Health Care & Insurance Legislation: 2007

1. Health Care & Insurance Legislation: 2007 Ventura County Association of Health Underwriters February 23, 2007 Alan Katz, RHU CAHU Vice President, Public Affairs

2. Health Care Legislation 2007 • Health Care Reform • Everything Else • Today we’ll focus on health care reform Health Care & Insurance Legislation: 2007

3. What We’re Up To Today • Why Health Care Reform • The Reform Proposals • Agents Focus • CAHU’s Healthy Solution (Draft) • Taking Action • Conclusion / Q&A Health Care & Insurance Legislation: 2007

4. Why Now. • Reason is found in the key messages proclaimed by the four leading advocates of reform: • Governor Arnold Schwarzenegger • Senate Republicans • Senate President Pro Tempore Don Perata • Assembly Speaker Fabian Nunez Health Care & Insurance Legislation: 2007

5. Governor’s Key Messages • Current System is Broken • Been a problem for a long time • Sacramento hasn’t addressed it • The “Hidden Tax” of the Uninsured • Need to eliminate the tax if we’re gong to keep the state’s economy strong • Everyone is responsible for the solution and everyone has something to gain • The gain outweighs the pain for everyone Health Care & Insurance Legislation: 2007

6. Senate Republican’s Key Messages • Current System Needs Strengthening • Provide Californians with Access and Choice • Make the Health Care System More Reliable • Introduce No New Taxes • Or fees or whatever you want to call them Health Care & Insurance Legislation: 2007

7. Senator Perata’s Key Messages • Current System is Broken • Share Responsibility: No More “Free Riders” • Focus is on 4.2 million uninsured in “working families” • Employers and employees share cost • Focus Competition on Price and Quality … … Not Underwriting • Through current plans or MRMIB-run “Connector” • Connector is optional for businesses and individuals Health Care & Insurance Legislation: 2007

8. Speaker Nunez’s Key Messages • Current System is Broken • Build on Existing Employer-based System • Single Payer not politically practical • The Insurance Marketplace Needs Reforming • Insist on Affordability for Working Families • Through public and private programs Health Care & Insurance Legislation: 2007

9. Why This Matters: Three Political Laws • The Law of Political Reality:Political Reality trumps Real Reality for all parties at all times • The Law of Political Activity:Politicians are paid to address perceptions and that’s what they do • The Law of Political Reporting:The media is paid to report on what politicians do and that’s what they do Health Care & Insurance Legislation: 2007

10. The Three Laws and the Uninsured • Media Reports an Increase in Uninsured • Politicians Repeat the Story Deploring the Increase in the Number of Uninsured • Media Reports the Politicians Repeating the Media Story and Deploring the Increase in the Number of Uninsured Health Care & Insurance Legislation: 2007

11. Comparison of Proposals Individuals Covered: Governor Schwarzenegger: All Californians Senate GOP: Improves access Senator Perata: Working families and all children Speaker Nunez: Working Californians and all children. Unemployed adults by 2012 Individual Mandate: Governor Schwarzenegger: Yes Senate GOP: No Senator Perata: Only for working families Speaker Nunez: None Health Care & Insurance Legislation: 2007

12. Comparison of Proposals Employer Mandate: Governor Schwarzenegger: Pay or Play (4%) Senate GOP: None Senator Perata: Pay or Play (sliding percentage of payroll) Speaker Nunez: Pay or Play Purchasing Pool: Governor Schwarzenegger: Yes Senate GOP: No Senator Perata: Yes Speaker Nunez: Yes Health Care & Insurance Legislation: 2007

13. Comparison of Proposals Guarantee Issue: Governor Schwarzenegger: Yes Senate GOP: No Senator Perata: Yes and community rating Speaker Nunez: Prohibits exclusions for pre-existing conditions Cap on Administrative Costs: Governor Schwarzenegger: Yes Senate GOP: No Senator Perata: No Speaker Nunez: No Health Care & Insurance Legislation: 2007

