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Covered California News & Commentary

Topics of interest to both consumers and agents related to Covered California and the ACA biased in favor of the successful implementation of the Exchange and deliberately apolitical.

December 2010 Archives

Governor Arnold Schwarzenegger today announced the appointments of Kimberly Belshé and Susan Kennedy to the California Health Benefit Exchange.

"We are once again taking first-in-the-nation action with the California Health Benefit Exchange," said Governor Schwarzenegger. "Both Kim and Susan are tremendous leaders that know how to get things done. With their deep understanding of health care, public policy and hands-on attitude, I know they will help build an exchange that will create a competitive marketplace, improve quality of care and reduce health care costs for California consumers."

Belshé has a distinguished background in the health care field with nearly 20 years of experience in related policy fields. Most recently, she has served as the secretary of the California Health and Human Services Agency since she was first appointed by Governor Schwarzenegger in 2003. In this capacity, Belshé has advised the Governor on all health, social services and rehabilitative policies, and serves as chair of the Governor's Task Force on Health Care Reform Implementation.

Prior to joining the Schwarzenegger Administration, she served in a number of leadership positions in state government under the administration of Governor Pete Wilson, including deputy secretary of the then-Health and Welfare Agency from 1991 to 1993 and director of the then-Department of Health Services from 1993 to 1999. After over a decade of public service in federal and state government, she served as the program director for The James Irvine Foundation from 1999 to 2003, a multipurpose foundation dedicated to expanding opportunities for the people of California.

Throughout her career, Belshé has served in a number of civic capacities. She is a board member of the Great Valley Center, which is dedicated to promoting the sustainability of California's Central Valley region, and a founding commissioner of the California Children and Families Commission. Additionally, she served as an executive committee member for the National Academy for State Health Policy, an organization dedicated to assisting states with solutions to complex health policy issues.

Belshé, 51, of Sacramento, earned a Masters degree in public and international affairs from Princeton University and a Bachelor of Arts degree in government from Harvard. Belshé is a Republican.

"The Exchange will improve the way millions of Californians get health insurance in our state," said Belshé. "I am honored to have this opportunity and I look forward to using my knowledge in health care policy to help shape the Exchange and focus competition on price, quality and service."

Kennedy has served as chief of staff to Governor Schwarzenegger since 2006. In this role, she has served as the Governor's chief advisor on all policy matters including the implementation of health care reform in California.

Previously, Kennedy served on the California Public Utilities Commission from 2003 to 2005, where she focused on regulatory consistency and broadband, infrastructure investment and promoting economic development. In addition, she served as a member of the California Bay-Delta Authority from 2003 to 2006, the statewide body responsible for overseeing the restoration of the San Francisco Bay Delta.

Kennedy served as cabinet secretary and deputy chief of staff for Governor Gray Davis from 1999 to 2003, where she was principal liaison to the cabinet and state agencies, departments, boards and commissions. Prior to joining the Davis Administration, Kennedy served as communications director for U.S. Senator Dianne Feinstein from 1995 to 1998.

Kennedy, 50, of Marin County, graduated with a degree in management from Saint Mary's College and attended San Francisco State University. Kennedy is a Democrat.

"I am honored Governor Schwarzenegger has given me the opportunity to reform our health care system in California," said Kennedy. "If we can do it in California, it can be done around the country. I look forward to developing a competitive health exchange that will give individuals and small businesses more affordable health care options."

The positions do not require Senate confirmation and there is no salary. Both appointments are effective January 1, 2011.

Earlier this year, Governor Schwarzenegger signed AB 1602 and SB 900 making California the first state-in-the-nation to enact legislation creating a health benefit exchange under federal health care reform. The California Health Benefit Exchange is an entity that will help California consumers and small businesses shop for and buy affordable health insurance starting in 2014. The Exchange will be governed by a five-member board appointed by the Governor and the legislature. Between now and the end of 2013, the Exchange board and staff will develop procedures and criteria to enroll Californians in the Exchange and select qualified health plans to participate. Similar to the purchasing pool proposed as part of comprehensive health reform advanced by Governor Schwarzenegger in 2007, the Exchange will enhance competition and give individuals and employees of small businesses the same advantages available to large employer groups including a more stable risk pool, greater purchasing power, more competition among insurers and detailed information regarding the price, quality and service of health coverage. Click here to read more on the California Health Benefit Exchange.

