California’s Healthcare Problems – Don’t Make the Problem Worse

By Consumer Alliance for a Strong Economy

The Governor yesterday unveiled a portion of his healthcare reform package, and there is good news and bad news for California consumers and small business owners.

The good news is that he has broached the subject of expanding Health Savings Accounts for consumers. HSAs are a valuable tool for consumers to afford healthcare insurance. They are relatively simple in that consumers put a portion of their incomes away into a tax-free savings account that can be used to pay for healthcare services.

The Governor’s proposal to expand availability of HSAs in California is good news. Our state is one of the few that tax HSA contributions, and the Governor should be commended for seeking to give consumers more power over their healthcare decisions.

Despite the Governor’s mild reforms announced yesterday, there is unfortunately more to the story. Small businesses should be concerned about a number of proposals being offered in the Legislature that the Governor has not taken a position on. These proposals – principally those offered by Speaker Fabian Nunez and Senate President Pro Tem Don Perata – are effectively tax plans on small business to fund healthcare for the uninsured.

Both Nunez and Perata consistently cite the large number of uninsured people in California and call for mandates on employers to offer health insurance to their employees. Having as many people as possible insured is a noble goal, but imposing mandates on small businesses with ever-shrinking profit margins is a dangerous move for California – especially when the root cause of high healthcare costs remain ignored by legislative proposals.

A largely ignored fact in the discussion over healthcare coverage is that a large number of people are voluntarily uninsured. Consider that over one million people who are currently uninsured are eligible for coverage under the state’s healthcare programs, Medi-Cal or the Healthy Families Program. Consider that private catastrophic coverage currently exists for consumers who do not wish to pay for costly low deductible policies. Consider that many uninsured are young and healthy people who do not regularly consume healthcare services.

If the Governor and Legislature are serious about getting more people insured, they should look to expand HSA plans and make healthcare premiums for individuals fully deductible for state income tax purposes. Other solutions exist that could well help contain the out-of-control costs of the current healthcare system. If the Governor is serious about fixing California’s healthcare system, he should come out and signal that legislative proposals that impose mandates on small businesses will never receive his signature to become law.

The bad news for small businesses is that the Governor has refused to reject plans that would impose new mandates on employers. Until the Governor indicates that he is willing to veto legislation that would require employers to either provide insurance for their employees or pay into a pool to provide government-run healthcare, consumers and small businesses should be greatly concerned.

If we are ever going to get a handle on rising healthcare costs, we have to make consumers a part of the solution. Forcing employers to pay for expensive plans will do nothing to lower the cost of healthcare services. All these mandates will accomplish is to reduce the number of jobs in California by forcing employers to lay off workers or relocate out of state. While many businesses offer health benefits to employees, it is largely because these are the businesses that can afford to do so. Small businesses with few employees and small profit margins often cannot afford to provide healthcare coverage. Forcing them to pay for insurance or pay into a pool that provides government-run healthcare is a good way to drive them out of business.

If the Governor is serious about reforming California’s healthcare system, he should send a clear signal that mandates are unacceptable. Making healthcare coverage more affordable – through HSA expansion and low-cost catastrophic coverage plans – makes good sense and puts more power into the hands of consumers of healthcare services. For the good of all California, he should draw a line in the sand and say NO to employer mandates and say NO to government-run healthcare schemes being advanced in the Legislature.

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