California Insider

The Consumer Alliance for a Strong Economy has begun airing a new ad in Sacramento attacking the governor's tax proposals to fund health care. You can view it here.

UPDATE: The Consumer Alliance, by the way, is a 501c4 organization formed to educate the public on public policy issues. As such, it has no legal oblgiation to disclose its donors, and doesn't do so.

According to the Department of Finance, the total value of the state version of the health care tax break Bush talked about Tuesday night is about $4 billion annually. That's the amount of state income tax Californians would be paying each year if their health benefits were taxed as income. What Bush is proposing on the federal level is to treat health benefits as income and then give everyone an automatic $15,000 deduction if they have family coverage and $7,500 for individual coverage. This would generally mean a shift in tax benefits from those with the most expensive employer-provided plans, which generally means the wealthiest people, to those who now buy their insurance on their own, which would include more middle-income people. The same could be done in California with a portion of that $4 billion. The health benefits exemption is the third largest tax exemption the state has, after the mortgage interest deduction and the exemption of retirement fund contributions made by employers.

UPDATE: The $4 billion number is from the Finance Department's annual report on "tax expenditures." You can find it here. The $4 billion represents the increased amount that would be paid in California personal income tax if the state treated employer-paid health benefits as regular income.

Health insurers generally reacted positively to Schwarzenegger's plan when he released it earlier this month. But in private they have been a little less laudatory. And little by little they are pointing out pieces of the plan that they could, well, live without.

Yesterday, the president and CEO of Wellpoint -- the Blue Cross parent -- told reporters and analysts that his company doesn't like the proposal to require insurers to spend 85 percent of premiums on services. He said because administrative costs are fixed, the limit would prevent the firm from offering low-cost plans where the percentage spent on admin would be higher.

You can read his comments here.

The Sacramento Bee today debuts its new subscription-only web coverage of the Capitol, known as Capitol Alert. Eventually, this blog will shift and become part of that product. It's all part of the new reality in the news business, where revenues from print are increasingly scarce and managers are looking for innovative ways to generate income from the Internet to keep our journalism alive. You can get a free glimpse of what the new service will look like here.