This page contains two letters prepared by Willie Pelote AFSCME Assistant Director of Political Action, to state legislators outlining our position on the on the healthcare legislation now before them.
November 13, 2007
The Honorable Mervyn Dymally, Chairman
Assembly Health Committee
State Capitol, Room 6005
Sacramento, CA 95814
RE: AFSCME Position on Health Reform Proposal (ABx1 1) – SUPPORT IF AMENDED
Dear Chairman Dymally:
The American Federation of State, County and Municipal Employees (AFSCME), is writing today to support ABx1 1 (Nunez and Perata), if amended -- the health care reform bill introduced as a consensus plan in this special session on health care.
On behalf of our 170,000 members in California who would overall experience direct or indirect relief from this legislation, we salute the legislature for continuing its efforts to craft a consensus plan that includes key demands of advocates, legislative leaders and the Governor. AFSCME has spent the past year working alongside the legislature to reform California’s ailing health care system, and we support passage of legislation in this special session. While a national solution to our health care crisis is ultimately needed to guarantee secure coverage for all Americans, we understand that leadership in California will be key to building momentum for national reform.
AFSCME gives our support for ABx1 1 only with conditions, as key components of the legislation are still evolving and amendments are needed.
AFSCME Reform Priorities
PUBLIC PLAN OPTION
AFSCME supports the provisions in ABx1 1 which, like AB 8, creates an essential “public insurer,” called the California Health Benefits Service (CHBS). ABx1 1 will assist existing public insurance plans based in county governments to expand their services, including helping public plans to share networks to offer quality, nonprofit coverage throughout California. The most effective step toward cost control that we can take is to give Californians a public plan alternative to private insurers. The public insurer is a top priority for AFSCME.
ABx1 1 will give Californians the option to choose a public insurance plan that can provide quality, not-for-profit, cost-effective health care as an alternative to private for-profit HMOs and insurance companies that have business incentives to deny care. Californians want and need a choice of good health coverage we can afford. CHBS would primarily rely on offering public coverage through uniquely Californian public plans, called local initiatives and county-organized health systems. These plans are already popular and successfully competing with private insurers to provide Medicare, Healthy Families and Medi-Cal coverage in counties where most Californians live.
CHBS could address the needs of Californians that private insurers fail to meet in a number of ways. It could help public plans share networks and provide technical resources. It could help public plans band together to offer multi-county specialized plans for certain employers, such as self-employed childcare workers who have difficulty finding affordable coverage. It could allow public plans to pool resources to give more purchasing power to consumers. It could cover undocumented workers in a way that could address documentation problems linked to financing their care.
EMPLOYER MANDATE
ABx1 1 includes a sliding scale employer mandate of 2 to 6.5 percent for employers. AB 8 had a flat mandate of 7.5%. AFSCME recognizes that lowering the employer contribution is an effort to reach a compromise. In that spirit we would cautiously support the fee change if the financing proves to be adequate, and after consideration of the final structure of ABx1 1 once amended.
The Governor and legislative leaders all have introduced plans that require employers to provide health insurance to their workers, or to pay a fee into a purchasing pool to give their workers coverage. The fee in ABx1 1 is a significant compromise from AB 8’s fee. The 7.5 percent threshold was at minimum close to the roughly 8 percent average employer contribution provided by all employers across the state to purchase insurance for their workers, including employers that do not provide coverage.
Nevertheless, the sliding scale fee in ABx1 1 continues to establish a health care minimum wage for employers and codifies in law an employer responsibility for providing health care. It will not burden micro-businesses. We understand that the intent is to mandate employers with payrolls above $250,000 to cover their workers, but the language is not clear on this point. AB1x1 should be amended to clarify how its fee structure works, and require medium to large employers to pay 6.5 percent on their entire payroll.
COVERAGE FOR HOME CARE WORKERS
ABx1 1 must be amended to designate county Public Authorities as the “employer of record” for In-Home Support Service workers. Currently, many home care workers obtain health insurance from these county Public Authorities. AB 8’s language should be reinstated.