The Governor and his Administration have been working since federal health care reform passed to implement key elements in California before the 2014 start date. In April, the Governor announced the state will contract with the federal government to operate a temporary health insurance program for medically uninsured individuals with preexisting medical conditions. In July, the Governor's Administration submitted the state's proposal to the federal government to establish and operate the federal Pre-existing Condition Insurance Plan through a public-private partnership with contracted vendors and overseen by the California Managed Risk Medical Insurance Board. To implement this program and expand affordable health coverage to uninsured Californians with pre-existing medical conditions, the Governor also signed legislation creating the Federal Temporary High Risk Health Insurance Fund to receive $761 million in federal funding.

While some parts of the nation are figuring out how to block national health care reform or repeal the law, California has plunged headfirst into making it work. The Republican governor and the Democratic legislature are cooperating to smooth the way for a new approach to insuring and treating million of patients.

California was the first state to pass legislation this summer, outlining how it plans to set up the California Health Benefit Exchange. The state has also received a $10 billion Medicaid waiver from the federal government that will allow it to expand its Medi-Cal program and usher in some other changes in the new bill ahead of schedule.

But not everyone in California is happy that the state is moving forward with reform. The problem -- as I found out while working on our story -- is that it is all very complicated. And given it's complexity, it can be difficult to explain to the public. No one denies that, not even its most vociferous boosters.

One conservative group headed by former Rep. Newt Gingrich put out a wall chart that shows 159 new offices, bureaus, commissions and programs that will implement the changes in what they call "Obamacare." The chart is huge and contains hundreds of deadlines and processes that government, doctors, insurance companies and hospitals will have to meet. Even if it's an exaggeration (and many ambitious laws are complicated), or even if most of those deadlines can be met with careful planning, it's a thicket that critics think can't be eliminated.

Nonetheless, California's health planners are giving it their all. Implementing health care reform -- and proving it can work-- is a major priority of the outgoing Schwarzenegger administration. They think they can navigate through that thicket, find the money to pay doctors and cover poor patients, and organize a complex, detailed and controversial system to take care of the state's patients. It will take a while -- at least four years, perhaps more -- to find out if they are right.

PBS NewsHour.com


Judge Strikes Down Insurance Mandate

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On Monday, U.S. District Court Judge Henry Hudson ruled that the federal health reform law's individual mandate is unconstitutional, agreeing with plaintiffs in a Virginia lawsuit that the mandate exceeds Congress' power to regulate interstate commerce, the New York Times reports (Sack, New York Times, 12/13).

However, the ruling -- which marks the first time that a judge has struck down a central provision in the law -- did not invalidate the law or block its implementation, the Washington Post notes.

Virginia Attorney General Ken Cuccinelli (R) filed the lawsuit in March just hours after the new reform law was enacted, arguing that the mandate -- which requires nearly all U.S. residents to obtain health coverage by 2014 or pay a penalty -- also conflicts with a state law that protects state residents from such federal insurance mandates (Helderman/Goldstein, Washington Post, 12/14).

Hudson's Ruling

In his 42-page ruling, Hudson dismissed the Obama administration's argument that because all U.S. residents would need health care services at some point, the coverage requirement simply is a way to regulate how they would pay for their care.
He wrote that requiring people to purchase insurance "would invite unbridled exercise of federal police powers." He added, "At its core, this dispute is not simply about regulating the business of insurance -- or crafting a scheme of universal health insurance coverage -- it's about an individual's right to choose to participate."

Hudson also rebuffed the administration's argument that federal taxation law permits the government to levy a penalty on individuals who fail to obtain insurance coverage, the Wall Street Journal reports. The penalty "lacks a bona fide intention to raise revenue," he wrote.

However, Hudson declined to grant the plaintiffs' request to set an immediate nationwide injunction against the entire law or the individual mandate pending an appeal (Adamy, Wall Street Journal, 12/14).

