another long legislative deadlock as we witnessed with this year’s state budget. GOP lawmakers have proven their willingness to tie up legislation requiring their support. If the rumors about an initiative are true, however, the Governor and the Legislative Leadership have found a creative solution. By bypassing the Legislature altogether on provisions requiring a two-thirds vote they effectively lockout the GOP minority. In the process they give themselves the flexibility to enact health care reform as they see fit.
5. Politics Still Trumps Policy: So we now know these are savvy politicans applying all their skills to producing a health care reform package — and to produce it quickly. Yet what’s still missing from the debate is an appreciation for the impact of the changes they contemplate. As I’ve previously posted, AB 8 is greatly flawed. Separating it into two pieces doesn’t fix the problems. It may enable them to become law, but that’s not a good thing if they will do more harm than good.

If the Governor and the Legislative Leadership reach a compromise on health care reform before the Legislature adjourns it will be hailed as a political miracle. The media will marvel at how Schwarzenegger, Nunez and Parata pulled back from the brink of public failure and ushered in a new era of health care for the state.

Success, however, should not be measured by when legislation is enacted, but rather by what the new law accomplishes. The measure of success should be results, not action. Passage of a compromise along the lines of the rumor reported here would be no victory. A special session providing lawmakers the time to get health care reform right is both good politics and good public policy. Hopefully we’ll be hearing rumors about just that soon.

Schwarzenegger Threatens AB 8 Veto: Update

An article in this morning’s Los Angeles Times (Schwarzenegger criticizes Democrats’ health plan) makes explicit what was implicit in the Sacramento Bee story I posted about last night: he won’t sign a bill without an individual mandate. The Times quotes the Governor as saying any health care legislation he signs “needs to have mandatory healthcare coverage and it needs to have shared responsibility.” This has been a consistent theme of the Administration when it talks about health care reform: shared sacrifice from individuals, businesses, doctors, hospitals, and insurers.

In the Times article, Governor Schwarzenegger also reiterated his opposition to a single payer approach to heatlh care reform. This means the Governor is on record as being willing to veto both reform bills the Legislature is likely to send him. His minimum criteria for a bill is pretty clear now:

1. No 100% government run health care system
2. No putting the burden of financing the system on business alone
3. Everyone must be required to obtain coverage

Otherwise, the Governor has announced himself open to compromise. As he says in the Times, “We have a good shot of getting it done, not exactly my way but a compromise way.” So the ball is now in the Legislature’s court. It will be interesting to see if they try to accomodate the Governor prior to their September 14th or stick to their guns and pass bills they know he will veto. My guess? The Legislature passes both AB 8 and Senate Bill 840, Senator Sheila Kuehl’s single payer legislation. The Governor vetoes both and, in his veto message calls for a special session devoted exclusively to health care reform. This allows all the players to demonstrate their commitment to the concerns of their key constituencies, while also sending a message that it’s time to get serious and work out some compromises.

The key to whether a special session produces the right reforms will be how open the Governor and the Legislative Leadership will be to incorporating the ideas and addressing the concerns of outside parties. But that’s a topic for another post.

Text of Assembly Bill 8 (Nunez and Perata)

I’ve written a number of posts about Assembly Bill 8 of late. It occurs to me some visitors to this blog might like read the legislation for themselves. The state maintains a site that provides copies of each version of a bill. Here’s the link to Assembly Bill 8.

Enjoy!

AB 8 and Unintended Consequences: Guarantee Issue

AB 8 requires individual health insurance carriers to accept virtually all applicants for coverage (a practice called “guarantee issue”). Because it empowers the Major Risk Medical Insurance Board (MRMIB) to establish criteria which would divert three-to-five percent of applicants to a high risk pool MRMIB manages, there’s a small safety valve. But it is small indeed — too small to avoid creating dramatically higher premiums and increasing the number of uninsured among self-employed and unemployed Californians.

Health insurance is about spreading risk. Insureds who incur lower than average claims subsidize those who incur higher than average claims. Why? Because the “healthier” group expects their costs to be covered if they’re ever on the subsidized end of the equation.

But if individuals know they can get coverage as soon as they need it, why would they buy it when they’re healthy? A system that incents healthy individuals to forgo coverage, but encourages those incurring heavy expenses to buy insurance is called adverse selection. It can devestate a health care market and AB 8 is a recipe for doing just that.

This isn’t just theory. In Kentucky when a guarantee issue market was created 45 carriers left the market and premiums skyrocketed. Things got so bad Kentucky lawmakers had to reverse their “reforms.” In Maine, guarantee issue, along with other reforms, means only one carrier offers individual coverage.  Significantly, even after the state agency regulating rates approved rate increases totaling 124 percent over six years, the lone carrier left in Maine still loses money in this market segment.

Then there’s New York and New Jersey. As noted in an earlier post, citizens of those states pay, on average, a “health care reform surcharge” of 350 percent. That’s how much more the average annual premiums in those states exceed the average annual premium in California.  Adverse selection will do that.

There’s other ways AB 8’s mandate to sell provision could increase premiums in the individual market. For example, it could result in non-Californians facing surgery or expensive treatment to establish residency in the state just tenuous enough to qualify for coverage. (It appears even opening a California-based post office box might work). Once the treatment is completed, they could “move” back to their home states having paid a fraction of the cost of their care. The majority of their medical expenses would be paid by Californians in the form of higher premiums. And as premiums increase it would make it economically attractive for even more individuals to drop their coverage until they need it, increasing the amount of adverse selection in the system and driving costs up further. The process would repeat in a death spiral that could undermine the entire system.