INDIVIDUAL MANDATE
ABx1 1 differs greatly from AB 8 in that it requires all Californians to have health insurance, not just workers. This is a major policy shift can only be considered within the context of the final legislation once it evolves. AFSCME would cautiously support a mandate on individuals only if it is assured that no one will be forced to purchase coverage they cannot afford, and if employers are required to substantially contribute to coverage. ABx1 1 goes far to reach these standards.
ABx1 1 exempts individuals from the mandate if purchasing coverage would exceed 6.5% of their income. ABx1 1 raises the percentage at which affordability is calculated (it exempts workers if their total health costs exceed 6.5% of their income, versus 5% in AB 8), but still protects lower income workers. AFSCME recognizes that raising the percentage at which affordability is calculated is also an effort to reach a compromise. In that spirit we would consider support of the change in affordability standards, but only after review of the final structure of ABx1 1 once amended, and after seeing legislative analyses showing the impact of the 6.5% standard for individuals by income inside and outside the pool.
In addition, ABx1 1 appropriately contains a new hardship exemption process that was not in the Governor’s plan or AB 8. AFSCME supports this hardship clause. It is an important protection in Massachusetts, where they established an appeal process and exemption for persons found to have extraordinary expenses and life circumstances who would otherwise be mandated to purchase coverage.
EXPAND PUBLIC PROGRAMS FOR WORKING FAMILIES
AFSCME supports the public program expansions contained in ABx1 1. AFSCME represents many workers and their dependents who would be eligible for expanded public program benefits, and who struggle to make ends meet. ABx1 1 raises the income level of parents and children covered by Medi-Cal and Healthy Families to 300% of the federal poverty line, just as AB 8 did. Eligibility should be determined according to a person’s work status, not immigration status.
ABx1 1 goes farther than AB 8, and expands coverage for “childless adults”, a provision in the Governor’s plan. It would cover individuals without dependent children up to 250% of FPL. AFSCME supports this expansion. This benefit would be of particular help to sole proprietors, especially AFSCME’s in-home family childcare providers.
COVERAGE FOR PART-TIME WORKERS
AFSCME provisionally supports ABx1 1’s mechanism for ensuring coverage for part-timers. AB1x1 captures part-timers by mandating uninsuring/under-insuring employers to pay a fee separately based on workers who earn over $25,000 versus those earning under. In contrast, AB 8’s fee was based on hours worked per month (over or under 120 hours).
AB1x1’s split based on wages rather than hours is conceptually acceptable to AFSCME, with the caveat that impact analyses must show that a cut-off at $25,000 will ensure that substantially similar numbers of part-time workers are captured as were in AB 8. It is still unclear in ABx1 1 how MRMIB will determine eligibility for the pool. Under AB 8, MRMIB was given the option of whether to cover part-timers in the pool, which AFSCME supported only if MRMIB was instructed to set part-time eligibility standards with the AB 8’s goal to provide universal coverage as their guiding standard.
Part-timers have much higher rates of uninsurance than full-timers, and even employers that provide good health insurance to full-timers often do not cover part-timers. A sizable number of AFSCME’s members in California work part-time, especially childcare and home care workers. Therefore, any employer mandate must include a “split”; the employee fee must be calculated separately to capture part-time workers versus full-time workers to make sure that uninsuring or under-insuring companies do not avoid paying a fee for part-timers.
PURCHASING POOL
ABx1 1 should clarify that the employer’s fee should reduce the cost of coverage for its workers using the pool, both part and full-time. Like AB 8, ABx1 1 establishes a government regulated purchasing pool through MRMIB to negotiate rates with health plans and enroll eligible people into those selected plans. This pool established by AB1x1 is open to employers, individuals eligible for public programs, and individuals without job-based insurance who quality for a new tax credit. Any worker using the pool should benefit from their employer’s contribution.
MINIMUM BENEFIT
ABx1 1 should be amended with regard to the establishment of a minimum benefit. We should protect people from having to purchase substandard employer coverage, establish standards for affordable benchmark coverage, give the legislature oversight over the creation of any minimum benefit, and allow people without creditable employer coverage to access group benefits.