Next Steps in Lawsuit

Hudson is the third federal district court judge in one of more than a dozen similar lawsuits to rule on the overhaul. In recent months, U.S. district court judges presiding over a lawsuit in Detroit and a separate challenge in Lynchburg, Va., dismissed those complaints. The Michigan lawsuit now is being reviewed in an appellate court in Cincinnati, while the Virginia challenge is under review at the Fourth Circuit Court of Appeals in Richmond, Va. (New York Times, 12/13).

Under standard procedures for such cases, the Cuccinelli lawsuit would proceed to Richmond appellate court for further review, CQ HealthBeat reports (Norman, CQ HealthBeat, 12/13).

The Times notes that judges at the Richmond appeals court now would have to consider opposite rulings on the same issue (New York Times, 12/13). Although the Department of Justice is expected to appeal Hudson's ruling, it is not clear how soon it plans to act, according to the Post. Meanwhile, Virginia Gov. Robert McDonnell (R), who welcomed Hudson's ruling, has launched an effort to gather other state governors to press DOJ to bypass the appeals court review and fast-track the case to the U.S. Supreme Court, the Post reports.

Following Hudson's ruling, Cuccinelli said he is continuing to seek the administration's help in moving the suit directly to the Supreme Court, but he declined to say whether he plans to file an independent petition. He said a fast-track review in the high court "is about creating certainty and finality," noting that a "normal process" that would take years is "just unacceptable for business, for doctors and for states" (Washington Post, 12/14).

However, some legal experts predict that a fast-track petition would face challenges along the way, Politico reports. Charles Fried -- a Harvard Law School professor and former U.S. solicitor general in the Reagan administration -- said, "Given that the health care mandate doesn't kick in until 2014, the argument for expediting it is not really strong," adding, "It's quite an unusual thing to do" (Haberkorn/Kliff, Politico, 12/14)


Read more: http://www.californiahealthline.org/articles/2010/12/14/judge-strikes-down-insurance-mandate-in-health-reform-law.aspx#ixzz187BiHT6S

Gov.-elect Jerry Brown (D) appointed Diana Dooley (D) as the next secretary of California's Health and Human Services Agency.

Dooley currently serves as president and CEO of the California Children's Hospital Association and previously worked as a special assistant to Brown during his previous term as governor. Dooley will replace Kim Belshé, who has held the HHSA secretary post since 2003 (Anderson, Fresno Bee, 12/7).

Job Duties

In her new role, Dooley will be involved in the implementation of the federal health care reform law. She will serve as one of five members on the board that will manage the California Health Benefit Exchange.

Dooley's other job duties will include:

  • Administering Medi-Cal, the state's Medicaid program;

  • Managing more than 33,000 employees;

  • Overseeing HHSA's annual budget of about $25 billion in state funds and nearly $60 billion in federal funds; and

  • Running health programs for children living in low-income households

Read more: http://www.californiahealthline.org/articles/2010/12/8/brown-announces-appointments-for-top-health-budget-positions.aspx#ixzz17YoXvYs2

Newly elected California Insurance Commissioner Dave Jones (D) says he plans to hit the ground running by reining in excessive rate hikes while maintaining an active voice in the development of the health insurance exchange program.

Addressing the new Republican gains in the elections and the challenges to health reform, Jones says people need to look beyond the rhetoric, and at the reform law's individual parts. "There are a number of immediate benefits provided to Americans and to businesses....I believe once people obtain those benefits, they'll see the value in keeping reform intact," Jones tells HRW, challenging the views of his Republican predecessor Steve Poizner, who contended the statute was unconstitutional and would contribute to the state's fiscal problems.

State insurance commissioners obtain their positions either through a governor's appointment or the election process. Four new insurance commissioners were voted into office Nov. 2, among them Jones, who defeated fellow state Assemblyman Mike Villines (R), and Ralph Hudgens (R), who succeeds Republican John Oxendine in Georgia. In Oklahoma, John Doak (R) unseated incumbent Kim Holland (D), while Sandy Praeger (R), who chairs the National Association of Insurance Commissioner's Health Insurance and Managed Care Committee, was re-elected unopposed in Kansas.

