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SACRAMENTO (AP) — Two bills aimed at helping the uninsured get health care coverage won’t send the California state budget deeper into the red, according to a state government analysis that contradicts claims by opponents.
Legislation creating an oversight agency to set up the California Health Benefit Exchange, a web-based marketplace for health insurance and a cornerstone of the national health care reform package, is on Gov. Arnold Schwarzenegger’s desk awaiting approval or veto.
Earlier this week, the California Chamber of Commerce issued an analysis critical of the bills, AB1602 and SB900, saying they could endanger the state’s ailing general fund with costs “potentially exceeding $1 billion annually.”
That assessment is far different from the report by the state’s nonpartisan Legislative Analyst’s Office, which found the exchange would be funded entirely by federal grants and fees it generates, until the federal funding’s sunset date in 2016.
After that, health insurers would be assessed fees to continue the exchange under California’s bills, and it is reasonable to expect the costs “would be passed on to enrollees through premiums,” according to the report, which was obtained by The Associated Press.
Schwarzenegger has expressed support for health care reforms but has yet to decide on the bills, spokeswoman Rachel Arrezola said Friday.
If he signs the bills, California would become the first state to implement an oversight board for insurance exchange marketplaces following the passage of federal reforms earlier this year. Massachusetts implemented its exchange prior to reform.
Nationally, more than 46 million Americans are uninsured, including more than 6.7 million Californians, according to The Henry J. Kaiser Family Foundation.
Exchanges are expected to create competitive markets in health insurance that would drive down costs and help the self-employed, small businesses and the uninsured buy coverage at improved rates. Affordability is crucial to trimming the number of uninsured in the run-up to 2014, when federal law will require most Americans to carry insurance.
Health Access, Consumers Union and the Small Business Majority support the California bills and want the governor to sign the legislation soon so the state can begin the difficult process of building the exchange.
“In a state the size of California, with potentially millions of enrollees in the exchange, setting it up will be a massive job,” said Betsy Imholz, Consumers Union’s health advocate.
Imholz said the number of potential customers and the increased competition among insurers should drive down costs substantially.
The exchange would be overseen by a five-member board, with two members appointed by Schwarzenegger before his term ends and the rest appointed by the Legislature.
Mike Genest, the former Schwarzenegger finance director who did the study for the chamber, said that setup gives “unlimited, unaccountable power and authority” to non-elected officials.
He said he arrived at the $1 billion cost figure in his report by assuming that with more coverage there will be more fraud involving public programs like Medi-Cal, and that the exchange will expand benefits, with some of that cost absorbed by the state.
The analyst’s report rejects the idea that benefits will be expanded by the exchange, noting that “under the legislation, the Legislature would retain full authority to set eligibility and benefit levels for state programs … .”
The report also said there are “numerous provisions” in the bills aimed at establishing public accountability. Among them, the board is required to provide annual reports on its finances, implementation of reform and the exchange’s performance to the Legislature and public.
Genest’s report and the Legislative Analyst’s Office did agree on one thing: Many details of how the exchanges will work have yet to be established.
The state’s largest for-profit insurer, Anthem Blue Cross, is among critics of the bills. Anthem wants limits on the new costs the exchange could impose on insurers. The insurer also has said the exchange’s oversight would be inadequate and it could limit choices for consumers.
Health Access Executive Director Anthony Wright dismissed those criticisms, saying Anthem “doesn’t want for the exchange to have bargaining power to negotiate for the best price and value.”
“Individuals in the market have no power now, and are at the mercy of the insurer,” he said.
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