14. Comparison of Proposals Other Insurance Market Reforms: Governor Schwarzenegger: Rates based on age and geographic area in individual market Senate GOP: Conformity with Federal HSAs, permit limited benefit plans, permit greater flexibility for coverage rates in Small Group Market to reflect lifestyle behavior Senator Perata: Community rating Speaker Nunez: Requires uniform benefit designs inside and outside of purchasing pool Health Care & Insurance Legislation: 2007

15. Comparison of Proposals Improve Access to Medical Services: Governor Schwarzenegger: Removes barriers to expansion of lower cost health models (retail based medical clinics) Senate GOP: Allows hospitals to refer uninsured to clinics; encourage RN-run clinics; financial encouragement of clinics Senator Perata: None Speaker Nunez: None Health Care & Insurance Legislation: 2007

16. Comparison of Proposals Cost Containment: Governor Schwarzenegger: Regulatory reform, pilot to combine workers comp with traditioal coverage, reward healthy behavior, data reporting, etc. Senate GOP: Expansion of clinics, pricing transparency, etc Senator Perata: Purchasing pool, evidenced-based practices Speaker Nunez: Disease management, technology, simplify benefit designs, promote healthy lifestyles, etc. Health Care & Insurance Legislation: 2007

17. Comparison of Proposals Financing: Governor Schwarzenegger: Federal Government ($5.5 billion), reallocates current state spending, employer contributions, employee contributions, fees on hospitals and phusician contributions Senate GOP: Federal Government ($2.2 billion), Smoking fees to fund MRMIP, reallocates current state spending Senator Perata: Federal Government (Medicaid/Healthy Families) Speaker Nunez: Federal Government (Medicaid/Health Families) Health Care & Insurance Legislation: 2007

18. Agents: A Need for Focus Lots of Hot Button issues Lots of interest groups focused on each element of the plan For Agents, two key questions: • If the provision becomes law will it harm our profession or our clients? • Is changing the provision an absolute necessity for other stakeholders? Applying this means agents should focus on ……. Health Care & Insurance Legislation: 2007

19. Agents Focus: Issue #1 Carrier Administrative Expense Cap • Governor would require carriers to spend 85% of premium dollars on medical claims • Result: Little or no funds left for distribution Concern: • Limits funds available for distribution • Likely to deter new entrants into the market • Doesn’t guarantee lower costs, just eliminates agents and reduces customer service levels Health Care & Insurance Legislation: 2007

20. Agents Focus: Issue #2 • Purchasing Pool • Availability varies by proposal, but all require some insureds to purchase through a state pool Concern: • Un-level playing field • Even when not required for all (Governor) the “anti-crowd out” provisions are weak Health Care & Insurance Legislation: 2007

21. Agents Focus: Issue #3 • Mandate to Issue: • Guarantee Issue in the individual market • Consumers can buy coverage at any time time • Assumption: Enforcement will work Concern: • Failure to enforce mandate to purchase will result in dramatic premium increases and commission reductions or eliminations • Current requirement for auto insurance is only 75% effective Health Care & Insurance Legislation: 2007

22. What’s Required: Get Involved • Join Health Underwriters – Today! • Contribute to CAHU PAC – Today! • Be a communicator • Inform clients of what’s at stake • Respond to articles in your local paper • Volunteer to speak in your community • Attend town hall meetings • Get involved in local campaigns • Meet with legislators in their districts Health Care & Insurance Legislation: 2007

23. CAHU’s Healthy Solutions • Will serve several purposes • Moves us from opposing everything to supporting something • Creates a context in which our key issues can be addressed • The Cap • The Pool • The Mandate • Provides a yardstick against which all proposals can be measured • Still being finalized. Discussing a Draft. Health Care & Insurance Legislation: 2007

24. CAHU’s Key Messages • All Californians deserve a health care system which • delivers both world class care and financial security • is accessible, affordable and fair • boosts the state’s economy, attracts news businesses and strengthens existing enterprises • is realistic about what one state can do Health Care & Insurance Legislation: 2007

25. Requirements of Reform CAHU believes a Healthy Solution is one which: • neither bankrupts families nor busts the state’s budget. • assures all Californians have at least basic health care coverage. • provides the state’s diverse population with diverse choices. • promotes ongoing and long-term innovation and experimentation to enable the state’s health care system to adapt over time to evolving needs. • assures consumers access to meaningful information and expert advice and counseling. Health Care & Insurance Legislation: 2007