The problem with AB 8, as it is in Maine, New York and New Jersey, is its creation of a mandate to sell coverage without a corresponding and enforceable requirement that consumers buy coverage.  Guarantee issue, when coupled with mandates to purchase, could go a long way toward achieving universal coverage. This is precisely what Governor Arnold Schwarzenegger proposed and it’s what the California Association of Health Underwriters calls for in their Healthy Solutions plan. Another previous post describes how Healthy Solutions approach to guarantee issue would help mitigate against the adverse selection and higher premiums AB 8 will create.

The proponents of AB 8 are not trying to increase premiums and encourage people to drop their coverage. Unfortunately, as written, the legislation is likely to have that very result. Let’s hope supporters of the bill will slow down and enable the Legislature to reconsider some of its provisions before Californians pay the unintended consequences.

Will Budget Impasse Delay California Health Care Reform?

The California budget for this fiscal year was to have been finalized before July 1st. Senate Republicans are withholding their needed votes, however, until more cuts are made and regulations are changed.  With lawmakers at home for their summer recess until August 20th passage of a budget anytime soon is unlikely. And with the Legislature scheduled to adjourn for the year on September 14th, the window available to pass other legislation is short.

Health care reform, as embodied at the moment in Assembly Bill 8 (Nunez), is just one of several major pieces of legislation held up by the budget impasse. Governor Schwarzenegger has an ambitious proposal concerning California’s water supply while Legislators are passionate about reforming term limits and addressing reapportionment.

So the question is, will the budget fiasco derail passage of health care reform legislation? The Los Angeles Times reports today that, the answer is probably “yes.” Under the headline, “Budget deadlock stalls Schwarzenegger’s agenda” the Times reports, “Everything has been put on the sidelines,” said Senate Leader Don Perata (D-Oakland). “No one would like to have a healthcare bill more than I would. But if we don’t have a budget, nothing else matters.” The article concludes with another quote from Senator Perata, “The only game played in center field here is the budget,” Perata said. “Until the budget is resolved, no one else gets in.”

All this would seem to lead to the conclusion that AB 8 is destined to become a two year bill, right?

I’m not so sure. As I posted earlier, there’s a tremendous amount of political pressure on the Legislative Leadership and the Governor to pass health care reform as soon as possible. Govenor Schwarzenegger wants leverage and visibility in the run-up to the state’s February presidential primary, which means he wants health care reform as soon as possible. The unions, close allies of both Senator Perata and Assembly Speaker Nunez, want health care reform now. Plus Legislators want voters to change the term limit laws on election day in February, and passage of health care reform before then would help cast them in a positive light.

It’s hard, if not impossible, to come up with solid public policy reasons for passing the budget this year. But politics often trumps public policy in capitals across the country. Yet if there’s just a few weeks between passage of the budget and the Legislature’s adjournment, the immutable laws of space-and-time trumps politics, doesn’t they?

Usually. But we have a Governor who has no qualms about making a dramatic gesture. A Governor who relishes acting outside of normal political practice. A Governor, in short, who could easily call for a Special Legislative Session to consider AB 8. As I understand it, all it takes is a stroke of a pen. The press conference is optional, but inevitable.

Calling for a Special Session would emphasize the importance of health care reform to the Governor. And it might be welcomed by Senator Perata and Speaker Nunez as it would enable them to divert attention away from the budget deadlock to substantial public policy. A Special Session would allow both the Governor and the Legislature to achieve their political need of passing health care reform — any health care reform — before the end of the year.

It’s the “any health care reform” that’s the problem. AB 8 needs a lot of work before its anywhere close to ready for implementation. As currently drafted it is likely to cost the state jobs and tax revenue, increase health insurance premiums and the number of uninsured, and devastate an industry that makes up over 15 percent of the state’s economy. Preventing these unintended consequences will require a great deal of discussion, deliberation, hard choices and compromise. In short, AB 8 needs to be a two year bill.

A Special Session might allow for a thoughtful approach to health care reform, but more likely ti will just serve as a forum for political theater. Californians deserve responsible, effective health care reform. There are proposals on the table, like the California Association of Health Underwriter’s Healthy Solutions plan which would deliver on that goal. AB 8 isn’t there yet. The Governor and the Legislature should take the time to get it right. Their constituents deserve no less.

Unified Legislative Health Care Reform Plan

Legislative leaders have combined their bills to create a unified alternative to Governor Arnold Schwarzenegger’s health care reform bill.  Assembly Speaker Fabian Nunez and Senate President pro Tem Don Perata announced on Thursday that the Senate bill (SB 48) would be rolled into an amended version of the Assembly bill (AB 8).

That Democrats in the legislature felt a need to present a unified approach is not surprising. They both have incentives to resolve the health care reform debate this session. These pressures include a desire to demonstrate accomplishments on “big issues” prior to expected ballot initiatives on reapportionment and term limits next year.

It’s also not surprising Speaker Nunez and Senator Perata resolved differences between their original health care reform bills by adopting the most expensive and intrusive option. (AB 8 and SB 48 Key Compromises).  This gives them plenty of negotiating room as they prepare for the inevitable talks to come with Governor Schwarzenegger. And adopting provisions advocated by their liberal and union constituencies has positive political benefits for them as well.

So now the pressure is on Governor Schwarzenegger to stake out his position by publishing details of his plan. The ideal format would be in the form of legislation, although that’s not really necessary for the Governor to have influence. Once the negotiations begin the legislative language will change quickly. The key is to have starting points with roughly equivalent levels of details.

In a future post I’ll discuss the key provisions of the new AB 8. For now, the most interesting dynamic to watch is the pre-negotiations positioning. It’s going to be a long summer.