SB-562: The Healthy California Act

Here we go again. A proposal in California for a single-payer healthcare system was introduced and read on February 17, 2017 in the California Assembly. The universal healthcare measure was proposed by state Sens. Ricardo Lara (D-Bell Gardens) and Toni Atkins (D-San Diego).

The proposal outlines that one state agency would manage the financing of everyone’s healthcare. Ambitiously, the state would cover all medical expenses for every resident, regardless of their income or immigration status, including inpatient, outpatient, emergency services, dental, vision, mental health and nursing home care. Although funding remains unclear, employees and employers would likely be taxed, and the state agency would combine that money with the funds California currently has allotted for Medicaid, Medicare and other health programs. Most alarmingly, private insurers would be prohibited from offering benefits that cover the same services as the state. It’s important to note that SB-562 does not replace California’s workers’ compensation insurance system.

Single-payer legislation has been introduced many times in the state. The Legislature became the first in the country to pass a single-payer bill in 2006, but it was vetoed by then-Gov. Arnold Schwarzenegger. This proposal is likely now being made after the disarray in Washington surrounding the proposed repeal of the Affordable Care Act.

There are many hurdles facing this bill. The biggest hurdle is funding. The authors say they intend to pay for the program through “broad-based revenue,” but details of a funding proposal have not been hashed out. Although enthusiastic, Governor Brown has expressed deep skepticism regarding how to pay for such a system. The governor points out that the overall cost of medical care in California is equal to 18% of the state’s gross domestic product, which would be about $450 billion.

Most recently, on April 17, 2017, the bill was re-referred to the Committee on Health. Assemblyman Jim Wood, Chairman on the Health Committee, has also expressed skepticism, noting the devil is in the details of how to pay for a single-payer healthcare system in California. During his election campaigns, Brown received more than a quarter-million dollars from groups opposing the bill.

Another problem the bill faces lies in Washington, D.C. The federal government would have to give California permission to take federal money allotted to Medicare and Medicaid for use in an entirely different project. Jennifer Kent heads California’s Medicaid program and has said that no state that has looked at single-payer systems has been able to clear this hurdle. In fact, it would require cooperation from the Trump administration to waive rules regarding use of federal Medicare and Medicaid dollars. Increasing the federal government’s role in state government and healthcare comes precisely as President Trump and Republicans in Congress look to reduce the role of government.

It’s hard to say exactly how this bill will work with California’s workers’ compensation system, partly because the legislation makes several findings in support of its goal, but none of which mention medical care covered by workers’ compensation. That does not mean, however, that healthcare reform and workers’ compensation medical benefits are not inextricably linked. Right now, the bill analysis requires the board (consisting of nine members appointed by the Legislature) to develop a proposal for Healthy California coverage of healthcare services currently covered under the workers’ compensation system, including whether and how to continue funding for those services under that system and whether and how to incorporate an element of experience rating. Further information can be found at the California Legislature’s website.

It’s easy to imagine a situation where California employees receive medical treatment for industrial injuries through the state’s single-payer system rather than through their employer. Californians might feel more comfortable going to a doctor they know and trust, since SB-562 allows every Californian to receive healthcare services from any participating provider. Californians might be less inclined to file DWC-1 claim forms, partly because they would be required to treat within the Medical Provider Network (MPN) of their employer’s carrier. With more Californians able to receive healthcare paid for by the state under SB-562, we might actually see the size of MPNs grow. This could potentially increase the number of employees filing claim forms, knowing that they can most likely treat with a doctor of their choice for their industrial injuries.

SB-562 could also change the standards for Utilization Review (UR) in the workers’ compensation system. Right now, private healthcare plans have much more liberal UR standards than the Medical Treatment Utilization Schedule (MTUS), which gives injured workers greater access to medical treatment. However, in an effort to cut down on costs following the sudden access of Californians to medical treatment, the state could adopt a UR process that is more in line with the MTUS than is currently used by private health care plans in California. This would mean that more and more medical treatment would be considered unnecessary to cure or relieve the applicant’s condition from the effects of his or her injury.

Another issue is whether or not employers will still be permitted to be self-insured, including for workers’ compensation claims. Right now, many self-insured employee welfare benefit plans use third party administrators (TPAs) to administer their workers’ compensation funds. These TPAs often take advantage of the contractual rates afforded to large private healthcare providers. If these large private healthcare providers end up leaving California because they cannot stay competitive under SB-562, then the fate of self-insured employee welfare benefit plans’ ability to pay for workers’ compensation claims is uncertain.

Opponents to the proposal say that injured workers would likely be subjected to even lengthier waits to see a doctor for self-procured medical treatment and that injured California workers could expect a reduction in the quality of their care. The bill has been called a job killer by opponents, although the bill analysis provides no specific information on this allegation. Opponents also state the bill would result in drastic budget shortfalls, ultimately requiring more cuts in services to injured workers.

Boehm & Associates wants to assure its clients that we are watching the progress of this bill closely and will not hesitate to advocate for our clients at the earliest opportunity.