Correction to This Article
A Jan. 9 article about Gov. Arnold Schwarzenegger¿s proposal for universal health coverage in California incorrectly said that two states, Massachusetts and Vermont, have passed laws requiring all of their residents to obtain health insurance. Massachusetts has done so, but Vermont has imposed no such requirement. The Vermont law, passed in 2006, seeks to expand coverage so that at least 96 percent of the state¿s residents have health insurance by 2010.

Schwarzenegger Proposes Universal Health Coverage

By Sonya Geis and Christopher Lee
Washington Post Staff Writers
Tuesday, January 9, 2007

LOS ANGELES, Jan. 8 -- Gov. Arnold Schwarzenegger (R) on Monday proposed a system of universal health insurance for Californians that would make the nation's most populous state the third to guarantee medical coverage for all its residents.

"Prices for health care and insurance are rising twice as fast as inflation, twice as fast as wages. That is a terrible drain on everyone, and it is a drain on our economy," Schwarzenegger said. "My solution is that everyone in California must have insurance. If you can't afford it, the state will help you buy it, but you must be insured."

Much of the opposition to Schwarzenegger's program, which requires legislative approval, is expected to come from his fellow Republicans, who object that the plan will be costly for small businesses. But the governor said California cannot afford not to do it. Nearly one in five California residents does not have health insurance -- a total of 6.5 million people, many of whom seek expensive care in emergency rooms.

Nationwide, the ranks of the uninsured are growing. Census figures show that a record 46.6 million Americans, including 8.3 million children, had no health insurance in 2005, up from 45.3 million in 2004. Among those who did have coverage, fewer were receiving it through their jobs as employers scaled back their health plans.

Analysts say the California proposal is illustrative of the resurgence of interest among politicians at all levels in expanding health coverage to the uninsured and that it provides fresh evidence that, with Congress stalled on enacting comprehensive health-care reform, the states are beginning to take matters into their own hands.

In the past year, Massachusetts and Vermont have passed laws requiring all their residents to obtain health insurance, with help from the state if necessary. Other states considering expanding coverage to reduce the number of uninsured include Washington, Montana, Rhode Island, Wisconsin and Illinois.

"Health care for the uninsured is back on the agenda," said Diane Rowland, executive vice president of the Kaiser Family Foundation, a nonprofit, nonpartisan organization that researches health-care issues. "The governors are trying to lead the way, but it's also going to take national action to try to address this problem."

Schwarzenegger's plan would require everyone living in California -- even illegal immigrants -- to have health insurance, at an estimated cost of $12 billion. Individuals who refuse to carry insurance could face reductions in their state income tax refunds or the garnishment of their wages. All businesses with 10 or more employees would have to offer coverage or pay a fee of 4 percent of their payroll into a fund to help the uninsured buy health insurance.

Schwarzenegger also recommended expanding the state's existing program for children's health insurance to families that earn less than three times the poverty level, or about $60,000 for a family of four.

The governor also wants to force insurers to offer coverage to people with existing medical conditions. Currently many insurers will not cover older people, those with major illnesses or even people with relatively minor complaints such as asthma or varicose veins.

Schwarzenegger also would require insurance providers to use 85 percent of their premium proceeds on patient care.

The state would increase reimbursements to doctors and hospitals by a total of $4 billion. Money for the program would come from new taxes on doctors (2 percent of their revenue) and hospitals (4 percent), federal funds, and county funds that now pay for emergency care for the uninsured.

In addition to objections from small business, Schwarzenegger is sure to face opposition to taxes on doctors and hospitals, additional regulation of insurance providers and the extension of coverage to illegal immigrants.

"Imposing a new jobs tax on employers of any size and expanding costly government mandates is the wrong approach, one which will devastate our economy," the Assembly's Republican leader, Mike Villines, said in a statement Monday.

But Schwarzenegger said that while the plan will cost money, it will pump funds back into the health system because of the expanded coverage. "Everyone ends up with a better deal," he said.

Lee reported from Washington.

© 2007 The Washington Post Company