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Governor Schwarzenegger's Mandatory Purchase of Private Health Insurance Doesn't Add Up for the Middle-Class, Says FTCR

SANTA MONICA, Calif., Oct. 9 /PRNewswire-USNewswire/ - The health care legislation announced late today by Gov. Arnold Schwarzenegger would shove more of the cost of health care onto workers and individuals while greatly reducing an employer's share and richly rewarding insurance companies.

The core of the governor's plan is to require all Californians to buy private insurance without capping what insurers can charge. Those earning under 250% of the federal poverty level -- $51, 625 for a family of four - would receive taxpayer subsidies. Those earning over the subsidy cut-off but under 350% could receive some "subsidy or a tax break," according to Schwarzenegger, if their insurance cost is more than 5% of their income. Insurance coverage for health insurance now costs $12,000 for a family of four -- nearly 20% of the annual income of a family of four earning at 250% of the poverty level.

Costs would be shifted to employees from employers. Under the plan, employers would have to pay between 1%-4% of payroll toward healthcare -- much less than what they currently pay. The governor proposed a patchwork of sales tax, lottery funding, and hospital fees to fill the funding gap.

"The numbers don't add up for the middle class, the state, or the health care system. Individuals, workers and families would pay more for health care than ever without any caps on what the insurers can charge. This is a sop to the insurance companies and a time bomb for the middle class," said Jerry Flanagan of FTCR. "Who will speak for the middle class to make sure that the private health insurance the state requires is affordable? We hope the legislature will protect the middle class from the government forcing them to buy an unaffordable private product."

Governor Schwarzenegger has received $719,600 in campaign contributions from health insurers.

A similar Massachusetts law would require citizens to spend 10% or more of their incomes on health insurance, and the state estimates that 18% of the uninsured cannot afford insurance at all -- including anyone making just over the subsidy cutoff, 300% of the federal poverty level, according the Foundation for Taxpayer and Consumer Rights (FTCR). Massachusetts assumes that insurance is "affordable" if consumers can pay the premiums, disregarding deductibles, co-pays and other co-insurance. The cheapest plans offered come with $2000 deductibles, co-pays of up to 35% for most health services, separate medication deductibles with up to 50% co-pays, and cap only some out-of-pocket costs.

For FTCR's detailed analysis on the mandatory purchase of private health insurance, go to:

FTCR is California's leading public interest watchdog. For more information, visit us on the web at

SOURCE Foundation for Taxpayer and Consumer Rights
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