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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House Energy and Commerce Committee Chairman Henry Waxman and Representative Bart Stupak, chairman of the panel’s oversight committee, sent a letter dated Aug. 17 to dozens of health-insurance companies, including Blue Shield of California.

The letter asks the companies to name all employees who were paid more than $500,000 in a single year between 2003 and 2008 and to itemize their pay, including bonuses, stock options, perquisites and deferred compensation.

The panel is investigating “executive compensation and other business practices in the health insurance industry,” Waxman and Stupak wrote in the letter. The lawmakers asked the insurers to provide most of the pay information by Sept. 4, and the other data by Sept. 14.

Waxman, of California, and Stupak, of Pennsylvania, are among a team of House Democrats trying to beat back criticism of legislation to redraw the nation’s medical-care system. House Speaker Nancy Pelosi, a California Democrat, has complained about the insurance industry’s “immoral” profits.

The letter asked the companies to explain how they determined what to pay executives and provide documentation used by their boards’ compensation committees. It also seeks information about corporate events held off company grounds since Jan. 1, 2007, including how much was spent on transportation, entertainment, gifts and food.

Medicare Advantage

The lawmakers asked the companies how much they earn through programs such as Medicare Advantage, which allows private insurers to deliver federally funded benefits. They called on the companies to provide data on profits from the individual insurance market and insurance provided through employers.

The Obama administration has proposed financing its overhaul of the nation’s health-care system in part by cutting federal subsidies to insurers participating in the Medicare Advantage program by $175 billion over the next 10 years.

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As 7 million uninsured Californians face east to pray for basic medical coverage from the high priest of change, President Barack Obama and his populist administration face a nearly hopeless task: Get concessions from historically—and stubbornly—self-interested stakeholders.

Just ask Hillary Clinton, whose own reform efforts in the early ’90s met with a blunt death blow at the hands of conservatives equating “reform” with “complete government control.” Clinton herself did not help matters by sequestering herself with a handful of brilliant minds and delivering her secret proposal on the steps of Congress, arms folded: health-care reform as fait accompli.

But there may be hope. Not just the hope Obama brings with his stunning worldwide popularity, grassroots support and Democratic Congress. And not just the hope gained from Clinton’s lessons of reform meltdown.

No, Barack Obama has a secret weapon right here in California that may help him claim ultimate victory: our state’s own failed reform effort.

Although the state’s health-care effort flamed out just a year and a half ago—hammered at a Senate Health Committee by a 7-1 vote in bipartisan opposition—it remains one of the nation’s most successful stabs at reform.

The story of Gov. Arnold Schwarzenegger’s grand vision of universal care is packed with devastating illness, seething passion, fretful hand-wringing and vicious table pounding. It features every interest group imaginable, each with its own angle, agenda and ideology. Like a Hollywood thriller, the stories intertwine, good guys turn sour, and even the best intensions are suspect.

Most important, it serves as the best road map so far to guide Washington over the bumpy, dirty boulevard of health-care reform.

“A lot can be learned by those in Washington, D.C., on how the Schwarzenegger administration conducted the negotiations and discussions,” said Jot Condie, president and CEO of the California Restaurant Association. “Whatever happens in California from a major public-policy standpoint usually rolls eastward.”

“Some important momentum happened in California to get beyond the usual stakeholders,” agreed Daniel Zingale, a health-care policy veteran from the administrations of President Bill Clinton and Govs. Gray Davis and Schwarzenegger. On the national stage, “the stakeholders are not lining up as usual.”

“Our work in California laid the foundation for what the Obama administration is proposing,” said Assemblyman Dave Jones, head of California’s Assembly Health Committee.

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First 5 California will provide $16.7 million to the Managed Risk Medical Insurance Board, the agency that administers Healthy Families. The funds will be used to pay health care premiums for children up to age 5 who are new applicants to Healthy Families through the end of the fiscal year in June.

"Today's action will allow the state to continue to enroll tens of thousands of infants and children in the Healthy Families program, ensuring them access to much-needed health care services," said Governor Arnold Schwarzenegger.

With their unanimous vote Monday, State Commissioners affirmed First 5 California's ongoing commitment to helping ensure all children have access to health coverage, particularly during this period of high unemployment and economic instability.

