Schwarzenegger Vows Health-Care Reform Bill Veto

September 12, 2007 ( - California Governor Arnold Schwarzenegger has vowed to veto a bill forcing employers to offer a cafeteria-style health benefits package or chip in 7.5% of payroll to a fund to pay for uninsured worker coverage.

The measure limits health plans’ and insurers’ administrative overhead by requiring them to devote at least 85% of their premium revenues to paying for health care services for policyholders and enrollees and sets up a 13-member oversight commission.

Schwarzenegger complained in a statement that A.B. 8 requires too large a share an employer share, making it “financially unsustainable.” The California Health Care Reform and Cost Control Act “would only put more pressure on an already broken health care system,” the Governor asserted.

The Governor also said A.B. 8 would allow insurers offering individual plans to deny coverage to applicants who fail to meet medical underwriting guidelines.

For his part, Assembly Speaker Fabian Nunez responded that the bill represents “best attempt at a compromise” with Schwarzenegger.

Rather than sign the measure into law, Schwarzenegger  announced on Tuesday that he was calling the legislature back into a special session to hammer out a compromise health-care reform bill.

Schwarzenegger, who has proposed his own  health care reform plan , disagrees with legislative leaders on how to fund a state purchasing pool. He proposes requiring employers with 10 or more workers to pay less than A.B. 8 in the form of a 4% payroll assessment supplemented by a 4% assessment on hospital revenues and a 2% assessment on physician fees.

A.B. 8 would require insurers to scrap current plans and instead offer five standardized plans on a guaranteed issue basis to all applicants seeking coverage. Excepted are the costliest 3% to 5% of applicants.

“We have made tremendous progress on this issue during the past session and have found considerable common ground,” Schwarzenegger said, in his statement announcing the special session.” I know that legislative leaders are willing to get the job done. We must keep working until we achieve the kind of historic solution that all of us and the people of California want.”

During the legislative debate, some Republican members questioned whether A.B. 8 could withstand a federal court challenge from employer interests who contend both A.B. 8 and Schwarzenegger’s proposal would violate the federal Employee Retirement Income Security Act (ERISA).