Sunday on This Week with George Stephanopoulos, California Gov. Arnold Schwarzenegger offered Barack Obama a helping hand. While he hadn’t yet talked to the president-elect, The Gov made it clear that “I am the first one to go and do everything that I can, as governor, and as a state, to support his administration because we have done a lot of studies and work on health care. If he wants to do health care, then we want to be his partners and help with the health care reform.”
Schwarzenegger’s offer of help invites an examination of his state’s failed quest to bring health insurance to all its residents—and the role he played in the plan’s demise. One year ago, the state spent a lot of time and effort trying to become a health care model for the country. The lessons it learned in the course of the struggle will be relevant for journalists as the political slugfest gets going and “the moment for health care reform is now” rhetoric recedes.
Lesson one: The money wasn’t there
After months of political wrangling, state legislators crafted a proposal with input from the governor and lots of special interest groups. The bill passed the California General Assembly, but the Senate health committee killed it a few weeks later. The state’s plan, patterned on the law passed in Massachusetts and similar to the blueprint that Obama and Clinton both peddled during the campaign, mandated that residents have insurance and called for massive subsidies to help people buy their policies from commercial carriers. Even with the huge amounts of money directed to buying private insurance, only 70 percent of the uninsured—some 6.5 million and rising—would be covered. When the state’s independent Legislative Analyst’s Office reported that, by its fifth year, program costs would exceed revenues by $300 million (and eventually by as much as $1.5 billion), reform collapsed, and Schwarzenegger moved on to more pressing budget matters.
Lesson two: Strong insurance regulation is politically difficult
California is also a state where the leading newspaper, the Los Angeles Times, has, in my judgment, done some of the year’s best health care reporting. The Times doggedly reported on an unsavory insurance industry practice called rescission. Once policyholders get sick and file claims, insurers look for evidence that they might have lied on their policy applications. If companies find some bending of the truth, intentional of not, they rescind the policy—often at a time when people are facing expensive treatments. Thousands of policyholders have found themselves without coverage just when they needed it most.
The Times exposed this practice and wrote about one carrier, Health Net, which paid bonuses to employees who purged sick people from the books. California regulators slapped the companies with fines, one as high as $10 million, and then made them reinstate some of the cancelled policies. The state legislature passed a law prohibiting the practice and establishing an independent review process. But the insurance industry balked—no surprise there—with its spokesman saying the bill didn’t offer real protections and “would have invited dishonesty on applications and lead to price increases and reduced coverage in the individual market.” No worries here. The Governor vetoed the bill, and the same practices continue.
Lesson three: Insurers will fight for the right to insure only the healthiest people
One point of controversy was whether California insurers had to offer coverage to sick people. During the campaign, Obama repeatedly said that, under his plan, carriers would have to cover everyone, even those with pre-existing conditions. A year ago, a California industry insider let me in on a little secret. The state’s giant carrier, Blue Cross, he told me, “said privately they will spend whatever it takes” to defeat any law that limits the company’s ability to select risk—in other words, reject sick people. “Blue Cross is best at risk selection,” he said. “They would take a big hit to their profits.”