26. The Yardstick • Affordability • Can the state afford the plan? • Can the state’s citizens afford the plan? • Universal Participation • Does it assure every Californian has basic health care coverage? • Cost Containment • Does it constrain rapidly rising medical costs? Health Care & Insurance Legislation: 2007

27. The Yardstick • Consumer Choice • Does it empower Californians to find and choose the health care coverage which best fits their unique needs? • Evolving Needs • Does it enable health care coverage to evolve with changes to the state’s population, their needs and expectations? Health Care & Insurance Legislation: 2007

28. Key Provisions: Access for All Low Income: Expanded state programs and subsidies • At launch help lowest income levels and expand only as state budget can support • Encourage personal responsibility by assuring all households above 100% of FPL pay a portion of the premium • Subsidies are targeted to average cost of basic coverage and are to be used in the traditional marketplace – no purchasing pool Health Care & Insurance Legislation: 2007

29. Key Provisions: Access for All Above 400% of FPL: Mandate to Buy. • All Californians not eligible for state sponsored programs must purchase basic coverage • Two versions: Catastrophic and Core • Enforcement through tax code, drivers license and other state-controlled privileges, and reduced benefits for those who delay Health Care & Insurance Legislation: 2007

30. Key Provisions: Access for All Carrier Mandate to Sell • Once 90% of Californians are covered, carriers will be required to sell on a guarantee issue basis • Until 90% coverage is achieved, expand MRMIP to be a true insurer of last resort • Even under guarantee issue, pre-existing condition exclusions and rate-ups may be applied • Length of exclusion and rate-up tied to duration previously uninsured Health Care & Insurance Legislation: 2007

31. Key Provisions: Financing • Individuals above 100% of FPL contribute to cost, even in government programs • a new health plan fee based on a carrier’s overall market share in the state • Increase on health related sin taxes: • Tobacco • Alcohol beverages • Guns and Ammunition • a new tax on hospital operating revenues and physician gross revenues or some other mechanism for capturing support from self-insured plans Health Care & Insurance Legislation: 2007

32. Key Provisions: Constraining Costs • Pay for performance • Electronic Health Records • Electronic Rx • Evidence based medicine • Hospital error reduction programs Health Care & Insurance Legislation: 2007

33. CAHU Healthy Solutions: A Reminder The package frees CAHU to focus on what’s important: • Caps • Pools • Mandates Health Care & Insurance Legislation: 2007

34. Dealing with Reality • There’s tremendous momentum for health care reform • The drive comes from all sides and both parties • Something is likely to happen • 2007: Education Phase • 2008: Action Phase Health Care & Insurance Legislation: 2007

35. Ingredients for Negative Change Political Perception of a Need for Change + An Overwhelming Desire to Be Perceived as Doing Something = Disaster Health Care & Insurance Legislation: 2007

36. Ingredients for Positive Change Political Perception of a Need for Change + A Market in Need of Agents = Opportunity Health Care & Insurance Legislation: 2007

37. Keeping Things in Perspective We’ve faced challenges like this before: • 1990-1993: AB 1672 • 1993-1994: ClintonCare • 1996: Single Payor Initiative We have time to marshal our resources • Debate is underway, but still in the “education” phase • The “battle” phase is months away • We can catch up – and quickly Health Care & Insurance Legislation: 2007

38. What’s Required: Stay Informed • Helpful publications: • Health Underwriter newsletters and magazines • California Broker • Helpful web sites: • Health Underwriters: • www.CAHU.org • The Governor’s Site: • www.StayHealthyCalifornia.com • My Blog (a shameless plug): • www.AlanKatz.WordPress.com Health Care & Insurance Legislation: 2007

39. Health Care Reform: An Opportunity • Agents have tremendous power: • Subject matter expertise • Clients that are constituents • Presence in every community • If we work together … • … If we stay focused … • We can make health care reforma change for the better for our clients and our profession Health Care & Insurance Legislation: 2007

40. Health Care & Insurance Legislation: 2007 Alan Katz, RHU