09/27/2010 04:47 pm ET | Updated May 25, 2011

In The Public Interest : Why Is California So Important in Health Care Reform?

This week, California Governor Schwarzenegger faces a choice to sign or veto important bills to implement the new federal health care law in his state. And his decision could be crucial in determining whether the new law lives up to its supporters' promises or fails the way opponents predict for one-fifth tenth of the country's population.

The Governor has proven himself a leader on innovative health policy in the past. In fact, California almost joined Massachusetts as a health-reform pioneer when the Governor helped lead a bipartisan push for a comprehensive reform law in 2007 and early 2008. And with the legislation on his desk this week, Governor Schwarzenegger has another chance to deliver big victories for health care consumers and make California a leader in early, effective implementation of the federal law.

Why is this important for the rest of America? Congress has not only passed the law, but it's already going into effect; the first consumer protections of the law went into effect online just last week.

You could be forgiven for thinking that all we need to do to get better care and lower costs is twiddle our thumbs and wait for all of federal reform to kick in.

But you'd be gravely mistaken.

The law leaves several of the most important decisions up to the states, and the truth is that states are just now beginning to grapple with the challenges and opportunities health care reform presents. That's what makes Governor Schwarzenegger's decision this week so important. If Governor Schwarzenegger does the right thing, this week, the Sunshine State will set an example for other states that want to craft health care solutions that work for their consumers and small businesses.

The key bills awaiting Governor Schwarzenegger's signature, that would address many of the most important elements of reform, include:

A First in the Nation Insurance Exchange: One of the biggest opportunities for states like California to put their stamp on reform is through the creation of their own health insurance exchanges. These new marketplaces will allow small businesses and individuals to pool their bargaining power and take advantage of economies of scale to deliver lower costs. Two state bills -- SB 900 (Senator Elaine Alquist) and AB 1602 (Assembly Speaker John Perez) -- would set up the California Health Benefit Exchange. Important provisions in the bills would empower the exchange to be an active purchaser, which means it'd be able to negotiate with insurers the same way a large company's human resources department does, and insist on more affordable, better choices for consumers. While Massachusetts, which adopted its own health reforms several years ago, already has its version of an exchange up and running, this legislation would make California the first state to create an exchange under the federal reform law.

Transparency on Premium Increases: The number one problem for many consumers is rising health care premiums. Anthem Blue Cross of California recently made headlines when they attempted to hike their enrollees' rates by up to 39% -- and they made headlines again when regulators discovered that the eye-popping rate increase relied on faulty math and bad assumptions. SB 1163 (Senator Mark Leno) will prevent a repeat of these unjust hikes. First, it will provide significantly increased transparency for insurers' rate increase proposals, so that consumers can know exactly where their money is going. It will also require insurers to subject their rate increases to independent review, to make sure their numbers add up. And it will make insurers give sixty days' notice before a premium increase goes into effect, ensuring that consumers won't be surprised by these changes.

Organizing the Individual Market: California has a larger individual market than most states, and it's here that reform is most needed. With few regulations protecting consumers from junk insurance, and a dizzying array of complicated products (many featuring coverage loopholes and limitations), consumers without a business' bargaining power and expertise behind them regularly pay too much for low-quality coverage. 
SB 890 (Senator Elaine Alquist) will empower consumers by organizing the individual insurance market into five clear tiers of insurance products, providing better information to consumers and driving more savings through increased competition between insurers. This will allow customers to make real apples to apples comparisons on what plan works best for them. It will also allow California's insurance market to smoothly transition to the better-regulated system federal reform will institute in 2014.

Protecting Consumers From Unjust Policy Cancellation: Consumers across the nation have had their policies cancelled when insurers used innocent mistakes on their application forms as an excuse to drop sick, costly patients. But in California, the problem has been even worse - it recently came to light that some of our state's major insurers were paying their employees a bonus for every sick patient they dropped. While the federal law puts an end to this practice, AB 2470 (Assemblyman Hector De La Torre) will give the prohibition teeth. The bill would require rescissions to face independent review, protecting consumers while simultaneously preventing bad actors from gaming the system.

Under California law, Gov. Schwarzenegger must sign -- or veto -- all of these bills by the end of the month -- that's this Thursday. If he approves them, California will be well positioned to get an early start on implementing the new health care law, delivering better health care for Californians and blazing a trail for other states.

The California Public Interest Research Group (CALPIRG) is a statewide non-profit, non-partisan public interest advocacy organization. CALPIRG is one of 26 state Public Interest Research Groups (PIRGs) a part U.S. PIRG, the federation of state PIRGs.