GOV. Arnold Schwarzenegger, the candidate who last year said he would never raise a tax and who attacked me for proposing that the very biggest corporations provide health insurance to their workers, didn't wait a week into his new term to call for new taxes on doctors and hospitals and a health insurance mandate on businesses with as few as 10 employees. With conservative groups already running attack ads that apply the "duck test" to the taxes in his plan (if it walks like a duck and quacks like a duck&), can it be long before we see Arnold Schwarzenegger, in grainy black and white and slow motion, walking backwards across our TV screens?
While the governor's post-election about-face is rich with irony, it's time for California to move on. Our system of job-based health insurance is coming apart, leaving more Californians uninsured or underinsured against sickness or injury. We need a new system, one that provides universal coverage and meets three key tests: reduces the health insurance drag on our economy; gives Californians quality care while protecting them from financial risk; and contains health costs.
First, any reform plan must relieve the health insurance squeeze on employers and job creation. In a global economy where almost all of our competitors finance health care through national health insurance, California firms find themselves at an increasing disadvantage as health care costs rise at twice the rate of inflation. Unable to pass along those costs to customers, businesses have responded by cutting back on health insurance coverage for their employees or cutting back on hiring.
Unfortunately, the Schwarzenegger plan is likely to accelerate both trends. It imposes a health insurance mandate, not just on the biggest, most established corporations, as I proposed last year, but also on small businesses with as few as 10 employees - the start-ups and entrepreneurial companies that are the engines of job growth. His plan requires them to offer health insurance or, alternatively, pay 4 percent of payroll. For these small enterprises, his employer mandate will operate as an added cost and as a disincentive for hiring. For larger businesses, which currently pay around 8 percent of payroll for health insurance, the Schwarzenegger plan, with its 4 percent requirement, will be an open invitation to do what competitive pressures are already encouraging them to do: dump more health insurance costs on California families and taxpayers.
Second, a health reform plan must provide all Californians with affordable health insurance and protect them against medical and financial risk. The Schwarzenegger plan mandates that everyone without workplace or public health insurance coverage purchase individual health insurance, and it provides subsidies for those with low incomes. But it leaves middle-class families, those earning $50,000 or more annually, without any assistance and with too little protection. Since few middle-class families can afford the cost of an average comprehensive family policy, around $12,000 a year, many will have to buy catastrophic policies, which have lower monthly premiums but would leave the family liable for $10,000 a year in costs if a member fell ill or was injured. Even if a family could weather one such year, a chronic illness, with year after year of large out-of-pocket costs, would be financially devastating.
Third, a reformed health system must control costs. The biggest driver of unnecessary cost in our health system is the private health insurance industry. Researchers at the University of California found last year that insurance-related administrative costs consumed about $16billion a year in California. Since 2000, insurers have doubled premiums to employers and families, raising them at four times the rate of inflation and faster than the costs of providing health care. As a result, the top seven health insurers are making record profits, triple what they made five years ago. In addition, insurance companies force doctors, clinics and hospitals to hire armies of people to deal with insurance claims, eligibility, contracting and utilization reviews.
But the Schwarzenegger plan essentially continues that status quo, allowing insurers to divert 15 percent of health dollars to profit and overhead - just about the current industry average. California cannot end the health insurance squeeze on business and provide quality, affordable universal health care unless the governor and the Legislature are willing to tackle this hidden tax on all of us.
Phil Angelides, former California State Treasurer, was the Democratic nominee for governor last year.
