California’s Proposed Health Care Reform: The Legal and Economic Implications

Resources

Agenda follows
Speaker Profiles
Overview of Health Care Security and Cost Reduction Act

Agenda

Summary of Sessions

Session 1: Legal / Regulatory Issues

This session will place the California plan in the context of other efforts to attain universal health insurance, either at the state level (Massachusetts) or the national level (e.g., proposals by Sens. Clinton and Edwards). It will address specific legal and regulatory issues arising from the Governor’s efforts to implement a universal coverage program. Universal coverage programs commonly impose an obligation on individuals to obtain health insurance. One can argue that individual mandates are the only tenable path to universal coverage in America. Yet it is also possible that defining the mandate’s basic coverage and enforcing individuals’ purchases of that coverage could prove to be intractable problems. Individual mandates may help avoid a potential conflict with the federal Employee Retirement Income Security Act (ERISA). While the principal focus of ERISA was to protect employee pensions, it broadly preempts state actions that impact the terms and conditions of employer provided benefits. As a result, courts have invalidated state health benefit requirements. Because ERISA preemption is fact specific, however, these decisions do not necessarily mean that the Governor’s plan is invalid. The panel will evaluate this preemption issue to map out the forbidden areas of state regulation, areas clearly within the power of the state, and the gray area in which the Governor’s plan appears to rest.

Session 2: Economic Issues

This session will discuss the economic and financial issues involved in achieving universal coverage, from the perspectives of the insurance firms, individuals, and the state. Under the governor’s plan, the individual mandate requires individuals to obtain insurance coverage, and insurers must issue health insurance coverage to all applicants (also known as guaranteed issue). An individual’s insurance premium would be based on modified community rating, which allows for premiums to vary based on the individual’s age and geographic area, but not the individual’s health status. Hence, insurers will have an incentive to try to avoid covering individuals with expensive preexisting conditions, either by excluding particular specialists from their network, increasing the administrative burden on individuals requiring expensive care, reducing marketing efforts to those individuals, or even exiting the market. The panel will evaluate policy options designed to enable these individuals to obtain affordable coverage, such as: (a) use a state-funded reinsurance subsidy to pay insurance firms for a portion of the costs of their most expensive insurees; or (b) mandate insurance firms to participate in a more general risk adjustment insurance scheme. Additionally, policies and lessons learned from other states will be discussed.