ABx1 1 leaves it up to MRMIB to define a minimum benefit package to meet the individual mandate and for health care provided to enrollees in the purchasing pool. No affordable benchmark plan is suggested, but should be. MRMIB is directed only to design a minimum benefit that meets “Knox-Keene” standards plus prescription drugs.
Due to perceived federal constraints, the bill does not dictate the structure of coverage that employers must provide, and instead requires employers to satisfy a certain level of spending on health care services as broadly defined by federal guidelines. Yet ABx1 1 mandates individual Californians to purchase coverage that meets certain minimum benefits. Employers should not be incentivized to avoid the employer mandate by offering substandard coverage that will not meet their worker’s needs– such as hospital only coverage or high deductible plans.
The minimum benefit package required to satisfy any individual mandate should not be left to MRMIB’s discretion without legislative oversight. Furthermore, if people are required to meet a minimum benefit, but have an offer of employer coverage that does not meets this standard, they should be given the option to access affordable or group coverage elsewhere – such as through the purchasing pool or the public insurer option.
PUBLIC HOSPITALS AND COUNTIES
Many AFSCME members work in public hospitals and in county government. ABx1 1’s language should be clarified. It should make clear that public hospitals and counties, and their workers, should not be financially disadvantaged by reform, nor compromise their ability to provide health care services. Areas to clarify are below.
- ABx1 1 relies on financing sources designed to maximize federal dollars from public hospitals, including instituting a hospital tax and increasing Medi-Cal rates. These were not included in AB 8, and are still undefined in ABx1 1.
- ABx1 1 also institutes a 5-year “local coverage option” (LCO) for childless adults under 100 percent FPL, which is similar to a program recently implemented in San Francisco. The LCO creates a coverage network for this clientele utilizing public hospitals and clinics. Its impact still needs to be determined.
- ABx1 1 would require counties to share in the cost of providing care to the uninsured, primarily by returning their perceived savings from health care reform to the state. This proposal is controversial and could greatly disadvantage county finances depending on how it is constructed in legislation. ABx1 1 does not have a clear proposal outlined for the county share of costs.
COST CONTAINMENT
ABx1 1 contains two measures that AFSCME believes are essential for cost control: allowing the state to negotiate its own prescription drug discounts, and expanding access to health care information.
- State negotiation of prescription drug discounts: ABx1 1 allows the pool to negotiate prescription drugs discounts, but should be amended. To contain health care cost inflation, the health care purchasing pool established under ABx1 1 must also be empowered to negotiate discounts on prescription drugs. The pool itself or a state agency other than the Department of General Services that has fully demonstrated its capacity to negotiate deep discounts should directly negotiate discounts for the pool. This function is best done by trained state employees, not outsourced to PBMs or other contractors which may not get the best deals for consumers. We should also allow Taft-Hartley plans and large public purchasers to access the discounts negotiated by the pool.
- Health care information expansion: AFSCME supports the “transparency” language in ABx1 1 as written, which is the same as that in AB 8. ABx1 1 would greatly expand the availability of information on health care cost and quality, particularly related to hospitals. This information is essential to getting health care costs under control for all Californians. The state agency responsible for health care information, the Office of Statewide Planning and Development (OSHPD), is empowered under ABx1 1 to use advisory boards of health research experts who are independent of the health care industry to ensure that we get the highest quality information. This group should have the authority to collect the data necessary to identify and address excessive charges and sources of poor health care quality, including unsafe medical practices that endanger patients and lead to more costs.
We appreciate your consideration of our key priority issues outlined in this document. If you have questions regarding our positions, please do not hesitate to contact me, Willie Pelote, at the AFSCME International office, 1121 L Street, Sacramento, CA 95814 or by calling (916) 441-1570.
