Democrats propose new health plan

SACRAMENTO -- Seeking elusive common ground with Gov. Arnold Schwarzenegger, the Legislature’s Democratic leaders will propose today to raise the tobacco tax by $2 a pack as part of their latest strategy to extend health insurance to most Californians.

The plan, which Assembly Speaker Fabian Nunez outlined to reporters late Monday, offers several concessions to Schwarzenegger as the two sides try to salvage their yearlong effort to overhaul the state’s healthcare system.

Nunez (D-Los Angeles) said the plan would be the template for whatever bill the Legislature ultimately approves during the ongoing special session on healthcare called by Schwarzenegger.

The proposal, which Nunez said would cost about $14 billion, takes some steps away from the bill passed by the Legislature earlier this year by demanding slightly less of employers and requiring more people to obtain health insurance. Those were two reasons Schwarzenegger vetoed the bill in September.

“The goal here is to get a deal with the governor,” Nunez said. “This gets us closer.”

The governor’s office reserved judgment on the proposal, and it was unclear how much more Schwarzenegger would demand as a price for his signature.

At the same time, Nunez and Senate President Pro Tem Don Perata (D-Oakland) risk losing the backing of labor unions if they make too many concessions. Without union support, it is unlikely that enough Democratic legislators would vote to pass the plan. Unions have yet to take a position on the new plan.

Even if the Democratic plan were to become law, backers would have to place the major financing provisions on the ballot, probably next November.

Employer groups, Blue Cross of California and the tobacco industry probably will field an aggressive campaign against it.

The proposal would:

Require employers to spend the equivalent of 6.5% of their payroll costs on healthcare or pay into a state fund. Employers with payrolls under $250,000 would pay 4% and those with payrolls under $100,000 would pay 2%. Nunez characterized this as an appeal to businesses, as the original Democratic plan vetoed by Schwarzenegger had a flat 7.5% payroll fee. But it remains a heavier levy than the 4% fee proposed by Schwarzenegger and is unlikely to win over business groups, which have called the governor’s plan as too costly.

Mandate all Californians to obtain health insurance, as Schwarzenegger has insisted. Low earners would have their premiums subsidized by the state, and families of four earning up to $92,925 a year would receive a tax credit for the portion of premium costs that exceed 5% of their incomes. The governor had proposed cutting off the tax credit for families of four earning more than $61,950, which labor unions had denounced as insufficient to ensure that health premiums not be too burdensome for middle-class families.

Require a state board to decide what minimum levels of insurance people would be required to hold. Any family that would have to pay more than 6.5% of its income on premiums would be exempted from the mandate to have insurance. This is a similar approach to the plan Massachusetts enacted this summer.

Increase the state’s 87-cents-a-pack tobacco tax to $2.87 to help pay for the subsidies. This proposal would replace Schwarzenegger’s plan to sell the rights to run the state’s lottery to a private company. Democrats have opposed that idea, and Nunez said polling shows that a tobacco tax would do better at the ballot box. A $2.60-a-pack increase that was sponsored by California’s hospital industry and several healthcare groups was rejected by voters last year.

Place a new tax on hospitals that would allow the state to qualify for several billion dollars more in federal aid. The money would be used to help hospitals care for the poor.

The Assembly has scheduled a hearing Nov. 14 on the proposal. Nunez said he hopes to hold a vote before Thanksgiving with the expectation that the Senate will vote in early December.

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jordan.rau@latimes.com