Governor's health care plan receives a checkup

Gov. Arnold Schwarzenegger's universal health care plan finally received a hearing in the Legislature on Wednesday – 10 months after he unveiled it amid much pomp – and was greeted with bipartisan skepticism.

Assembly Speaker Fabian Núñez, D-Los Angeles, hailed the hearing before the Assembly Health Committee "as an historic opportunity" to "engage Californians in a more positive attitude about the work that we do."

But the six-hour hearing, which included a two-hour presentation by Kim Belshé, Schwarzenegger's secretary for health and human services, reaffirmed that both Democrats and Republicans remain opposed to major provisions of the plan.

"This is a tall order of business for the administration," Belshé acknowledged as she began her sales pitch. "I'm 5-foot-11 (and) I hope I'm up to it."

Panel members expressed admiration for Belshé's command of details but disagreed with the administration about how to pay for the $14 billion plan and provide coverage for 6.7 million uninsured Californians.

The Republican governor's proposal – which he outlined in January but put into legislative language only last month – would require both employers and employees to contribute to health care coverage.

Democrats oppose the individual mandate and want employers to pay a bigger share than Schwarzenegger proposes.

Republican lawmakers, meanwhile, favor a more incremental, market-based approach. They also warn the courts could overturn a mandate on employers.

"Maryland passed an employer mandate and under (federal) law all of what we're doing is illegal," Assemblyman Alan Nakanishi, R-Lodi, told Belshé.

But Belshé expressed confidence the governor's plan would withstand legal challenge. She said a federal court struck down the Maryland law because it provided employers with only one option – an 8 percent payroll fee.

The governor's plan, she said, "does not expressly require employers to provide coverage." They would have the option of contributing to a state-run insurance pool – and the fee would be zero to 4 percent of payroll.

"We believe the governor's plan – with the lower fee on the sliding scale – strengthens California in terms of any possible (court) challenge," Belshé said.

But Democrats want employers to contribute at least 7.5 percent of their payroll to health care. They note employers who currently provide coverage pay more than 13 percent, on average.

Bill Dombrowski, chief executive officer of the California Retailers Association, said businesses support the governor's proposal. "We urge you not to follow the tried-old method of 'Once again, let's look at the employers,' " he said.

But Assemblyman Mark Leno, D-San Francisco, said families at the low end of the middle class would face an unfair burden under the governor's fee structure.

"With an employer mandate of no more than 4 percent, the employer's portion for a family of three earning $60,000 a year is going to be $2,400 and the balance on the employee's is probably going to be $7,600," Leno said.

But Belshé said individuals making 350 percent of the federal poverty rate who do not have health insurance through their employer would be eligible for a tax credit to offset the price of their premiums.

She said, "Roughly 80 percent of the uninsured would have access to some financial assistance under the governor's plan."

Last month, after vetoing Assembly Bill 8 – a competing proposal backed by Democrats – the governor revised his plan.

Wednesday, Democrats on the Assembly Health Committee expressed concern that the new plan leaves it to the secretary of health and human services to establish a minimum benefit level.

Under the revised plan, doctors would no longer be required to contribute 2 percent of their revenue to provide subsidies for the poor.

To compensate for the loss of revenue, Schwarzenegger is proposing to lease the state lottery to a private management firm and use the proceeds to help finance his health plan.

But a report released Wednesday by the nonpartisan Legislative Analyst's Office noted the amount the private sector may be willing to pay to run the lottery is not known.

The report also warned lawmakers they should count on much less money from such a transaction than the administration assumes.

The Legislature is now more than six weeks into a special session on health, after failing to reach an agreement during the regular session.

Schwarzenegger and Democrats had hoped to reach a deal by now. Their plan is to place a financing measure before voters on the November 2008 ballot.

But as Wednesday's hearing wore on, Art Pulaski, executive secretary-treasurer of the California Labor Federation, said the day marked the "beginning of negotiations."

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• Call Aurelio Rojas, Bee Capitol Bureau, (916) 326-5545.