Sincerely,
Willie L. Pelote, Sr., Assistant Director of Political Action
International
cc: Honorable Members of the Assembly Health Committee (Democratic Members)
Honorable Members of the California Legislature (Democratic Caucus)
Arnie Sowell, Policy Director, Assembly Speaker Fabian Nunez
Sumi Souza, Special Assistant, Assembly Speaker Fabian Nunez
Deborah Kelch, Principal Consultant, Assembly Health Committee
Charles Wright, Senior Policy Consultant, Senate President pro Tempore Don Perata
David Panush, Health Consultant, Senate President pro Tempore Don Perata
Ana Matosantos, Chief Deputy – Legislative Affairs, Office of the Governor
David Maxwell-Jolly, Chief Deputy of Child Support
Services, CHHS
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Letter regarding ABx12
November 13, 2007
The Honorable Mervyn Dymally, Chairman
Assembly Health Committee
State Capitol, Room 6005
Sacramento, CA
RE: AFSCME Position on Governor’s Oct. 9th Health Care Proposal (ABx1 2) – OPPOSE
Dear Chairman Dymally:
On behalf of AFSCME’s 170,000 public service members in California, I am writing to oppose Governor Schwarzenegger’s October 9th proposal to reform California’s health insurance system.
In the face of the tremendous health care crisis facing California, he has put together a proposal that not only fails to address the crisis, but would actually make it worse. The thrust of his proposal would reward profit-gouging private insurers, pharmaceutical companies and health corporations that have largely brought on our current health care crisis and punish its victims.
AFFORDABILITY
Of the many serious problems with the Governor’s proposal, the most glaring is that it is not affordable for families. Instead of increasing the carrots (providing affordable health plans for families), it resorts to sticks. It heavily relies on an individual mandate to finance health care and places the financial burden of the full cost of health insurance on many Californians living in households with income over 350% of the federal poverty level.
The drafters of the Governor’s proposal appear to believe that the individual mandate is affordable, but the evidence is that for many it is not. Many of the affected households, particularly those in the Bay Area, are already financially stretched to the limit. We know from the Insight Center’s Family Economic Self-Sufficiency (www.insightcced.org) project that some families in the Bay Area need incomes at least 600% of the federal poverty level to afford a very modest standard of living. For these families, any cost increase in the order of what the Governor is proposing risks serious hardship, including loss of home.
Under the Governor’s proposal, households subject to the individual mandate would be termed “insured”, but in reality, most of them would be left with absolutely no coverage for any health care that they may need. This is because his proposal contains no limit on out-of-pocket health care costs for most Californians.
The health consequences of unlimited health care costs can be dire. Ever since the classic 1982 Rand Health Insurance Experiment, we have had evidence that high out-of-pocket costs lead people to avoid necessary health care. The high deductibles incorporated in the Governor’s proposal would mean that some people would forego necessary health care and could suffer ill health, including death, as a result.
The proposal claims to help households with incomes below 350% of the FPL through a tax credit for their insurance premiums. Many self-employed in-home child care providers who AFSCME represents fit this demographic. But the Governor’s proposal leaves many of these households exposed to high out-of-pockets costs and the difficulties in accessing care that they entail.
The Family Economic Self-Sufficiency project shows that some Los Angeles families with incomes at 350% of the FPL who are living very modestly are barely making ends meet. The Governor’s proposal would confront them – along with many Bay Area families – with out-of-pocket health care costs many could not afford. Some would miss necessary health care and suffer ill health. Some would experience serious financial hardship and the consequences.
While demanding so much of working Californians, the Governor’s proposal rewards or fails to hold accountable those largely behind the health insurance crisis.
COST CONTROL
By far, rising costs are the biggest issue for union members and the majority of working families. Any health care plan must substantially tackle rising costs to be successful. The Governor’s plan sidesteps key cost-saving opportunities.
Insurers, who profit enormously from the current health insurance crisis, would be allowed to take well over 15% of the dollars Californians would be mandated to pay them under the Governor’s proposal. While the proposal appears to cap insurers’ share at 15%, it provides that insurers only have to meet the 15% rule based on their “aggregate” income and would allow them to charge more for products designed for the individual mandate.
Insurers are allowed to offer non-standardized plans, making it virtually impossible for Californians to comparison shop and making it easy for insurers to dupe them. We know from the Medicare experience with supplement insurance that only standardized plans give those buying insurance a good look at their options. If insurers don’t have to offer standardized benefits, as under Medicare, then they could easily confuse and take advantage of Californians.
