On December 17, 2007, the California Assembly passed ABX1 1. Should the legislation pass the Senate, the Governor indicated he would likely sign the legislation into law. The bill expands coverage and makes other improvements to the health care system. The bill creates a "pay or play" system for employers and would establish an individual mandate for Californians to have insurance. (There are some exceptions for lower-income individuals when the cost of coverage exceeds 5% of family income, or in other situations of hardship, yet to be defined.) Employers would be required to offer coverage or contribute between 1% and 6.5% of payroll, depending on company payroll size, toward the cost of employee coverage through a purchasing pool or "connector." ABX1 1 would expand eligibility for public health insurance programs for children and parents, contingent on subsequent budget allocations. The proposal also aims to improve access to coverage in the individual insurance market. Other details include provisions to improve transparency and quality; promote preventive care; better manage chronic disease; and contain health care costs.
Q2: What will it cost and how will it be paid for?
Initial estimates are that ABX1 1, when fully implemented, would cost approximately $14.4 billion. The California HealthCare Foundation is supporting a team of experts that will soon provide specific estimates of cost and financing. Key financing components include increased federal funding, employer contributions, and county contributions. Additional financing through a 4% hospital fee and an increase in the state tobacco tax to $1.75 a pack is subject to approval of a ballot initiative, which would likely be brought before the voters in November 2008.
Q3: Who would be covered?
Initial estimates, provided by Jonathan Gruber, Ph.D., are that the proposal, when fully funded, would extend coverage to 3.6 million of California's 5.1 million uninsured, including nearly all children. An estimated 2.87 million uninsured adults (under age 65) would be covered, and 760,000 uninsured children would be covered. The vast majority of uninsured Californians who would be newly covered under ABX1 1 earn less than 400% of the Federal Poverty Level.
Q4: How does the state budget shortfall impact the prospects of health reform?
Large components of the proposal to expand coverage are financed through new sources of dedicated revenue, including new fees on employers and hospitals and an increased tobacco tax. However, expansion of public programs such as Medi-Cal and Healthy Families would require funds allocated within the state budget in 2009-10 and beyond. Senate President Pro Tem Don Perata has asked the legislative analyst to study the impact of the proposal on the state's general fund. Voters may find it challenging to separate health reform financing from the state budget, given the complexity of health reform financing and the fiscal concerns that will likely dominate the 2008 legislative term.
Q5: When would more Californians be covered?
More children would be eligible for Healthy Families coverage starting in July 2009, while parents/caretakers and other lower-income Californians would be eligible for Healthy Families and Medi-Cal type coverage, respectively, starting in 2010. Expansion for both programs would be contingent on state and federal funding. Individuals would be required to have a minimum level of coverage starting July 1, 2010.
Q6: What happens next?
Should the Senate pass ABX 1 1 and the Governor sign the bill into law, funding for the measure is contingent on voter approval of a ballot initiative, The Secure and Affordable Health Care Act of 2008. Proponents will need to gather a sufficient number of qualifying signatures to place the measure on the November 2008 ballot, which typically takes about three to four months. Then the counties and Secretary of State need to verify signatures. The measure must qualify for the ballot by 131 days before the election (to be included in the November 4, 2008, election, the initiative must qualify by June 26). Proponents will have to act quickly if they are to gather sufficient signatures to qualify, and enough support to pass, the funding measure in November.
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Q7: On what aspects did the legislature and Governor compromise?
In September 2007, the Governor vetoed AB 8 (Núñez), the Assembly Speaker Núñez's original health reform proposal, citing concerns about its ability to achieve universal coverage and a lack of diverse funding sources. ABX1 1 contains a number of compromise provisions aimed at addressing the Governor's concerns, while incorporating some issues of critical importance to Speaker Núñez, including concerns about affordability. The following are key areas of compromise:
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Funding: Funding for ABX1 1 would come from a wider variety of sources, including a 4% hospital fee, fees on employers, and an increased tobacco tax.
Q8: Which health benefits are covered and what would people pay for their health coverage?
Under ABX1 1 employees who receive health coverage from their employers would see no change to the status quo. Those employees whose firms paid the fee would receive coverage through the new purchasing pool and would have a choice of plans that provide basic benefits plus prescription drug coverage. Individuals seeking coverage on their own (in the "individual market") would choose from among five benefit plans. Children in families earning up to 300% of FPL would be eligible for Healthy Families coverage and parents and caretakers (earning up to 250% FPL) would also be eligible for Healthy Families. Local coverage options for select populations of very low-income adults are also proposed.
Q9: How does this compare to health reform plan passed in Massachusetts?
ABX1 1 is similar to the health reform passed in Massachusetts in many ways. The Massachusetts Health Care Reform Act requires all residents 18 years or older to have health insurance. Like the Massachusetts law, ABX1 1 would allow for exemptions for low-income individuals in certain cases. The law establishes a state purchasing pool to provide coverage options for people without access to employer-provided coverage and employers with 50 or fewer workers. The Massachusetts Act requires employers with more than ten employees to make a "fair and reasonable" contribution toward employee health coverage or pay an assessment to the state of up to $295 per worker annually. Massachusetts also expanded eligibility for children in the state's Medicaid program. However, broad coverage expansion in California would require significantly more in new financing than it did in Massachusetts because California has so many more low-income, uninsured workers.
Q10: What is the California HealthCare Foundation's position on ABX1 1?
The California HealthCare Foundation does not take positions on legislative proposals or ballot initiatives. CHCF is committed to ensuring that reform proposals are based on sound analysis and an accurate understanding of their impact. To this end, CHCF has funded experts to provide analytic assistance to policymakers involved in developing coverage expansion proposals. This includes modeling how much proposals will cost and who will be covered. CHCF is also working to inform the broader health reform debate by tracking proposals, highlighting trade-offs and impacts, and illustrating how features of California's health care landscape might influence the viability of the various plans. Updates are available at CalHealthReform.org and, if financing for health reform is placed on the ballot, at HealthVote.org.
