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


Friday, November 2, 2007
International House
2299 Piedmont Avenue
Berkeley, California  94720

Is universal health care coverage in California’s future? This meeting will review the proposed legislation under consideration by the Governor and the legislature of the State of California, and focus on several significant legal and economic issues it presents. Two panels will explore these issues from various perspectives, including those of individuals, insurers, employers and the State.  Drawing on published and original research as well as the review of the policies and lessons learned from other jurisdictions, participants will identify strategies to successfully navigate around the major obstacles that may impede universal health coverage from becoming a reality in California.


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


9:30 – 10:00

Registration and Breakfast

10:00 – 10:10

Opening Remarks and Overview of the Proposed California Plan

Richard Scheffler, Ph.D.
Director, Petris Center and Distinguished Professor of Health Economics & Public Policy, UC BerkeleySchool of Public Health and Goldman School of Public Policy

10:00 – 10:45

Opening Remarks and Overview of Governor Schwarzenegger’s Proposal

Ruth Liu
Associate Secretary-Healthcare Policy,
California Health & Human Services Agency (italics)

Introduction of Panels

Ken Taymor, J.D.
Executive Director of the Berkeley Center for Law and Business

10:30 – 12:00

Session 1: Legal and Regulatory Issues

Moderator:  Deene Goodlaw, J.D.
Adjunct Professor of Law, UC Berkeley, Boalt Hall School of Law 
Issue #1  Potential conflicts between the State’s insurance program and the federal Employee Retirement Income Security Act (ERISA)
Issue #2  The structure and enforcement of mandates requiring individuals to obtain insurance

The Individual Mandate: Inevitable, Unsustainable or Both?

Panelist:  Robert F. Graboyes, Ph.D,
Senior Health Care Advisor, National Federation of Independent Business (NFIB)

Individual Mandates in the California, Edwards, Clinton and Massachusetts Health Insurance Plans

Panelist:  Peter Harbage,
President of Harbage Consulting

ERISA Preemption of State Health Insurance Employer Mandate

Panelist:  Ann Marie Marciarille, J.D.,
University of the Pacific, McGeorge Capital Center for Government Law and Policy

12:10 – 1:20

Lunch Break

1:30 – 3:00

Session 2: Economic Issues

Moderator: Richard Scheffler, Ph.D.
Director, Petris Center and Distinguished Professor of Health Economics & Public Policy, UC Berkeley School of Public Health and Goldman School of Public Policy 
Issue #1  Implications of proposed reform for the insurance industry
Issue #2  Reinsurance and risk adjustment programs to reduce insurers’ incentive to avoid covering high risk individuals

Implications of Proposed Reform for the Insurance Industry

Panelist:  Jerry Fleming,
Senior Vice President and Health Plan Manager,  Kaiser Foundation Health Plan; Board Member, California Association of Health Plans

Reinsurance Programs

Panelist:  Brent Fulton, Ph.D.,
Health Services Researcher, Petris Center, UC Berkeley

Risk Adjustment Programs

Panelist:  William Dow, Ph.D.,
Associate Professor of Health Economics, School of Public Health, UC Berkeley

3:00 – 3:15

Closing Remarks

Ken Taymor

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.