Governor Announces $12 Billion Plan To Provide Universal Health Care To Californians

Gov. Arnold Schwarzenegger of California has unveiled an ambitious plan to provide health insurance to all 36 million residents of the state, including 6.5 million people who are currently uninsured.

But the governor's plan has sparked controversy among California legislators and policymakers, with several leaders in the state legislature backing competing health care reform proposals that would provide more limited coverage at a lower cost.

Announcing the plan on January 8, Gov. Schwarzenegger characterized the current health care system in California as "broken" and in desperate need of reform. "We have to aim high and attack the entire system from top to bottom," the governor said. "We can create a model the rest of the nation can follow."

The plan, which requires the approval of the state legislature, would take a multi-pronged approach to financing health insurance for Californians who lack coverage. Employers with 10 or more workers would be required to offer a health care plan to their employees or pay a fee of 4% of their payroll into a state-administered purchasing pool that would provide subsidized coverage to the working uninsured. In addition, the state would assess a "coverage dividend" of 2% of gross revenues on physicians, and 4% on hospitals, to pay for higher reimbursements for health care providers that treat patients enrolled in California's Medicaid program, Medi-Cal.

Under the governor's proposal, insurers would be banned from refusing coverage to applicants with prior medical conditions. In a move intended to limit the amount of revenue insurance companies allocate to profits and administration, the plan would require insurers to spend at least 85% of premium revenues on medical care.

California's Healthy Families program, which provides low-income children with health insurance coverage, would be expanded under the plan to include children in families with incomes of up to 300% of the federal poverty line. All children resident in the state would be eligible to enroll, including those whose parents are undocumented workers.

Prior to Gov. Schwarzenegger's announcement, Massachusetts, Maine, and Vermont had launched initiatives to provide health care coverage to all—or nearly all—residents. But implementing a universal health care plan in California could prove more challenging because California has a far greater number of uninsured residents than these New England states.

Like the plan in Massachusetts, residents of California would be required under Gov. Schwarzenegger's proposal to secure health insurance coverage substantial enough to protect themselves and their families against catastrophic medical expenses and to prevent the cost shifting that occurs when large numbers of people receive care without paying the full cost.

Republican leaders in the California Senate have proposed a more modest plan to provide health care coverage to some of the uninsured, without mandating universal coverage. Meanwhile, the Democratic leaders of both houses of the legislature have put forward separate health care proposals that are more comprehensive than that of the Republicans, but still fall short of providing insurance coverage to all California residents.

At a press conference on January 31, Gov. Schwarzenegger told reporters he welcomed the debate over various aspects of his health care plan, and he was "very happy to hear and to have a proposal from the Republicans." Negotiations among state lawmakers will be necessary, the governor added, "but the bottom line is...we're going to get there."