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February 2008

Recent State Updates

California: On January 28, the health reform legislation that was a compromise between Governor Arnold Schwarzenegger and Assembly Speaker Fabian Nunez (ABX1 1), did not receive enough votes to pass out of the Senate Health Committee. Because the financing of the proposal would need to be passed by popular referendum, this defeat makes it all but impossible to forge a new compromise in time to make the 2008 filing deadline for the November ballot. (For additional details on the ABX1 1, see SCI’s State of the States, pages 34-35.)                                   

Lawmakers who opposed the bill primarily cited concerns about its cost. Just prior to the Senate hearing, the Legislative Analyst’s Office issued a report saying the costs of the health reform proposal could be much higher than expected if the state faced a recession or higher-than-expected increases in health care costs. In addition, the Governor released his fiscal year 2008-2009 budget, which showed a $14.5 billion shortfall in the state budget (and which has since been revised to $16 billion).

Several key legislators said they hope to address smaller reform proposals over the coming year. Senate President Pro Tempore Don Perata suggested moving forward on reforms to the insurance market to limit administrative expenses and to cap medical loss ratios. He also suggested using hospital fees to raise provider payments. Others have promoted expansions to Medi-Cal and Healthy Families, although the funding again becomes a stumbling block.

In the wake of a stalled attempt at comprehensive reform in 2008, the state faces the possibility of significant cuts to health care funding. The Governor’s budget includes $1.1 billion in cuts to Medi-Cal, which would result in a loss of an additional $1.5 billion in federal funds. These changes would include a 10 percent decrease in provider payments and the elimination of coverage for chiropractic care, dental services for adults, podiatry, and vision services. The budget for the Healthy Families program would decrease by much less—$49.1 million—but it is unclear whether there is enough money in the budget to cover the expected increase in enrollment over the next year.

Massachusetts: December 31, 2007 marked the deadline for adults to obtain health coverage or face a tax penalty. Since reform was enacted in spring 2006, the number of individuals that have health coverage has grown by an estimated 340,000 residents, representing close to 5 percent of the state’s total population. The increase in residents that have health coverage includes about 168,000 lower-income adults who have joined Commonwealth Care, the new state/federal subsidized plan, 70,000 who have enrolled in Medicaid, and more than 100,000 who have been added to the commercial insurance rolls, either purchased through an employer or from the carriers in the non-group market.

The rising coverage rate has initiated other trends in the Massachusetts insurance market. First, the average growth in private market insurance premiums for 2008 is expected to be below 10 percent for the first time since 2001. Second, the Massachusetts Hospital Association recently released a report showing that the costs for uncompensated care (or costs to the Massachusetts free care pool) have declined 28 percent over the last three years. They attribute this decline to rising coverage rates in the Commonwealth.

While the increase in the number of people covered by health insurance is a sign that the health reforms enacted in 2006 are working, the rapid pace of enrollment in the Commonwealth Care program has forced state officials to revise upward their initial cost estimates for FY 2009, from $725 million—which was the funding estimate when health reform was enacted in 2006—to the most recent estimate of $869 million.

New Jersey: On December 19, 2007 Governor Jon Corzine signed legislation to allow certain children to buy into the New Jersey FamilyCare program. Currently, New Jersey FamilyCare covers children up to 350 percent of the federal poverty level (FPL). With the new legislation, those with higher incomes can buy into the program if they have been uninsured for at least six months. The state estimates that 15,000 children could benefit from the program. Prior to the passage of this legislation, it was not possible to buy child-only coverage in the state. Adding at least one parent to the policy made it cost-prohibitive for many families. The FamilyCare program will provide a new and more affordable insurance option for those families.

New Mexico: A bill reflecting Governor Bill Richardson’s health care reform proposal was introduced during the legislature’s 30-day session. Following substantial debate and amendments in the House, the bill crossed over to the Senate, passed the Senate Public Affairs Committee but was never allowed to be heard in the Senate Finance Committee, where it died as the session ran out of time. The Governor has called for a special session; however the date of that session has not yet been determined.

Following the House amendments, the bill would have included numerous reform provisions including various insurance market reforms, increased access to the state’s high risk pool, the creation of the Healthy New Mexico Work Force Fund to fund outreach and pay for health care premiums or services through publicly authorized programs to expand coverage, a requirement that employers with more than 10 employees offer a pre-tax (Section 125) premium-only option for employees, and the creation of a Health Care Authority as a single point of accountability for data, analysis, plan management, and policies to increase coverage and access, and control costs.

Rhode Island: On February 12, Lieutenant Governor Elizabeth Roberts released a package of new reform proposals entitled the Healthy Rhode Island Reform Act of 2008. Various aspects of the proposal include:

  • Creating the Rhode Island Health Insurance Access Hub (similar to the Massachusetts Connector) to allow individuals and small employers to purchase portable, affordable health insurance;
  • Requiring all residents with incomes over 400 percent of FPL ($41,600 for an individual, $84,800 for a family of four) to purchase affordable health care coverage;
  • Requiring that employers with more than 10 employees pay a health security assessment of approximately 8 percent of the taxable wage base per full time employee per year. Employers may deduct from the assessment their average expenses per employee for providing health insurance coverage or other health benefits. Funds collected from the assessment go to the HealthHub to provide support for insurance for the uninsured;
  • Allowing dependent children up to 25 years old to remain on their parents' insurance regardless of student status;
  • Exploring the possibility of developing a regional approach to health insurance carrier regulation to allow for reciprocal licensing with Massachusetts and Connecticut;
  • Establishing a Healthy Rhode Island Strategic Plan to develop and implement a five-year strategic plan to chart a course to promote health and wellness;
  • Establishing a Healthy Rhode Island Chronic Care Management Program;
  • Creating the Health Care Quality and Value Database to allow the Department of Health to collect and analyze health outcome and cost data from all sources; and
  • Establishing a Joint Task Force on Health Care Reform to develop comprehensive health care reform recommendations.