When President Obama’s health care overhaul became law two years ago, California lawmakers jumped into action.
Within months, they adopted several state laws that implement or build on the federal measure, including one to create a state health insurance exchange and another to allow young adults up to age 26 to remain covered by their parents’ health insurance policies.
Lawmakers passed even more bills related to the overhaul last year and continue to debate sweeping proposals now. The difference this year is that the fate of those state laws and the impact they will have on Californians hang under what state Sen. Ed Hernandez calls a "cloud of uncertainty."
Before the end of the month, the U.S. Supreme Court is expected to rule on the constitutionality of the federal health law, called the Affordable Care Act. Among the most likely scenarios, the court may leave the law intact, overturn it completely or strike down a key provision that requires most people to purchase health insurance.
Each possibility carries different implications for California, a state that took an early and aggressive approach to implementing the federal law.
"We will have to rethink everything" if the federal law is overturned in part or whole, said Hernandez, a Democrat from West Covina and chairman of the Senate Health Committee. “We have to reassess all of these measures. Some of them are actually contingent upon the implementation of the Affordable Care Act."
Experts predict up to 3 million uninsured Californians will become eligible for health coverage starting in 2014, when the major provisions of the law take effect, such as an expansion of Medicaid eligibility. And the Golden State, which already has received more than $1 billion in federal funding, is counting on billions more.
Should the Supreme Court undo the law’s provisions or funding, some state lawmakers and consumer advocates say that Californians still will benefit from better health coverage, thanks to the new state laws. Others fear that those new requirements will raise the cost of insurance.
“It will be important for everyone in California to step back and think through how we respond in a way that will work for affordable coverage,” said Patrick Johnston, CEO of the California Association of Health Plans.
The list of state bills that implement or expand on the Affordable Care Act is long, and includes:
- A law that created a state health insurance exchange where Californians will be able to buy health coverage and find out whether they qualify for subsidies.
- A law that prohibits insurance companies from denying health coverage to children with pre-existing medical conditions.
- A law that prohibits insurers from setting lifetime caps on benefits.
“There are things that millions of Californians already are benefiting from,” said Richard Figueroa, director of Health and Human Services for the California Endowment health foundation.
Additional measures are being debated by the Legislature now, such as a proposal that would prohibit insurance companies from denying coverage to anyone — not just children — regardless of pre-existing conditions.
Hernandez, who is the author of that measure and a fervent supporter of the Affordable Care Act, says he will move forward with that bill as long as the federal law stands. At the same time, his office is scouring existing laws to determine which are tied to the fate of the federal law and which will remain state law regardless.
Hypothetically, he said, “let’s say most of those laws are invalid, we have to start all over and turn those into statutes that are not dependent on the federal government.”
But could those measures come at a price to Californians?
“They cost money. There’s no doubt about it when you mandate things like expanding coverage to kids or banning lifetime maximums,” said Geoffrey Joyce, director of health policy at the Schaeffer Center for Health Policy and Economics at USC.
Just who will bear that cost is up for debate.
Figueroa and Kim Belshé believe that insurers already have built into premiums the costs of the new mandates. Belshé, former secretary of the state Health and Human Services Agency, is a California Health Benefit Exchange board member.
"The insurance products being sold last year, this year and next year reflect the changes that have already occurred," she said.
But Johnston of the health plan association said the true effect of the state’s laws on Californians’ pocketbooks will hinge on the Supreme Court’s decision. He describes the critical pieces of the Affordable Care Act as a "three-legged stool" that work together to keep costs down.
One leg of the stool is the billions in federal funding for expanding coverage, he said. The second is the requirement — known as the “individual mandate” — that most people purchase health insurance. The third is called “guaranteed issue,” which restricts health insurance companies from denying coverage to people for any reason, including pre-existing conditions.
If the Supreme Court strikes any one or more of them down, he said, California “can’t just ignore the leg of the stool that was removed,” he said.
Take the individual mandate, for example. If everyone must purchase insurance, the theory goes, insurance companies will have a large and balanced pool of customers where risk is spread among the sick and healthy — and so is the cost.
Without the mandate, some healthy people wouldn’t buy insurance, which would reduce the size of the pool and boost the price of insurance for others, he said. Plus, the state has passed laws requiring additional coverage from insurance companies, such as bans on lifetime coverage limits.
"The premise of the mandate is that you’re spreading the cost of these kinds of improved coverage across the population. The impact on rates is not as great," said David Lansky, CEO of the Pacific Business Group on Health, a nonprofit coalition of 50 large companies that focuses on healthcare issues.
"But if you don’t have that mandate in place, the cost of the required improvement in the benefits is only being shared by those who have coverage."
Hernandez already is considering a statewide individual mandate or other measure should the Supreme Court strike down the federal one. But he and others caution that a state individual mandate and insurance exchange can’t be successful without federal money.
"A lot of people talked about how the mandate is the heart of health reform," said Anthony Wright, executive director of Health Access California, a consumer advocacy group. "The mandate is the cherry on top. The heart of health reform is the subsidies."
The subsidies would allow more Californians to afford coverage, he and others said.
“If those federal funds disappeared or were enjoined by the court, California would be back to the drawing board,” Belshé said.
Emily Bazar is a senior writer at the California HealthCare Foundation Center for Health Reporting, attached to the USC Annenberg School for Communication & Journalism. The center reports on health and health policy in California. It is funded by the nonpartisan California HealthCare Foundation.