California’s health premiums have risen faster than anywhere else in the United States. The spiraling health care costs, according to Schwarzenegger, undermine Californian companies’ competitive advantage.

Gov. Schwarzenegger said “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. It also protects small business with a sliding scale so some pay only 1% of payroll.”

He added that the Health Care Security and Cost Reduction act raises affordability for all and manages rising medical costs by widening coverage, improving access to preventive cases and bringing down expensive, and needless emergency room visits.

Providing affordable health coverage

Families whose incomes are between 100%-250% of the poverty line will have access to subsidized and affordable coverage – this will be made possible when the state creates a new purchasing pool. Consequently, low and middle income Californians will be able to purchase a health insurance plan they can afford. The Act puts a ceiling on how much a Californian has to contribute towards premium costs, this is based on income. If a person’s income is 100%-150% of poverty there is no contribution, if his/her income is 151%-250% a premium cannot amount to over 5% of his/her income.

Protecting middle-income Californians

Those with higher incomes will be entitled to a tax credit. A person who earns 250%-400% of poverty will receive a tax credit if his/her insurance costs are over 5.5% of income. The Act also provides an extra tax credit for those who retire early. If your income is over 250% of poverty and your employer does not offer coverage you will receive a contribution toward your premium.

The Act also makes employers let employees pay their health insurance premiums on a pre-tax basis through IRS Code Section 125 plans, bringing substantial tax savings to middle-income Californians and their employers – a saving of about $2 billion in state and federal income taxes and federal payroll taxes. It is estimated that it will not cost an employer more than $200 to establish a Section 125 plan.

While health insurance premiums rose by 6.1% nationally, in California they rose by 8.3% in 2007 (California HealthCare Foundation) – over double the state’s 3.4% inflation rate.

The Health Care Security and Cost Reduction Act was approved by the California State Assembly last week.

Some Highlights of The Act

— Every Californian should take responsibility for his/her health coverage
— Every person who wants to buy insurance is guaranteed to get it
— Responsibility is shared across government, hospitals, employers and the individual
— Tax credits and subsidies will make coverage more affordable for individuals and families
— As Medi-Cal reimbursement rates will increase hospitals and emergency rooms are more likely to be kept open
— People will be able to select their health coverage and keep their existing insurance

Source – Office of the Governor of California Website

Written by – Christian Nordqvist