"First 5's action shows that anything is possible when all sides come together to tackle a problem -- even in the worst budget times," said Senate President Pro Tem Darrell Steinberg.
Assembly Speaker Karen Bass added, "I thank the First 5 commissioners, including my appointees to the panel, for hearing our appeals and stepping up to the plate with a responsible resolution for these children."

Since voters passed Proposition 10 in 1998, First 5 California has established itself as the largest and most stable funding source of health coverage for children up to age 5 in California. Last year, the agency spent more than $48 million on children's health insurance.

"First 5 California is proud to help take this first step forward in expanding children's health coverage as part of our larger mandate to serve the needs of our state's youngest children," said Kris Perry, First 5 California executive director.

Forty-seven county commissions are committed to presenting their commissioners with requests to help provide part of this funding in the coming weeks.

First 5 county commissions that have pledged support include: Alameda, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El Dorado, Glenn, Humboldt, Imperial, Kern, Lake, Lassen, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Napa, Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito, San Diego, San Francisco, San Joaquin, San Luis Obispo, Santa Clara, Santa Cruz, Shasta, Solano, Sonoma, Stanislaus, Tehama, Trinity, Tuolumne, Ventura, Yolo and Yuba.

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"Onboard the Anthem Blue Cross HealthFair Bus visitors will receive, free-of-charge, a health evaluation consisting of a full lipid panel; weight, height and waist measurements; blood pressure test; and Body Mass Index analysis. Together, these tests provide a snapshot of one's personal health," explained Leslie A. Margolin, president of Anthem Blue Cross. "Anthem is committed to the community, offering this service regardless of employment, immigration or insurance status. By proactively empowering individuals with vital, personal, medical information, we are taking an important step toward keeping Californians healthy."

"We're particularly enthusiastic about this tour because we'll be reaching several populations that might not necessarily have access to basic primary healthcare," noted Margolin. "For example, in the greater Los Angeles area we are partnering with strong community organizations such as the Urban League, P.A.T.H. (People Assisting The Homeless) and the Kedren Community Mental Health Center -- offering the free health screenings to their constituents. Anthem is committed to improving the lives of the people we serve and the health of our communities."

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Over the past several years, they have pocketed billions of dollars in government subsidies selling private Medicare plans. They know that Democrats aim to cut those bonus payments, however, so they're searching for new ways to grow. They see universal health care, which could turn 46 million uninsured Americans into potential customers, as their next big opportunity.

President-elect Barack Obama has regularly listed universal health care among his top priorities. Even so, some experts believe, the new president must address his prime concern -- the economic crisis -- before he can think about launching an expensive health care program. As a result, they say, private insurers will likely endure the looming Medicare cuts with little opportunity to offset those losses.

"There isn't going to be a growth driver in the health insurance business for the next few years," predicts Robert Laszewski, an industry consultant who serves as president of Health Policy and Strategy Associates. "It's going to be very bad times relative to the very good times" health insurance companies have enjoyed.

Others still see a real chance for meaningful reform. They believe that the economic crisis has been caused in part by skyrocketing health care costs, which have been blamed for half of all personal bankruptcies and the decline of giant corporations such as General Motors and Ford . As a result, they feel that the country's leaders must address both issues at the same time.

Sheryl Skolnick, senior vice president of CRT Capital Group, belongs to that camp. The veteran health care analyst predicts that Democrats will pounce on the "irresistible opportunity" to pass a comprehensive health insurance bill now that they have the power to do so.

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Premiums continue to march upward but by and large seem to be in line with a trend seen last year: rising, but at slower rates than in the first half of the decade, when they rocketed higher and buffeted the local health care market.

Health insurance brokers who negotiate health plan packages for local companies say they are seeing some premium increases below 10 percent this year -- although depending on the plan and company size, some increases are far higher.

"It's all over the board," said Bud Martin of ABD Wells Fargo Insurance Services in Santa Rosa.

"It depends a lot on the size of the group and what kind of benefit structures they have," he said. "Sometimes it's 10 or 11 percent, sometimes it's 17."

Nationally, the annual cost of family coverage under employer-sponsored plans reached an average of $12,680 in 2008, up from $5,791 in 1999, according to the Kaiser Family Foundation, a nonprofit health research group. Employees' share of that annual bill hit an average of $3,354 last year, up from $1,543 in 1999.

Experts caution that workers shouldn't choose a plan on premiums alone, but should take into account factors such as how much they expect to use health care services.

