CAHU
The Governor's Healthcare Plan: Not a Good Solution,
But A Good Start

by Jeff Miles

   After years of complacency, California is about to attempt to reform its healthcare system. Too often, we place the onus of fixing healthcare on one sector, whether it is employers, individuals, healthcare providers, government, or insurers. All of these sectors attended at the Governor’s plan rollout in January, including myself representing the California Association of Health Underwriters (CAHU).

   Governor Arnold Schwarzenegger’s recently announced plan to cover all Californians is remarkable not just for its scope and ambition but also for its understanding that quality, health coverage is a responsibility shared by all Californians. While many of its principles are sound, a great deal must be reconsidered and reworked if true and lasting reform is to occur.

CAHU has been a vocal supporter of shared responsibility as a keystone to real healthcare reform. The two central tenets of this approach are universal access and mandatory participation. Californians must be able to get the medical care they need, but this right depends on everyone supporting the system.

   Public-private partnerships have driven America’s healthcare system for the past four decades and it is refreshing to see that the Governor has embraced that principle. However, more can be done to reduce bureaucratic duplication between the public and private sector.
For instance, the proposed state-run insurance pool would provide a function that the private sector already performs quite well: connecting individuals to a range of health plan options. In other words, the government wants to take on the role of the agent. Redundancies such as this add unnecessary expenses that hurt California’s ability to offer a dramatic solution and create an unnecessary bureaucracy.
Under the proposal, insurers would also be required to spend 85% of consumer premiums directly on healthcare. While patient-centered care is a vital part of a functional health system, an arbitrary cap on administrative expenses would do more harm than good to consumers.

   Some advocates for healthcare reform seem to believe that any dollar spent on administration is wasted. Those with this view fail to see that proper administration is an integral part of providing effective service and protection to consumers. When developing guidelines, reformers should keep the needs of patients chiefly in mind and ensure that they are accorded an appropriate level of administrative support.

   Healthcare is an extraordinarily complicated process, which can be difficult for consumers to navigate. Caps on administration could diminish the consumer experience by limiting responsiveness to consumer requests for information, claims, and even something as trivial as a request for a new identification card. Administrative expenses also allow for advanced fraud management measures designed to protect consumers from over billing by providers – a practice that adds to the escalation of health insurance premiums.

   The emphasis on cost containment measures is one of the strongest aspects of the plan. CAHU has consistently called upon the State to reform the tax code to conform to federal rules paving the way for individual health savings accounts (HSA) and we are extremely pleased that the Governor has heeded our call. HSAs provide an extraordinary tool for individuals to manage their healthcare expenses; they are a necessary part of expanding access to affordable coverage.

   A better regulatory environment could lead to greater use of cost-saving developments, such as retail clinics and health information technology. By minimizing unnecessary physician visits and striving to eliminate medical error, healthcare premiums could begin to fall. Retail health clinics are an idea whose time has come and I expect legislation this year to reduce regulatory barriers to them.

   To be sure, Schwarzenegger’s proposal is not perfect. All stakeholders affected by its provisions will have serious reservations about certain aspects of his agenda. Whatever one’s feelings about specific provisions, it should be encouraging that, for once, there is a real impetus for change. I have no doubt that any final product will deviate in many ways from the current plan, but the prominence of shared responsibility is a reason for cautious optimism. Over the next several years, CAHU will continue to advocate for sensible reform of our public-private healthcare system.

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Jeff Miles is the founder and two-time president of the California Association of Health Underwriters. He can be reached at jeff@milesorg.com.