In contrast, AFSCME has supported numerous cost-saving measures, all of which were included in some form in AB 8 that we believe are essential pieces of reform.
Of these cost-saving mechanisms, AFSCME believes the most effective step toward cost control that we can take is to give Californians a public plan alternative to private insurers. The “public insurer” is a top priority for AFSCME and is missing from the Governor’s proposal.
A Public Plan Alternative to Private Insurers
Californians want and need a choice of good health coverage we can afford. We should have the option to choose a public insurance plan that can provide quality, not-for-profit, cost-effective health care as an alternative to private plans – including for-profit HMOs and insurance companies that have business incentives to deny care. The State of California should build an alternative public plan based on existing public insurance plans (officially called local initiatives and county-organized health systems) that are already popular in California and successfully competing with private insurers in our counties to provide Medicare, Healthy Families and Medi-Cal coverage.
Just as Medicare offers choice of public or private plans for 40 million beneficiaries, such an insurer would address the needs of Californians that private insurers fail to meet. A public plan assures residents that there is an affordable, high quality choice available that meets established benchmarks for access and cost.
For example, once formed, the public insurer could offer specialized plans for employers, such as self-employed child care workers who have great difficulty finding affordable coverage. It could provide a mechanism for multiple public plans to pool together to give greater purchasing power to consumers. It could offer an integrated network of public plans that cooperate throughout the state to provide better networks for consumers. It could provide care for immigrant workers in a way that could address many of the documentation problems linked to financing their care.
Health Care Data Reporting
The Governor’s proposal appears to address the issue of health care data reporting, but it does not. Hospitals and physician escape any assurance that health care data reporting would reveal overcharging and unsafe medical providers. Instead the proposal would allow a state agency to determine what data to collect. Given how close the Schwarzenegger administration is to the health care industry, we could easily be left with data on health care cost and quality as unhelpful as that currently available.
We need a health care data reporting system that is independent of the health care industry and working with highly-qualified health services researchers. This group should have the authority to collect the data necessary to identify sources of poor health care quality and excessive charges. With the information this group would develop, we could address the problem of widespread overcharges and unsafe medical practices that endanger patients, often leading to additional, unnecessary costs.
Prescription Drug Prices
In the Governor’s proposal, pharmaceutical businesses avoid altogether any program to effectively use the bulk purchasing power of state purchasers to gain lower prescription drug prices. We need a state agency with staff experienced in successfully negotiating lower prescription drug prices to pool the purchasing power of the state’s purchasers and substantially reduce our prescription drug costs.
As a result of the ineffective cost controls proposed by the Governor, health care cost inflation for the rest of the purchasers of health care would continue unabated under his proposal. The process by which health care cost inflation has driven employers to drop or reduce coverage, has created major conflicts in collective bargaining, and has increasingly denied Californians access to care would continue to grind away at our health care system.
UNINSURING EMPLOYERS
Although the Governor claims that employers would share responsibility, he lets off uninsuring employers (those employers that do not pay health benefits) with 10 or more workers with only an employer mandate to pay 4% of health care costs – not even a third of the health care cost responsibility. Smaller employers would pay even less.
Many of the workers of those employers affected by these minimal mandates would be expected to bear the rest of their health care costs under what some call a worker “take-up requirement” and through the out-of-pocket costs of high-deductible insurance. Under the individual mandate, they could be faced paying for “insurance” that would be unaffordable and that would pay relatively little, if any, of their health care costs.
While the Governor’s proposal would establish a partially subsidized purchasing pool to help very low income workers under the mandate, its subsidies would not cover undocumented workers – a major part of the state’s workforce. According to the Census Bureau, Mexican immigrants – many undocumented – make up over 4/5th of our agricultural workforce, over 4/5th of our dishwashers, over half of our construction laborers. In total, an Urban Institute study shows that there are at least one million undocumented workers in California (www.urban.org). They need and deserve health care too.
