Questions and Answers about AB1X
Will AB1X increase access to healthcare?
Not exactly. AB1X establishes insurance rules called “guarantee issue.” While this sounds good – it has actually led to less coverage for consumers in other states because of its dramatic cost. If consumers can always get insurance, there is little incentive to purchase coverage until you are actually sick – driving up the cost of premiums for everyone. Premiums in states with “guarantee issue” like Massachusetts, New Jersey, and New York have some of the highest health insurance premiums in the country, while California has some of the lowest rates. See rates in other states here.
Instead of “guarantee issue,” our elected officials should focus on guaranteeing access to coverage at an affordable price – even if someone has a preexisting condition. A purchasing pool would provide consumers a choice of plans and the state could provide premium assistance to those who need it.
Will AB1X increase consumer choice?
AB1X actually reduces consumer choice and adds bureaucratic red tape. Currently, families and employers can pick from a number of different kinds of health plans that fit their health and budget needs.
AB1X’s “one size fits all” approach to healthcare will force individuals and families to select from a limited number of insurance products with costly mandates developed by state bureaucrats. This onerous proposal will mean hundreds of thousands of Californians will likely be forced to buy MORE EXPENSIVE healthcare coverage, even if they are happy with what they have now.
Healthcare reforms should give consumers more choices, not fewer, so consumers can find the coverage that fits the needs of their families and their budgets.
Will AB1X control rising healthcare costs?
Unfortunately, AB1X does nothing to control what’s driving healthcare costs. This bill simply forces more of these costs on individuals, families, businesses and their employees. There are many elements of this bill that will increase costs. AB1X will likely force millions of California employers and families to buy more costly insurance than they now buy and limit their choices of insurance products. AB1X also requires insurers to charge more for healthcare for hundreds of thousands of small and medium-sized employers, even in cases where the employer has a history of keeping healthcare costs low. All of these misguided rules will lead to more uninsured Californians when companies and families can’t afford the increased costs.
Will AB1X lead to more insured Californians?
AB1X proposes to fund healthcare for all Californians by taxing employers who don’t provide healthcare. But AB1X underestimates the real cost of providing healthcare coverage by nearly 70% - according to data from the California Health Benefits Survey. AB1X taxes employers to create a state-run purchasing pool. But the bill assumes that coverage for California employees can be purchased for $250 a month per employee, while the average in 2006 was $379 and rising. When the fund runs short, the state will be forced to raise taxes or cut coverage and increase the uninsured population – neither of which is a good option for California consumers.
Who would pay for this coverage?
AB1X creates a huge new state program that doesn’t include any new funding source. The bill merely requires the state director of finance to determine that there are enough funds to start the program. A specific funding mechanism is found within a companion voter initiative recently filed with the California Secretary of State’s office for the November 2008 general election. The funding mechanism includes an employer mandate, requiring all employers who don’t provide health coverage to pay between 1 and 6.5 percent to the state. This will place a tremendous burden on employers, particularly small employers. AB1X does not exempt even the smallest mom and pop businesses. However, numerous court decisions and legal experts indicate that AB1X’s approach violates federal law. Since this is a major source of funding for the state-run purchasing pool, millions of Californians in this new state purchasing pool could be left without coverage.
In addition to the employer mandate, the funding mechanism calls for a $1.75 tobacco tax increase, a 4% hospital tax and requires counties to pay 40% of the cost for those newly enrolled in Medi-Cal due to coverage expansions. The text of the companion initiative can be found here.
How does AB1X eliminate lower cost coverage options?
AB1X puts upward pressure on healthcare costs in two ways. First, it puts state bureaucrats in charge of determining what kind of coverage an individual or employer must buy. Second, the bill requires health plans to spend 85 percent of premium revenue on patient care. This sounds like a good idea, but it may actually result in higher costs. Administrative costs are largely the same for any product. Consequently, products with lower premiums naturally have a higher administrative cost on a percentage basis. That means the least expensive plans have a higher percent of their costs to cover these fixed administrative expenses. The most affordable coverage options would be the first ones eliminated, putting coverage even further out of reach.
Will a new state purchasing pool lower costs?
Not likely. In fact, state pools have been shown to actually exhibit higher costs. (Read the study by the California Health Care Foundation.) The real drivers of health costs are more closely related to the health of the employees in the pool than the size of the pool. This means that a new state pool with generous benefits will likely attract fewer healthy individuals, which will lead to higher costs and even fewer healthy individuals. The end result is higher costs for individuals and families in the pool.
Read the bill for yourself…
Printable Page (PDF)
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