Your eyes on California Government

SEPT. 16, 2011

By KATY GRIMES

While cash-strapped California is cutting the state-funded health care safety net more aggressively than most other states, lawmakers continue to push for a government takeover of private-sector health care.

Despite the failure of every government-mandated health plan, and flying in the face of reason and economic sense, many wonder why California politicians and state officials continue to push for their own version of Obamacare. Even as the national Obamacare health plan has been greatly neutered in the past year, California continues to forge ahead with a plan which could bankrupt the state.

Massachusetts Republican Gov. Mitt Romney imposed Romneycare, the individual government mandate, on the citizens of Massachusetts. Taxpayers in that state are now required to fund subsidies on insurance premiums that have risen more than 30 percent since the Romney plan was enacted.

Is that the political plan in California?

The nonpartisan Legislative Analyst’s Office examined the frequently proposed California single-payer plan. The LAO found that California taxpayers would be facing a bill of $200 billion, amounting to more than $5,000 in new taxes on every individual residing in the state today.

Obamacare

Important provisions in the Obamacare health plan have been greatly modified or put to back to bed during the past year. This isn’t entirely due to individual states’ fights with the Obama administration. Federal government officials have admitted that the health-reform law is so convoluted and contradictory that they are not sure how to enforce it. Federal officials say parts of the law might not even be actively enforced.

What does this mean for California? Despite public opposition by Californians to government-mandated health care, multiple bills have been introduced and re-introduced in the last several years, attempting to force single-payer healthcare on California citizens.

According to health insurance expert Craig Gottwals, an employee benefits attorney for Liberty Benefit Insurance Services and instructor at the University of California, in 2014 all employers with at least 50 employees must buy comprehensive heath insurance for all full-time employees, or pay a penalty of $2,000 dollars per employee.

“With the average cost of health care per employee around $8,000 by 2014, some employers will exit the health care marketplace and pay the fine. An employer could drop health coverage, pay a fine, even give employees a raise, and end up ahead,” Gottwals explained.

A typical family coverage plan could easily cost $20,000 in 2014, and currently some plans already do. Under the Patient Protection and Affordable Care Act, an employer will not be allowed to charge an employee more than 8 percent of that employee’s annual household income for health insurance.

Two employees working at the same company will find themselves treated very differently by the same employer because of government-mandated insurance coverage. A higher-wage employee will not be affected by the 8 percent stipulation. But the lower-paid employee, by law, will have to be greatly subsidized by the employer.

Gottwals said that, instead, companies will reduce the amount of low-paid jobs in their businesses: “And because this portion of the law only applies to businesses with 50 or more employees and to employees who work 30 or more hours a week, employers will convert many of their lower paying positions to 29 hours a week or less. This phenomenon already occurs in Hawaii, which has a similar mandate.”

An employee benefits publication recently reported that Phyllis Borzi, Assistant Secretary of the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA), told an employer group in March that she has no desire to enforce the health reform’s 8 percent trigger for “unaffordable coverage,” scheduled to take effect in 2014.

Under that provision, an employee can quit a group health plan and take a voucher of company money to buy coverage through a state-run health insurance exchange.

The rule states that vouchers only become available if the employee contribution to health coverage exceeds 8 percent of the total household income. But it is illegal for employers to ask employees for information about spousal income or for access to personal tax returns. “We’re stumped on what to do. We have to ask ourselves if we sidestep enforcement, who would complain?” Borzi asked.

Court Rulings

In August, the 11th U.S. Court of Appeals ruled that a key provision in the federal health care reform law, requiring Americans to enroll in a health care plan or face a penalty, was unconstitutional.

It found that Congress exceeded its authority by requiring Americans to buy coverage. “Congress never sought to require the purchase of wheat or war bonds, force a higher savings rate or greater consumption of American goods,” during the Great Depression or World War II, the Appeals Court said.

The case stems from a challenge by 26 states which had argued the individual Obamacare mandate, set to go into effect in 2014, was unconstitutional because Congress could not force Americans to buy health insurance or face the prospect of a penalty.

However, Gottwals was quick to point out that California was not one of the states in this important lawsuit.  “Hence, the ‘individual mandate,’ which is set to take effect in 2014, is still set to roll out in the 24 states that were not part of this litigation.  Furthermore, because the 6th Circuit (in Cincinnati, OH) believes that that the individual mandate is legitimate, we now have a split of opinion amongst federal appellate courts.”

