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Aug 18, 2003

CONTACT: Jerry Flanagan - 415-633-1320

Vying for Control, Insurers Contribute $285 K To Davis' Anti-Recall Campaign

CA Legislature to Convene Health Care Reform and Workers' Compensation Conference Committees

As the state legislature prepares to convene two conference committees addressing the state's ailing health care and workers' compensation systems, insurers -- opposing oversight of the rates they charge consumers and other pending reforms -- have contributed $285,000 to Davis' ant-recall effort:

* On August 14, HealthNet contributed $25,000 to the "Governor Gray Davis" committee.

* On August 13, the state's most profitable health insurer, Blue Cross, contributed $20,000; Molina, a Southern California HMO that recently went public, contributed $10,000.

* Robert Gumbiner, founder of another HMO, FHP, which later merged with PacifiCare, contributed $100,000 to Davis' "Taxpayers Against the Recall" committee on August 4, 2003.

* On July 29, the HMO PacifiCare gave $25,000 to the "Governor Gray Davis" committee.

* On June 4, Zenith, the state's second largest private workers' compensation insurer, gave the "Taxpayers Against the Recall" committee $100,000.

* The non-profit HMO, Blue Shield, contributed $5,000 to the "Governor Gray Davis" committee on May 6.

"Politicians influenced by insurance company campaign contributions must remember that their constituents are being priced out of the market due to insurer waste and profiteering. Governor Davis and the legislature must address the one issue that voters and small business owners care most about: affordability," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights.

In response to 30% and higher workers' compensation and health care premium increases, Senate pro Tem John Burton will convene two conference committees later this week to consider more than 20 reform proposals. Health care reform is likely to be tied to worker's compensation reform, which Governor Davis has said is one of his top priorities.

SB 2, authored by Senator Burton, requires employers to either provide health care benefits to their workers and their dependents or join a state-sponsored insurance pool. The measure, known as "pay or play," could go a long way to increase access to health care coverage in that more than 80% of California's 6.5 million uninsured are working families. In the past, opposition from the business community has been the root cause of failed universal health care reform. This year, the logic of employer affordability has provided common cause to reform efforts in the health care and workers' compensation systems because when a business provides health care benefits, employees are less likely to seek coverage from the costly and inefficient Workers' Compensation system. Simply, when workers are in good health they are less susceptible to workplace injuries. Davis has not taken a position on the labor-backed SB 2.

A key aspect of the workers' compensation debate will be whether doctors, hospitals and physician groups will be required to abide by pre-determined fee schedules.

"For consumers, rising costs equate to decreased access. The fundamental public policy issue is the lack of control over costs whether it concerns prescription drugs, monthly insurance premiums, hospital charges, or physician rates," said Flanagan. "The verdict is still out as to whether politicians will protect California consumers and small business owners by requiring all players to abide by efficiency standards."

Bills to Watch:

Senate Bill 2

Authors: Senate President pro Tem John Burton (D- San Francisco) Senator Jackie Speier (D-Hillsborough)

Sponsors: AFL-CIO & California Medical Association

The vehicle of health care reform in the legislature will be a "pay or play" bill, SB 2 sponsored by the President pro Tem, John Burton. This bill requires all employers to either provide health benefits to their employees and dependents or pay for coverage through a state run health care program. Two other versions of the model will be considered in the committee, one by the chair of the Assembly Health Committee, Dario Frommer, AB 1527, which would provide tax credits for small businesses, and a health insurer sponsored bill, AB 1528, by Rebecca Cohn.

Senate Bill 26 Authors: Senator Liz Figueroa & Senate President pro Tem John Burton

Sponsors: The Foundation for Taxpayer and Consumer Rights & AARP

There are several key components missing from the mix of bills to be considered in the conference committees, including cost controls and a plan for an effective state-run purchasing pool. Policy elements of SB 26 and SB 921, respectively, provide a plan for each of these missing elements and should be included in the discussion. A third bill, AB 30, by Assembly Member Richman provides a plan to utilize available federal funds to expand public programs to cover eligible consumers.

The Figueroa/Burton proposal, SB 26, directly addresses the need for eliminating waste, inefficiency and profiteering in the health care system by proposing a "prior approval" process for health insurance rates. This proposal, modeled after the vastly successful insurance reform ballot initiative Proposition 103, requires insurers to get prior approval from state regulators before raising rates.

In California, insurers commonly spend between 20-30% of every health care premium dollar on administrative costs, advertising, executive salaries, surplus, and profit. 26 states currently require some state oversight of health insurance rates.

Senate Bill 229

Author: Senate President pro Tem John Burton

Supporters: California Labor Federation

Several bills bridge the gap between health care reform and workers' compensation reform. A separate conference committee is scheduled to consider several Workers' Compensation reform proposals. Employer concerns with controlling costs and the similarity in the structure of SB 2 proposal and the existing Workers' Compensation system make a strong argument for rationalizing the two systems. SB 229 would provide relief to skyrocketing workers' compensation insurance by capping premium increases for all small businesses that also offer health insurance benefits.


The Foundation for Taxpayer and Consumer Rights is a non-profit and non-partisan consumer advocacy organization.