The California State Senate in late May passed SB 562, which would move the state to a single-payer healthcare system. On June 23, California Assembly Speaker Anthony Rendon announced the bill would remain in a rules committee “until further notice.” However, because the California legislature sits in a two-year session, the action does not mean the bill is dead. On the contrary, Rendon says, it gives legislators time to debate and discuss much-needed changes to healthcare that could have national implications.
“The Senate can use that time to fill the holes in SB 562 and pass and send to the Assembly workable legislation that addresses financing, delivery of care and cost control,” Rendon says.
Since the bill could have an impact on healthcare not only in California, but also nationwide, EBA spoke with John Scatterday, senior vice president and public agency employee benefits ractice leader at Torrance, Calif.-based benefit brokerage Keenan, to understand the firm’s and employers’ view of the bill. What follows is an edited version of the conversation.
EBA: What are Keenan’s thoughts on the single-payer initiative?
Scatterday: We did a briefing recently for our customers. The reality is that the California Senate Appropriations Committee noted that cost estimates are subject to enormous uncertainty and that is because it is an enormous task to completely rebuild the California healthcare system from one that is a multi-payer system into one that is effectively a single-payer, fee-for-service one and creating infrastructure for administering care through a single-payer.
The committee estimates the total cost in the $400 billion per-year range. There are existing state and local funding levels today of about $200 billion. In a nutshell, about $200 billion would be required in additional tax revenues to make this happen. That is a very significant tax increase. If you put it in context, the California budget — the entire state budget — is $167 billion in the 2016-2017 fiscal year. Talk about a tax increase, it would be 25% larger than entire state budget.
Keenan’s perspective is this is fluid and if you look at the polling, [there is] very strong [public support] if this is free. But, the polling isn’t very strong when folks recognize that this would represent a significant tax increase. We will have to see where it goes. Clearly, Gov. Jerry Brown has staked out a position that he will not support this and would veto if it involves a tax increase.
There is ambiguity on how this would impact self-funded employers. It is clearly very well defined that it would eliminate all fully-insured health insurance.
Keenan’s perspective is what I just stated: That its fluid and this would be very expensive. And, like anything, $400 billion is just sort of a best guess at this point, it could be a lot more.
It is clearly on everybody’s radar and could have dramatic implications. But the enormity of the tax burden seems, in my perspective, that it is going to be a challenge.
EBA: Are employers concerned?
Scatterday: They are curious about it. I wouldn’t say they are concerned. The average customer thinks this is way too early to get to worked up about. They have heard about it, so they are curious and they are pragmatic about the odds of a bill with that kind of price tag passing in a state that is one of the most highly taxed states already. They are not concerned; they are curious.
EBA: With so much uncertainty in the marketplace, how do you advise clients?
Scatterday: First and foremost, we do our best through a variety of mediums to keep our clients as up to date as possible. We do it through webinars, we do it through briefings. We certainly meet with many of our clients as often as possible and are constantly keeping them appraised on issues that are topical, whether it is changes to the ACA, like the deferral of the Cadillac tax.
The point is it is our job to keep our customers abreast and current of what is going on and how we think it could impact them real-time. Customers appreciate that, they know that things are fluid.
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