HOME CARE WORKERS AND PART-TIME WORKERS
Among the workers who could be affected by the employer mandate, In-Home Support Service workers (home care workers) are not even assured that the counties that employ them would be required to comply with the mandate. Part-time workers would not be assured of any coverage at all.
Any health care reform legislation should address groups such as these. It should make it clear that counties are the employers of IHSS workers for the purpose of covering health care costs. It should provide that as many part-time workers as possible are eligible for benefits.
PUBLIC HOSPITALS
The Governor’s proposal is particularly unfair to University of California hospitals and county hospitals. It looks to assess counties to pay for some of the proposal’s costs, endangering their ability to care for low-income residents. Further, it disadvantages U.C. and county hospitals relative to private hospitals by giving private hospitals higher Medi-Cal rates and capping reimbursements for U.C. and county hospitals.
Any health insurance reform must assure that any combination of increased taxes, Medi-Cal rate changes, and changes in the California hospital waiver leave these hospitals with funds needed to treat their patients. It should also not competitively disadvantage these hospitals.
FINANCING
The financing of the Governor’s proposal is a grossly inadequate. It includes an employer mandate that would not even cover a third of health care costs without clear provisions for enforcement. Without these provisions, noncompliance would be widespread.
The financing of Governor’s proposal is also poorly designed in that it charges counties in a way that may undermine their health care systems’ ability to treat patients when needed, leading to the long-term and higher health care costs that can follow missed treatments. It uses a hospital tax; but the tax is offset by Medi-Cal rate increases – largely relieving hospitals of their share of the responsibility. It makes rosy assumptions about federal funds that may not materialize as the Congress and White House fight over SCHIP reauthorization and the CMS denies states waivers for proposals containing elements similar to those of the Governor’s proposal.
Lastly, it relies on taking education money from the lottery – an idea that would lead to a set of falling dominos as educators losing lottery funds seek general funds monies and other programs who may lose general fund monies as a result would be left looking for other funders.
We need financing that is fair and raises the funds necessary to cover health care costs. The employer health care spending mandate should raise funds enough to fund comprehensive health care for their workers in combination with additional reliable state funding for that purpose.
Enforcement of the employer mandate should be handled by an agency with experience in the area of employer compliance. It should have adequate staff for the purpose and should routinely audit employers. It should have whatever legal authority it needs to quickly and effectively collect from non-complying employers.
The state’s share of the funding should not be raised in a way that creates long-term health care problems or sets off a row of state programs robbing one another to stay solvent. It should use realistic assumptions about the likelihood of its projected sources providing funds.
CONCLUSION
The Governor’s proposal does not address the causes of the health insurance crisis and, so, it would continue. Most likely, if his proposal were adopted, insurers would cash in on the windfall his proposal would create for them until a backlash led to some form of partial repeal. Then, insurers could take their one-time profits and leave us to deal with a health insurance crisis that had only gotten worse in the meantime.
If we are going to pass health insurance reform, it should be with the long-term in mind. Health care costs should be contained, starting with the establishment of an alternate plan that can compete with private insurers. The special situations of workers in child care, part-time workers and undocumented workers and the situations of these workers must be taken into account. Workers should be protected against unaffordable policies and policies that would impede their access to necessary health care. Employers should be required to pay their fair share of health care costs and counties should pay for home care workers. Our safety net should be left with the resources it needs to do its job.
We believe that the discussion of health insurance reform should start with AB 8 (Nuñez), a bill that represents a year’s work of legislators and advocates. From that starting point, we stand ready to continue work to craft a consensus plan that would be a major step in the right direction of solving California’s health insurance crisis.
Unfortunately, the Governor’s proposal goes in the wrong direction and would, thus, move us away from needed health insurance reform. For these reasons, AFSCME opposes it.
If you have any questions, please do not hesitate to contact me at (916) 441-1570.
Sincerely,
Willie L. Pelote, Sr., Assistant Director of Political Action
International
cc: Honorable Members Assembly Health Committee
Honorable Members of the State Legislature
Deborah Kelch, Principal Consultant, Assembly Health Committee
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