Schwarzenegger offers sweeping insurance plan

SACRAMENTO, Calif. -- Gov. Arnold Schwarzenegger on Monday proposed extending health coverage to nearly all of California's 6.5 million uninsured residents, promising to spread the cost among businesses, individuals, hospitals, insurers and the government. Schwarzenegger said his plan will save $10 billion a year by cutting costs and redirecting money already in the health care system.

"My solution is that everyone in California must have health insurance," the governor said. "If you can't afford it, the state will help you buy it. But you must be insured. That is number one."

Under Schwarzenegger's plan, all Californians would be required to have insurance, although plans for the poorest people would be subsidized. Businesses with 10 or more employees would have to offer insurance to workers or pay 4 percent of their payroll into a state fund. Smaller businesses would be exempt.

Last year, Massachusetts became the first state to require universal health insurance. Massachusetts companies must offer insurance to employees or pay into a state pool.

"This plan one-ups Massachusetts," said Peter Harbage, a health care consultant with the New America Foundation, a nonpartisan think tank. "The governor has gone further and added doctors, hospitals and health plans" to those who must help pay.

The state would subsidize insurance for the estimated 1.2 million poor people who do not currently qualify for state health coverage. They would be able to buy insurance through a state-run pool and would have to make a small contribution toward their premiums.

Insurers could no longer deny coverage to people because of medical problems. And all children, regardless of their immigration status, would be covered through an expansion of the state and federal Healthy Families program.

The governor said savings created by his plan would offset new fees he is asking doctors and hospitals to pay -- 4 percent of revenue for hospitals and 2 percent for doctors.

The state also would increase what it pays doctors and hospitals through Medi-Cal, the state insurance plan for the poor.

The proposal immediately met with stiff resistance. Unions balked at the requirements for individuals, calling them a tax on the middle class. The mandate for employers upset many of Schwarzenegger's business allies, who fought a similar requirement just three years ago with his help.

Fellow Republicans also reacted negatively.

"Imposing a new jobs tax on employers of any size and expanding costly government mandates is the wrong approach," Assembly Republican leader Mike Villines said in a statement, predicting the proposal would "devastate our economy."

Allan Zaremberg, president of the California Chamber of Commerce, questioned whether businesses would be asked to pay more in the future as premiums rise.

"The biggest fear that we all face is that people who are satisfied with the system, who can afford the system, will suffer increased costs," said Zaremberg, a key Schwarzenegger ally.

The governor was supposed to give his address in person to a panel of health care officials. Instead, he spoke via video link since he is still recuperating from a broken leg suffered in a skiing accident.