Gottwals said that the ruling will apply additional pressure to the Supreme Court to decide the law and the individual mandate’s fate.

“As a practical matter, the law will not function well without the individual mandate. You cannot require that insurance companies take all applicants with no restriction for pre-existing conditionals, while simultaneously telling individuals they need not buy insurance,” Gottwals said. “That disparity would eventually drive all health insurers out of the marketplace as the only folks buying coverage would be the imminently ill.”

As of this moment, nothing will change in any of the 50 states as the individual mandate was not set to take place until 2014.  But this decision should help in bringing the dispute to an ultimate conclusion to the U.S. Supreme Court more quickly.

Gottwals also shared some of the details of the Obamacare bill neutering:

Under an insidious provision in the Obamacare law, employers were required to provide health care cost information on 2011 W-2 statements that are distributed to employees in 2012. But last year, the IRS waived that requirement for 2011 and said the health care cost reporting requirement would apply to 2012 W-2s, which are issued in 2013.

But it wasn’t out of any sense of fairness. The real reason was that large national payroll companies were not able to program their software in time to make the W-2 changes.

More Taxes

Watch for this change as well as some type of penalty for having a “Cadillac” health plan. Gottwals said that a tax will kick in by 2018 for those with more expensive health plans. Regardless of the size of the annual deductible per plan, the tax will be solely triggered by the total cost of the plan to the insured.

The other big change is that a provision for triggering a 1099 form filing was slipped into the Obamacare bill. Currently, 1099’s are issued for various types of wages on independent contractors. But the Obamacare bill included a provision which would make a 1099 issued for all goods sold as well as services rendered.

Gottwals said that the 1099 scheme was  nothing more than a sneaky funding mechanism for the very expensive state health exchanges, which are currently unfunded.

Fortunately, this provision was overturned in November 2010.  But before it was overturned, then-Gov. Arnold Schwarzenegger made California the first state to create an insurance exchange after Obamacare was passed. The health exchanges are supposed to be Internet-based places to shop for health benefits, for people who do not get health benefits at work.

Shortly after Schwarzenegger’s creation of the exchange, the Obama administration approved $10 billion for California to begin expanding coverage to its poorest residents, another key part of the new law.

But with the state’s budget crisis, California’s 2012 spending plan cut $2 billion from the low-income medical plan, Medi-Cal.

While California already spends less per beneficiary than any state, state officials are planning to limit Medicaid beneficiaries to an unheard-of seven doctor visits a year, with exceptions only for essential care.

California currently pays providers of Medi-Cal, the state’s Medicare provider, less than Medicare providers get in all but two states. But state officials are pushing to cut payments to doctors, hospitals and others who serve Medi-Cal patients by another 10 percent. And officials plan to lower the Medi-Cal reimbursement for standard visit to the doctor to less than $12.

Whether it is Obamacare, or California’s own state-sponsored health plan, it is evident that the state is not capable of running the business of health care, given what has happened with Medi-Cal.

With the state and federal government so grossly regulating private employers’ health-plan offerings, it’s evident that the manipulations were meant to push employers out of the health care market in order to create a demand for government-run healthcare.

But that doesn’t seem to working so well. California’s latest health care bill, AB 52, by Assembly members Mike Feurer, D-Los Angeles, and Jared Huffman, D-San Rafael, was ordered to the inactive file before the current legislative session ended. The bill will be kept on life support and deals worked out behind the scenes, because it didn’t have enough support in the legislature, or with the governor.

SB 810 by Sen. Mark Leno was also ordered shelved for the time being.

The state-mandated healthcare bills are not gone, but also not sitting on the governor’s desk — yet.

AB 52 “prohibits health care service plans and health insurers from implementing a rate for a new product or instituting a rate change unless it submits an application to the Department of Managed Health Care (DMHC) or the Department of Insurance and the application is approved. The Director of DMHC and the Insurance Commissioner would have the authority approve, deny, or modify any proposed rate or rate change,” the bill’s analysis explains.

SB 810 ”Creates the California Healthcare System (CHS), a single-payer health care system, administered by the California Healthcare Agency (CHA), to provide health insurance coverage to all California residents,” state the bill analysis.

Tags: Arnold Schwarzenegger, budget deficit, California budget, California Legislature, Democrats, government, government health care, Jerry Brown, Katy Grimes, legislature, Obamacare, Public Employee Unions, Republicans, Sacramento, tax increases, Taxes, waste