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Golden State Leader Proposes Employer Insurance Mandate

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California Gov. Arnold Schwarzenegger wants to use the tax system to encourage employers to provide health coverage and to use a new health care tax to subsidize expansion of Medi-Cal, the state’s Medicaid program.

The fact that 6.5 million California residents now lack health coverage hurts all state residents, not simply the uninsured, Schwarzenegger said today at an event held to announce the governor’s health finance proposals.

“More than 60 emergency rooms have closed over the past decade because they didn’t want to keep treating people without insurance,” Schwarzenegger said. “Unpaid medical bills mean billions of dollars in hidden taxes for the rest of us because those services all have to be paid for.”

Schwarzenegger, a Republican, pleased health insurers and brokers in 2004 when he vetoed a “universal health insurance” bill that year. That bill would have applied mainly to large and midsize employers. Schwarzenegger said at the time that the state should tackle the problem of the uninsured with a comprehensive plan, instead of putting most of the responsibility for fixing the health finance system on larger employers.

The Schwarzenegger proposal released today would create new responsibilities for individuals, doctors, hospitals and most small employers as well as for larger employers.

Schwarzenegger’s plan calls for:

- Increasing the rates Medi-Cal pays doctors and hospitals, to eliminate the burden Medi-Cal now imposes on providers.

- Requiring all Californians to have health coverage that is substantial enough to protect against catastrophic risks.

- Expanding access to coverage by requiring insurers to issue individual insurance on a “guaranteed issue” basis and limiting the difference between the rates insurers can charge sicker individuals and healthier individuals.

- Setting up a health insurance purchasing pool for moderate-income residents.

- Requiring insurers and health maintenance organizations to spend 85% of every premium dollar on patient care.

- Using a 2% tax on doctors’ fee income and a 4% tax on hospitals revenue to subsidize and expand Medi-Cal.

- Requiring employers with 10 or more employees to provide health coverage or pay an “in-lieu fee” of 4% of payroll.

- Requiring employers to set up Section 125 plans, so that employees can make tax-sheltered contributions to health insurance.

- Starting wellness incentive programs.

Meanwhile, in other California news, Steve Poizner, the state’s new Republican insurance commissioner, says he will ask lawmakers to make the California insurance commissioner’s office officially bipartisan.

Poizner, who did not take money insurers during his campaign and says he will not accept donations from insurers while commissioner, also is calling for state lawmakers to pass a law banning contributions to the commissioner’s office from individuals or entities that are regulated by or do business with the California Department of Insurance.