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California next in line for health care reform

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California next in line for health care reform

WASHINGTON—California could become the next U.S. state to enact comprehensive universal health care coverage legislation, the top executive of one of the state's largest health insurance companies says.

"We may just have the perfect moment in time" when this can happen, said Bruce Bodaken, president and chief executive officer of Blue Shield of California in San Francisco.

Speaking last week in Washington at the 4th Annual World Health Care Congress, Mr. Bodaken said several forces coming together—including support for universal coverage by a popular governor who has put together a shrewdly drafted proposal with little opposition—bode well for enactment of reform legislation.

Referring to the sweeping coverage proposal outlined in January by Gov. Arnold Schwarzenegger, Mr. Bodaken described the measure as one in which "everyone sacrifices a little" to take care of a huge problem in the state: the 6.5 million people—about 20% of California's population—who lack health insurance coverage.

Under the governor's plan, all California residents would be required to have health insurance. To reach that goal, the state would expand eligibility for Medi-Cal—the Medicaid program that provides coverage to the very poor—while providing subsidies to other lower-income individuals to obtain private insurance through a state purchasing pool.

To help fund the coverage expansion, employers with 10 or more employees that do not offer coverage would be assessed a fee equal to 4% of payroll while hospitals would pay an assessment of 4% of revenues and doctors would pay 2% of revenues.

Opposition to the proposal has been muted. "There are not organized groups against it in its entirety," Mr. Bodaken said.

Two factors may be the reason for that lack of opposition, Mr. Bodaken said: The burden of funding coverage would be shared and the benefits will, to some extent, offset the costs.

For example, while health care providers would face new assessments, the state would significantly boost reimbursement rates for Medi-Cal providers.

Additionally, while employers may be philosophically opposed to being forced by the government to offer health insurance or pay a new assessment, they stand to reap big savings on health care premiums if the proposal is enacted. That is because providers, which would benefit from major reductions in uncompensated and undercompensated care, no longer would be under the same financial pressure to inflate charges for patients with employer-provided coverage.

While there isn't a consensus on how much provider cost-shifting now inflates insured patients' charges, "Whatever it is, it is a big number," Mr. Bodaken said.

At the same time, while the California governor's proposal would require health insurers to spend 85% of premiums they receive on patient care, universal coverage would expand the health insurance market.

While Mr. Bodaken is optimistic about passage, he noted significant obstacles must be overcome. While the GOP governor's proposal is certain to win strong support from Democratic lawmakers, gaining votes from members of his own party—many of whom oppose an employer mandate—will be challenging.

And if pieces of the proposal are picked off, the package probably would not survive as different interest groups could feel they would bear too much of the cost of expanding coverage rather than the responsibility being evenly shared, he said.

As a practical matter, health care reform legislation is unlikely to be considered before the legislature approves a state budget, which is expected in early July.

"At that point, the real work will begin," Mr. Bodaken said.

Meanwhile, in Massachusetts, state regulators are implementing a 2006 law to move the state closer to universal coverage.

Already, 70,000 low-income uninsured individuals—out of an eligible pool of 140,000—have signed up for health insurance plans that have state-subsidized premiums.

"We are ahead of schedule," said Jon Kingsdale, executive director of the Health Insurance Connector Authority, an independent state agency charged with implementing key parts of the law.

The coverage expansion is making a difference in the lives of state residents, said Mr. Kingsdale, citing several examples of previously uninsured residents who are seeing doctors and getting necessary medications on a regular basis for the first time in years.

"These are real people who have gotten help," said Mr. Kingsdale.

Enrollment in another program established by the 2006 law—one in which small employers and individuals can buy plans offered by commercial insurers through the Connector Authority—starts next week and will offer, in some cases, dramatic premium savings.

For example, one health plan offered through the Connector carries a $2,000 deductible at a cost of about $175 a month. By contrast, the monthly premium for a plan requiring much more cost sharing and currently offered in the individual market is $335.

"Already, we are making health insurance a lot more affordable," he said.