"Often employees will just choose the plan that sounds the best or the name that sounds the best," said Debra Squyres, director of human capital consulting at TriNet. For example, an employee might choose a "Platinum" plan over a "Value" plan "not knowing really how that plan works," she said.

The San Leandro-based firm provides human resource outsourcing services including benefits management to about 900 Northern California firms.

Some plans, said Squyres, are not raising their premiums as much, but are offsetting that by increasing their patient deductibles, co-payments and out-of-pocket maximums.

That's not necessarily bad, because people who use their health services less may find that option more sensible and cheaper. But it illustrates why plans need to be carefully examined, Squyres said.

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But advocates say that if the Healthy Families Program needs such a drastic change, this would be the hardest decision to be taken in a 10-year history time. Lesley Cummings, the executive director of the Managed Risk Medical Insurance Board, said that nearly 162,750 children would have to wait almost six months before being checked by a doctor.

The program now gives medical insurance for almost 900,000 children and an averaged 27,000 kids are subscribed every month. If no action is taken, the system will reach a $17.2 million loss. A decision is expected to be taken in December and the waiting list will also be settled on December 18.

Cummings stated that if the board doesn’t cut the enrollment now, worse actions will be necessary taken later. "Capping enrollment, rather than eliminating coverage that a child currently has, seems the preferable path," he added. The bad thing is that kids who come from families who earn up to %250 of the federal poverty level are eligible for this health program.

Incomes of $3,667 a month divided to a family of three are $4,417 a month divided to a family of four makes it possible for the parents to subscribe their children to the Healthy Families Program. Those who are below this line get healthcare through Medi-Cal program.

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Programs and services at California Health & Longevity Institute are based upon the foundation of health and wellness: nutrition, fitness, medical and strategies for change. Leading experts including physicians, registered dietitians, exercise physiologists and lifestyle consultants offer immersive, customized group programs as well as individual consultations. A state-of-the-art medical clinic offers executive physicals, complementary medicine therapies such as acupuncture and diagnostic testing.

Companies are investing in longer-term solutions aimed at improving overall quality of life for employees and health of their organizations as the cost of employer-sponsored benefits continue to eclipse the majority of expenditures. Studies also note that more than 75 percent of employers' health-care costs in California and productivity losses are related to employee lifestyle choices (Centers for Disease Control and Prevention). Approximately $260 billion in output is lost each year due to health-related problems. (The Common Wealth Fund).

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Schwarzenegger, in a memo to lawmakers, called the so-called rescission practice “deplorable,” but noted he vetoed the bill because it lacked several consumer protections and was “written by the attorneys that stand to benefit from its provisions.”

The measure would have established an independent review process of each case and required that policies be rescinded only if insurers prove consumers willfully misrepresented their pre-existing conditions on a policy application.

Schwarzenegger said he wanted the bill to include six other protections, including a requirement that companies continue health insurance coverage for family members of someone whose policy has been dropped.

Assemblyman Hector De La Torre, D-South Gate, who sponsored the health care bill, said the governor's criticisms were ill-founded. He said the family protection provision was left off the bill because it was contained in a different measure that the governor approved, Assembly Bill 2569.

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Schwarzenegger, in a memo to lawmakers, called the so-called rescission practice “deplorable,” but noted he vetoed the bill because it lacked several consumer protections and was “written by the attorneys that stand to benefit from its provisions.”

The measure would have established an independent review process of each case and required that policies be rescinded only if insurers prove consumers willfully misrepresented their pre-existing conditions on a policy application.

Schwarzenegger said he wanted the bill to include six other protections, including a requirement that companies continue California health insurance coverage for family members of someone whose policy has been dropped.

Assemblyman Hector De La Torre, D-South Gate, who sponsored the bill, said the governor's criticisms were ill-founded. He said the family protection provision was left off the bill because it was contained in a different measure that the governor approved, Assembly Bill 2569.

“The governor is not fulfilling his obligation to the insured population of California,” De La Torre said. “For the foreseeable future they will be able to be dumped with impunity, as they have in the past.”

De La Torre also noted that the governor had stonewalled legislators in negotiations.

“It's good enough for him to get an applause line in the State of the State address, but it's not good enough for him to follow through and work with Legislature to make it happen,” he said.

Daniel Zingale, the governor's top health adviser, said Schwarzenegger's opposition to rescission is clear, noting that the state has taken several actions against California health insurance companies during his administration.