Recent media reports have questioned how influential these commissioners will be in crafting health reform policy. There's no doubt they will continue to serve as relevant leaders in their state, Alan Weil, executive director of the nonpartisan National Academy for State Health Policy, tells HRW. "Certainly on the ground the insurance commissioner is going to be very involved in the oversight of plans, particularly the rating provisions, which are a key part of the law."

On other reform matters, however, such as the design of the insurance exchanges, he says, "their voices will be one of many other players," such as the governors and "even the Medicaid state agency or independent boards" appointed to create these things, Weil says.
"The exchanges have multiple functions, the primary one being to enter into contracts with health plans, and the second one is to deliver subsidies to moderate-income families, and neither of those are traditional insurance commissioner functions," Weil says.

Jones sought to challenge some of those views in an interview with HRW. The reform law carves out a very explicit role for the insurance commissioner: "It says both [HHS] as well as the exchange authority in each state needs to consult with and confer with the commissioner in drafting of regulations and implementation of the exchanges. I plan to play a very active role in that process," says Jones, adding that he'll be working with California's newly established exchange authority to accomplish these tasks.

In developing the exchanges, "I think one of the most important things we need to address is making sure that the health insurance companies and HMOs do not have the ability to essentially cherry-pick healthy lives outside of the exchange and just leave in the exchange those who are ill or who have a high propensity for illness. That would undermine success of the exchange," Jones says.

Rate Hike Authority Exists for Other Insurance

Jones also plans to work toward his long-time goal of granting California's insurance commissioner the authority to reject excessive rate hikes. "I continue to believe it's one of the missing pieces of national health care reform," he says. The commissioner already has such authority under a state constitutional provision known as Proposition 103, which applies only to auto, property and casualty insurance.

Insurers have "vociferously opposed my legislation in the three prior sessions [of the state Assembly], and I have every belief they will continue to do so, but in wake of these double-digit increases year after year, there's a growing awareness among California voters that this is a reform that's badly needed," he says.
State legislation to limit insurers to just one rate hike a year was vetoed on Sept. 30 by Gov. Arnold Schwarzenegger (R). The outgoing governor reasoned that the bill was premature since the federal government already was working with states to establish a process for the annual review of unreasonable premium increases.

California's legislature did pass a law this year, however, "that will require information on cost drivers of health insurance premiums and independent actuarial analyses of rates. So regulators will have the ability to review all of that data as required now by state law and the new reform law," Patrick Johnston, president of the California Association of Health Plans, tells HRW, adding "we should give these statutes a chance to work."

Blue Shield of California and Anthem Blue Cross in California both declined to comment.

On the issue of medical loss ratios, Jones said he was generally pleased with the NAIC's MLR recommendations, although he conceded there are areas that HHS Sec. Kathleen Sebelius could seek to improve upon in its forthcoming regulations.

"Specifically, I was disappointed to see a number of federal and state taxes [beyond what the Democratic authors of the bill had intended] were allowed to be included as a part of the calculation," he says.

As Jones vows to rally for the health reform law, new Republican commissioners are just as likely to oppose it. While unavailable to provide comment to HRW, Hudgens in a recent radio interview opined that "the insurance commissioner 'can't do squat on the health care law,'" says Stephen Northington, president of Group Insurance Solutions, LLC, an insurance brokerage firm. Northington ran against Hudgens in the primary for commissioner, but lost along with several other candidates.

"Certainly the rest of us in the race were in a very different position on that because we felt the insurance commissioner's office can do something with regard to the regulations being written," Northington tells HRW. He adds that Hudgens has probably changed his mind since the interview. "I do believe he is going to oppose the health care reform law, and I know the attorney general is as well." The two offices in all likelihood will work together to make sure that Georgia espouses that position, he says.

Georgia had previously decided not to participate in the reform law's high-risk pool program on the basis that it would be too costly for the state, Northington says. The state, however, did accept the $1 million HHS provided to set up its health insurance exchange, "so my guess is the insurance commissioner's office is going to move forward with putting the exchanges in. My hope is the state would...not give more power to the federal government, and I would assume Ralph would have that attitude as well.

Reprinted from AIS's HEALTH REFORM WEEK, a new newsletter designed to help savvy business leaders in health care understand what the enormous changes mean to them ... and what they can do about it.

By Jennifer Lubell, Associate Editor (jlubell@aishealth.com)

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