California Healthcare Reform:Sound and Fury Await Preemption
by Alan Katz

A lot of blood, sweat, tears, and money have been spent on the healthcare reform debate in California. Hordes of lobbyists, armies of state staffers, thousands of citizens, several lawmakers, and the Governor have labored long and hard to create a package of reforms that can garner enough agreement to become law. The work will continue for some time.
      Some pundits say that nothing will come from all this. The differences are too wide; the costs are too great; and the parties are too polarized to find common ground. Others (and I’m among them) think that the differences are overstated; the financing will be decided by voters next November; and the political impetus to accomplish something will overcome the politics of polarization.
      As I watch the presidential campaign unfold, I’m wondering how much it all matters. Whatever California accomplishes on the health care reform front is likely to be preempted before it can have much impact.
      If the Governor and legislative leaders fashion a workable compromise in the next several weeks, most of its provisions are likely to be contingent on approval of an initiative on the November 2008 ballot to finance the reforms.       This means that few of its provisions are likely to kick in before 2010 and some will take a year or two more to implement.
      On that same ballot, we’ll elect a new president. Whoever wins will have spent considerable time pledging to improve the nation’s healthcare system.       While there are some differences among the candidates, the proposals tend to break along party lines. Democrats call for mandating healthcare insurance for all Americans, although none of the major candidates supports a single payer system. Republicans focus more on market-based solutions that do not require mandates. (Wharton School’s site has a good summary of how healthcare reform is shaping up in the presidential campaign.)
      The healthcare reform debate in Washington will be as vocal, complicated, and passionate as it has been in California. Nothing will pass immediately, but there will be tremendous pressure to enact something before the 2010 Congressional elections. After all, with unions and big business standing side-by-side calling for change, healthcare reform is rapidly becoming a non-partisan issue. Calls for reform will grow louder if several states pass markedly different reform plans (patchwork approaches to national problems aren’t favored in this country). And if several of those state efforts fall to ERISA challenges, the outcry for a national solution will be deafening.
      So let’s assume the new president signs a national healthcare reform package before November 2010. From a practical standpoint, this means that the implementation of a national healthcare reform package would begin in 2012, give or take a few months. Since federal law trumps state law, much of what’s in place in California, Massachusetts, Vermont, and elsewhere will be preempted. After all the debate and hard work, most of what was built here will be swept away.
      The impact on state’s like California is almost Shakespearian (”Out, out, brief candle! Life’s but a walking shadow, a poor player that struts and frets his hour upon the stage, and then is heard no more. It is a tale told by an idiot, full of sound and fury, signifying nothing.” Macbeth Act 5, scene 5).
Passage of a California solution could still have great value. It would be a model for national reforms, add pressure for federal action, and be a safety net in the event of federal inaction.
      So, we’ll continue to trudge along, debating passionately the nuances of the mandated Medical Loss Ratio provision, what affordability looks like and the fairness of mandating coverage. We all need some sound and fury in our lives. And besides, “… there’s nothing either good or bad, but thinking makes it so.” (Hamlet, Act 2, scene 2).
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Alan Katz is a past president of both the National and the California Association of Health Underwriters. In 2003, NAHU named Alan the Health Insurance Person of the Year, awarding him that year’s Harold R. Gordon Memorial Award. To read Alan’s Blog, visit http://alankatz.wordpress.com.