SHRM Online, August 31, 2006

The California General Assembly approved a health care reform bill on Aug. 28 that would create a surprising new outlaw in the Golden State’s sliver of the wild, wild West—private medical insurance.

The California Health Insurance Reliability Act (SB 840) would create a state-run, single-payer health care system and bar private medical insurance. State Sen. Sheila Kuehl, the bill’s author, expects the measure will be approved by the Senate and reach Gov. Arnold Schwarzenegger’s desk within days.

All state residents would be covered by the state-run health care system, including illegal immigrants, Californians traveling out of state for up to 90 days and California retirees living out of state if they pay required taxes to the Health Care Fund, according to a Health Care for All summary of the bill.

Within California, all federal, state and county money currently spent on health care would be reallocated to the state Health Care Fund, which would provide about a third of the needed funding, the summary asserts. Other funding would come from state health taxes that would replace health insurance premiums paid to insurance companies as well as co-pays and deductibles. The California Health Insurance System would become operative when the state Secretary of Health and Human Services determines that the health insurance fund has sufficient revenue to implement the bill, according to a state Senate report.

It notes that “numerous indicators show the depth of the problems facing the state’s health care system,” which the bill seeks to redress. These problems include “the fact that nearly one in five Californians are uninsured and employers are decreasing or dropping health benefits for their employees and retirees.” The report adds that “the rise of health plans characterized by expensive deductibles and co-payments represents the final indicator of a crumbling health care system that fails to keep even insured families out of bankruptcy when they experience a serious illness.”

The California Chamber of Commerce opposes the legislation, asserting in a statement that “California residents do not want a single-payer government-run system.” A government-run health care system—Proposition 72—failed in 2004.

Governor’s opposition

SB 840 could die on the governor’s desk. Schwarzenegger reportedly said at a July 24 health care summit that he did not believe that the government should be running the health care system, according to Health Access California.

Others agree. The Pacific Research Institute estimates that a government-run health care system in California would cut health care spending by just 4 percent but result in a drop in the number of physicians from 94,000 to 71,000. Access to medical technology would be diminished significantly, and there would be lengthier waiting times for medical treatment, the institute predicted in a release earlier this year.

The institute described SB 840 as “a Canadian-style government health care monopoly in California.” It noted that the Canadian Supreme Court ruled last year that the government monopoly on health care, mandated by the Quebec Health Insurance Act and Hospital Insurance Act, violates the Quebec Charter of Human Rights and Freedoms (Chaoulli v. Attorney General of Quebec).

The laws allow “only the very rich, who can afford private health care without need of insurance to secure private care in order to avoid any delays in the public system,” stated Justices McLachlin, Major and Bastarache in their concurring opinion. “Delays in the public health care system are widespread,” they added. “In some serious cases, patients die as a result of waiting lists for public health care.”

But SB 840 is not without its supporters. “The growing cost of health insurance is bankrupting our businesses and working families. Our health care system is being decimated to pay for insurance company waste,” Kuehl stated in an Aug. 28 release. “SB 840 is the right solution for California.”

And State Assembly Speaker Fabian Núñez said that “this plan provides security and savings to every California family, helps businesses by reducing their health insurance costs and saves the state almost a billion dollars.” According to Núñez, “the governor should sign this historic bill.”

Related articles:
Calif. health care mandate gets new life, only to die again, HR News, Dec. 2, 2004.
Judge overturns Maryland ‘Wal-Mart’ health care law, HR News, July 20, 2006.
Fair share health care regs proposed, State Workplace Law Resources, August 2006. For the latest HR-related business and government news, go daily to www.shrm.org/hrnews.

Allen Smith, J.D., is SHRM’s manager of workplace law content.
© 2006, Society for Human Resource Management