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In the last year, Health Net -- California's largest health insurer -- has been forced to pay a number of fines and penalties related to the company's policy rescission and cancellation practices, according to the Times. An investigation by the California Department of Insurance found that the company did not follow state laws whKen handling policyholders' claims and treated them unfairly. Health Net also will work with the department to make improvements to its cancellation and rescission practices and could face an additional penalty of as much as $3.6 million if a follow-up investigation finds that the company has not corrected all deficiencies, the Times reports.

The agreement allows Health Net to avoid any further penalties for potential legal violations uncovered by auditors. The California health insurance company did not admit any wrongdoing. Chief Executive Jay Gellert said his company did "not necessarily agree with the California Department of Insurance," but the settlement was a chance "to move forward and make sure these affected individuals can obtain coverage" (Girion/Lifsher, Los Angeles Times, 9/12).

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Increased premiums for low-income families are expected to put the program out of reach for many and a new insurance policy in California is also expected to cut enrollees, the paper said.

"The trend is likely to further destabilize California's already shaky healthcare system," the paper noted.

Studies have found that children without health insurance are less likely to go to the doctor for routine visits that allow early diagnoses and treatment for diabetes, obesity and other increasingly common ailments, according to the paper.

Between 2001 and 2005, the number of Californians younger than 19 who were uninsured at any given time decreased 25 percent to about 763,000, according to the for Health Policy Research at the University of California in Los Angeles.

Uninsured children in California tend to perform worse in school and miss more classes than those with coverage, several studies have found.

Most of the drop came through aggressive enrollment efforts in state and private healthcare programs and despite the erosion of employer-based insurance, which was leaving more adults without coverage, the paper said.

But legislative budget negotiators this year have decided to increase premiums for the state's California's Healthy Families program, which pays for medical care for more than 850,000 children of low-income workers who are above the federal poverty line.

The state estimates that the parents of 19,000 children will end up dropping out of the program by July because of the two-dollar or three-dollar monthly increases. A family with three or more children, earning between two and 2 1/2 times the federal poverty level of 24,800 dollars a year, would see the monthly premium rise to 51 dollars.

The state expects the rule to pare Medi-Cal rolls by about 196,000 children over the next two years.

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In a deal with state regulators, the insurers agreed to offer former members new coverage regardless of preexisting medical conditions and to reimburse them for medical expenses. In exchange, the California Department of Managed Health Care will close investigations into the companies' rescission practices. Regulators began mailing out notices to individuals Tuesday.

The state's largest insurers have all been widely accused of looking for ways to drop individual policyholders who incur high costs. The insurers contend that members who are dropped have misrepresented their medical histories on their applications.

The practice has been condemned by lawmakers, judges and regulators.

The agreements between the state and the insurers were unprecedented in their ambition to restore health insurance coverage. But they also have come under fire from consumer advocates.

The mailed notices triggered another flare-up.

Lawyers for policyholders expressed concern Friday at a hearing in a suit against Health Net over a plan for the insurer to notify former members about the state agreement.

State law stipulates that such notices go through lawyers for members of the presumed class, said Mike Bidart, one of the policyholder lawyers.

What's more, he said, California insurance policyholders would eventually receive court-approved notices about developments in the case, including any settlement.

"Our concern was that it creates tremendous confusion for people to get one notice and then another," he said.

Los Angeles County Superior Court Judge Victoria Chaney set a hearing for Sept. 2 to consider the issue. Then late Monday, Bidart said he learned that the state intended to send the notices out itself.

"I'm sure they are doing this because the courts don't currently have jurisdiction over the DMHC," Bidart said. "They are basically end-running what was about to be heard by the court."

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The bill aims to restrict profit on individual policies, mandate a minimum for benefits and regulate California insurance companies' ability to cancel plans retroactively, the Los Angeles Times reported Monday.

The plan falls short of Gov. Arnold Schwarzenegger's original plan of providing insurance for 5 million uninsured Californians, the Times reported.

State law makers rejected Schwarzenegger's $14.9 billion insurance plan in January, although insurance companies backed the bill, as it would have provided them with millions of new customers, the report said.

The new bill has little support from California health insurers because it crimps profits on some of their most lucrative policies, the Times reported.

A 2006 survey found that individual policies cost an average $259 per month, compared with $383 per month for policies purchased by small businesses for their employees.

Individual policy owners, however, paid three times the amount the group policy members paid for deductibles and co-payments, the Times reported.

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