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September 15, 2009

California Leaders Back Health Program for the Poor

Dismayed by the number of poor children about to be dropped from a publicly subsidized health insurance program, California lawmakers voted Thursday to levy a tax on insurance companies to help maintain the program, which had been slashed into near nonexistence as part of the state’s budget.

The remarkable last-minute deal — in which Democrats wrote the bill’s language and the Schwarzenegger administration leaned on health insurance companies to accept it — may well presage efforts by other states to involve the health insurance companies in efforts to insure people as Congress hotly debates similar measures at the federal level.

The program, Healthy Families, which insures roughly 700,000 children of needy parents who earn too much to receive Medicaid coverage, had been almost eliminated this summer through $175 million in reductions made by lawmakers and Gov. Arnold Schwarzenegger. Grappling with large budget deficits, the governor and his fellow Republicans in the state legislature adamantly opposed new levies of any sort to salvage state programs.

But in a rare moment of bipartisanship budgeting, Republicans and Democrats together passed the bill by the required two-thirds majority: on Wednesday the State Senate voted in favor of the measure, 27 to 8, and on Thursday, the Assembly voted 58 to 0. The new legislation replaces an existing tax on insurers that was about to sunset with a smaller levy, one that will ultimately be reimbursed to the insurers through a mix of Medicaid matching money and federal stimulus monies.

“In this particular situation, I didn’t see this as a tax increase,” said Dave Cox, a Republican state senator who helped push for passage. Mr. Cox was one of several Republican lawmakers who criticized tax increases during the summer budget battles.

“To have 600,000 or 700,000 kids walking around without coverage would have been a disaster,” he said. “It was just the right thing to do.”

Since mid-July, the insurance program had been closed to all new enrollment, and had accrued a waiting list of 71,000. Currently $196 million in the hole, the program was set to drop about 600,000 children in November.

Under the new law, which Mr. Schwarzenegger has pledged to sign, health insurance companies that participate in the state’s Medicaid program will face a 2.35 percent tax on gross revenues, replacing the 5.5 percent existing tax that will end in October.

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Posted by healthinsurance at 09:31 AM | Comments (0)