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October 2007

State Health Reform Update

California: On October 14, Governor Arnold Schwarzenegger vetoed a health care reform bill passed by legislative Democrats. The legislation would have expanded health insurance to about four million of the 6.5 million state residents who lack coverage. Employers would have been required to contribute as much as 7.5 percent of their payroll to cover the cost of health insurance for employees to pay into a state pool that would provide coverage. The legislation would not have included a requirement that all state residents obtain health insurance.[1]

On October 12, Governor Schwarzenegger introduced a revised $14 billion proposal, Health Care Security and Cost Reduction Act, which largely maintains the framework the governor outlined in January of 2007. The bill maintains the governor’s January construct of universal coverage and shared responsibility across sectors (employers, providers, government, health plans, and individuals). The bill requires all state residents to obtain health insurance. A new financing option is added to the bill: a 40-year lease of the California lottery to a private management company for $37 billion. The state would use the money to create an annuity of $2 billion annually to help fund the governor's plan to overhaul the state health care system. The bill retains obligations on employers and hospitals to participate in the financing of expanded coverage through the payment of fees.  Fees on physicians have been dropped from the governor’s proposal.

Under the revised proposal, the state would subsidize coverage for individuals with annual incomes at or below 250 percent of the federal poverty level (FPL). All children up to 300 percent FPL would be eligible for subsidies.  Premiums have been eliminated for persons receiving subsidized coverage with income below 150 percent FPL. Lower-income workers who do not qualify for the subsidies but whose health insurance premiums exceed 5 percent of their family’s income would receive a tax credit.

The revised proposal would also require all employers who do not offer health coverage to contribute based on a sliding scale fee from 0 percent to 4 percent based on their total payroll. The new plan would double to $2 billion the amount businesses contribute, while allowing small businesses to contribute less and businesses with a payroll less than $100,000 being exempt.  The Governor’s January proposal did not impose fees on employers with fewer than 10 full-time employees.

Under the new proposal, the state Health and Human Services Agency would establish a minimum benefit level for medical, hospital, preventive and prescription drug coverage.

Colorado: Members of the Colorado Blue Ribbon Commission on Health Care Reform approved a draft of a fifth health care proposal that would require all documented state residents to obtain health insurance.[2] Provisions include:

  • The combination of Medicaid and the Child Health Plan Plus and expands Medicaid eligibility to parents and childless adults with incomes up to 200 percent of the federal poverty level (FPL). Children with incomes up to 250 percent FPL would be eligible as well.
  • Employers are not required to offer insurance but would be required to offer a Section 125 payroll deduction mechanism to help employees purchase insurance on a pre-tax basis.
  • A “Connector”-like purchasing mechanism to assist small employers and their employees with the purchase of health insurance.
  • Insurance market reforms to prevent “healthy" people from being denied coverage. Allowed premium rating factors will include age and geography.
  • Expand Cover Colorado, Colorado’s high-risk pool, to cover more people with chronic conditions.
  • Subsidies will be provided for individuals with incomes up to 400 percent FPL.

Other provisions of the proposal would:

  • Create a standard identification card for all state residents;
  • Provide subsidies for low-income residents to purchase insurance; and
  • Set up 24-hour, seven day a week nurse lines for residents.

The proposal also calls for the assessment of fines on uninsured residents, but residents with incomes between 400 and 500 percent FPL would be exempt if their insurance premiums are greater than 9 percent of their income.

A final draft of the fifth proposal is expected to be completed by the end of November. The Commission previously gave approval for an in-depth technical assessment by an independent contractor to four other proposals aimed at expanding coverage to the state’s uninsured residents.

Illinois: Following the collapse of any agreement with the state legislature regarding comprehensive health care reform, Governor Blagojevich has announced that his administration will use executive authority to pursue changes that would increase access to health care for thousands of uninsured residents.

The governor’s new health care initiatives include:

  • Illinois Covered Assist—will provide access to a medical home with limited benefits including primary care, a prescription drug benefit, hospital services, and disease management to uninsured Illinoisans with incomes under 100 percent of the federal poverty level (FPL).
  • FamilyCare Expansion—will provide access to the FamilyCare program for uninsured parents with SCHIP-eligible children under the age of 19 with incomes up to 400 percent FPL and who have been uninsured for 12 months.
  • Expansion of Coverage for Young Illinoisans—using the Comprehensive Health Insurance Program (CHIP), the state’s high-risk pool, children who have pre-existing conditions and who are aging off the All Kids program will have their CHIP premiums subsidized up to age 21.
  • Working Families Premium Assistance—will provide annual premium subsidies up to 20 percent of the cost of health insurance premiums to families at or below 300 percent FPL, with premium subsidies not to exceed $1,000.
  • Illinois Breast and Cervical Cancer Program—the expanded Illinois Breast and Cervical Cancer Program will allow all uninsured women, regardless of income, to access free mammograms, breast exams, pelvic exams, and pap tests. If diagnosed with cancer upon screening, participants will have access to coverage for treatment through the Medicaid program. This expansion will provide access to screenings for an additional 261,000 women.

South Dakota: During the 2007 legislative session, South Dakota enacted a law, House Bill 1169, that established the Zaniya Project Task Force; “Zaniya” roughly translates as “health and well-being” in the Lakota language. The Task Force is charged with developing a plan, including action steps and timelines, to provide health insurance to uninsured South Dakota residents. The Task Force has recently issued its legislatively required report that includes numerous advisory recommendations to approach the issue of health care reform in a comprehensive fashion – to not only ensure access to the uninsured but also to address increasing health care costs.

The Task Force report included recommendations to:

  • Create a high risk pool[3] to extend coverage to “uninsurables;”
  • Develop an employer assistance program including strategies to provide additional information and ease administrative burdens;
  • Promote personal responsibility for health care including encouraging those who can afford it to purchase health insurance;
  • Increase enrollment of eligible individuals into existing public programs;
  • Expand Medicaid eligibility for pregnant women up to 133 percent of the federal poverty level (FPL);
  • Increase coverage to children in families with incomes between 201 and 250 percent FPL either through premium subsidies or through SCHIP expansion;
  • Use health information technology to promote quality and efficiency;
  • Encourage informed consumer choice;
  • Improve and expand chronic care management;
  • Support access to primary and preventive care as well as encourage lifelong wellness; and
  • Promote numerous policies to expand access to health care and to improve the health status of American Indians.



[1] “Schwarzenegger, Democratic leaders close to deal on health care reform,” San Francisco Chronicle, September 23, 2007

[2] “Expanded Medicaid, Nurse Line Part of Plan,” Denver Rocky Mountain News, September 25, 2007

[3] In 2003, the state created the South Dakota Risk Pool to offer coverage to people who lost health insurance through no fault of their own and who had previous creditable coverage. However, that risk pool did not provide access to uninsured South Dakotans with a pre-existing condition or illness that kept them from getting private coverage, unless they lost creditable coverage only recently. The pool carries a premium cap of 150 percent of the average market premium.