California Gov. Schwarzenegger Highlights How Health Care Reform Helps Businesses’ Bottom Lines

Comprehensive Reform Helps Employers and Employees

12/20/2007 -- With health care premiums rising faster in California than anywhere else in the nation, California Governor Arnold Schwarzenegger today joined large and small business leaders, labor, advocacy groups, hospitals and health care professionals to discuss how spiraling health care costs put California companies at a competitive disadvantage.

"Currently, businesses pay $15 billion in hidden taxes to cover the uninsured. Everyone pays more in premiums, co-pays, deductibles and other out-of-pocket expenses. Our plan contains costs by eliminating the hidden tax. It requires insurers to cover everyone so workers don't have to live in fear of losing coverage if they leave their job," said Governor Schwarzenegger. "It also protects small business with a sliding scale so some pay only 1% of payroll."

The Health Care Security and Cost Reduction Act increases affordability for everyone and controls rising medical costs by expanding coverage, improving access to preventive care and reducing costly, unnecessary emergency room visits.

* Provides affordable coverage. The state will create a new purchasing pool that will provide access to subsidized, affordable coverage to individuals and families with incomes between 100-250 percent of the poverty level. As a result, low-and-middle income people will be able to buy an affordable health insurance plan. The Act limits how much Californians will contribute toward the cost of their premium based on income.

o 100-150 percent of poverty: No contribution
o 151-250 percent of poverty: Premium limited to no more than 5 percent of income

* Protects middle-income Californians. The Act protects working families with higher incomes by providing a tax credit: Those earning between 250-400 percent of poverty will receive a tax credit if the cost of buying insurance exceeds 5.5 percent of income. The Act also calls for an additional tax credit to make health care more affordable for early retirees. In addition, anyone with an income above 250 percent of poverty who works for an employer who doesn't offer coverage will get a contribution toward their premium.

The legislation also requires employers to let employees pay their health insurance premiums on a pre-tax basis through IRS Code Section 125 plans. This will bring significant tax savings to middle-income Californians and their employers. By paying for health care benefits on a pre-tax basis, employees and employers will save approximately $2 billion dollars in state and federal income taxes and federal payroll taxes. The expected cost to an employer to establish a Section 125 plans is $200 or less.

According to a recent report by the California HealthCare Foundation, health care premiums in California went up by 8.3 percent in 2007, while premiums increased by 6.1 percent nationally. This increase is more than double California's 3.4 percent inflation rate. Since 2002, premiums in California have gone up by more than 86 percent, while at the same time nationally premiums have increased by 78.5 percent.

The Health Care Security and Cost Reduction Act, which was approved earlier this week by the California State Assembly:

* Requires that all Californians take responsibility for their health coverage (individual mandate).
* Guarantees that everyone who wants to buy insurance can get it (guarantee issue).
* Spreads responsibility across individuals, government, hospitals and employers (shared responsibility).
* Makes coverage more affordable for individuals and families through tax credits and subsidies.
* Helps keep hospitals and emergency rooms open by increasing Medi-Cal reimbursement rates.
* Allows individuals to choose their health coverage and keep their current insurance.

Source: California Governor

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