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Sep 13, 2003

CONTACT: Jerry Flanagan - 415-633-1320 or Jamie Court - 310-874-9989

New CA Employer Mandate for Health Coverage by 2006 Means State Has Deadline to Mandate Affordability

SACRAMENTO, Calif., Sept. 13 -- The California legislature passed legislation today that will provide health care benefits for the growing number of working Californians who do not have access to care. The Foundation for Taxpayer & Consumer Rights (FTCR) applauded the effort but said that how the legislature now addresses skyrocketing health care costs will determine the program's success or failure.

FTCR called upon the legislature to enact insurance and HMO premium regulation, price controls on doctors and hospitals, and a state-run insurance pool open to all Californians, whether employed or not, by 2006, the date of the plan's phase-in.

"Now that there is a mandate for employers to provide health care, we have a deadline to mandate affordability. That's good news," said Jerry Flanagan of the non-partisan, non-profit FTCR. "The legislature has delayed implementation of the bill for two years. Now it's time for the tough work to begin, of requiring insurers, hospitals and doctors to abide by appropriate price controls that limit profiteering, waste and fraud. The state cannot mandate a product that is grossly overpriced without regulating its costs. Employers now have an incentive
to engage in the health care regulation debate."

Under the proposed "pay or play" plan, employers of 20 or more employees must either provide health care benefits directly to workers or pay a fee for the worker to receive care from a state-run insurance purchasing pool. Amendments to the bill delay the implementation until 2007 for medium-sized employers, 2006 for large employers, and will not require employers with 20-49 employees to participate unless a 20 percent tax credit is adopted first. The bill does not provide protections for consumers on the amount of out-of-pocket charges they will be required to pay in order to access medical services.

HMO's and health plans claim that skyrocketing premiums are the result of increasing medical costs. However, in 2002, the cost of health insurance for a family of four increased 250 percent more than the rate of medical inflation, according to a 2002 Kaiser Family Foundation report. A report released this week by the Kaiser Family Foundation, found that employers are passing on higher health care costs to employees: Since 2000, employees' share of premiums for family coverage have increased from $1,619 to $2,412 a nearly 50 percent increase.

FTCR stated that Hawaii's 30-year experience with a similarly constructed "pay or play" system has shown that without cost controls, the solvency and stability of the health care system is threatened:

-- After 3 consecutive years of 10-28 percent premium increases, the Chamber of Commerce of Hawaii asked the state legislature and the governor to provide independent oversight of rates in 2002.

-- During that same year, health care premiums had increased 250 times faster than medical inflation.

-- The Hawaii legislature approved, and the Governor signed, legislation allowing a regulator to deny unfair premium increases.

The Foundation for Taxpayer and Consumer Rights is a California based non-profit and non-partisan consumer watchdog organization. For more information visit us on the web at http://www.consumerwatchdog or

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