1. ALLIANCE FOR HEALTH REFORM, STATE COVERAGE INITIATIVES BRIEFING, WASHINGTON, D.C., OCTOBER 26, 2007.

2. NEW AMERICA FOUNDATION AND CA HEALTH CARE REFORM D.C. and California-based nonprofit and nonpartisan think tank Met with and advised Governor Arnold Schwarzenegger and his staff from outset Concepts and research on individual mandate, hidden tax on the insured (Len Nichols and Peter Harbage), and shared responsibility used by administration and credited to NAF.

3. UNIVERSAL COVERAGE: CALIFORNIAS ADVANTAGES Strong citizen support for health care reform (77% concerned they cant pay for cost of major illness; 70% percent think system needs major change; 72% back Governors plan; 61% in favor of Democrats pay-or-play bill (A.B. 8/ Nunez-Perata) Support or interest in comprehensive reform from labor, big business (Silicon Valley Leadership Group), small business (67% of owners polled feel employers should contribute), insurers, and hospitals (CA Hospital Assn. supports Governors plan) High-profile and activist governor negotiating with powerful unions and health advocacy groups

4. UNIVERSAL COVERAGE: CALIFORNIAS CHALLENGES High rates of uninsured; relatively low rates of existing employer-based coverage 4.9 million without insurance; 6.5 million, or over 20% of population, without coverage during year; CA employer coverage dropped from 64 to 54% from 1987 to 2005. Political structure: undemocratic and archaic two-thirds rule needed for legislature to pass budget and any bills that raise taxes. 52-day Republican holdout over passing budget stalled momentum for health reform Additional federal funding needed to finance reform, rather than MA use it or lose it; ERISA issues Friction between Governor, G.O.P. minority in legislature, and labor over different health care proposals, notably affordability and business contribution

5. AFFORDABILITY IS CRITICAL PROPORTION OF TOTAL FAMILY INCOME SPENT ON PREMIUM AND OUT-OF POCKET COSTS, NON-EMPLOYMENT BASED, 2007. For middle income, affordability involves both what one can and should pay Health Care Expansion in California: What Can Consumers Afford to Spend? U.C. Berkeley Center for Labor Research and Education and the UCLA Center for Health Policy Research, September 2007

6. THE MISUNDERSTOOD MANDATE? Opposition to individual mandate in Governors plan a sticking point Mandates and regulations will begin to reform individual insurance market away from risk selection in direction of competition on value Guaranteed issue by insurers relies on mandates Leaving out mandate compromises universality Affordable benefit package must be available before individual mandate is enforced Sensible and feasible outreach strategies and auto- enrollment will make enforcement, penalties rare

7. HOW THINGS STAND NOW Special legislative session on health and water policy convened mid-September; Governors proposal put in legislative language early October: too little, too late? California Labor Federation (state AFL-CIO) opposing Governors plan outright; Democrats and labor lukewarm at best Assembly hearing scheduled 10/31/07

8. WHERE DOES CALIFORNIA GO FROM HERE? One ballot initiative, none, or several? Financing: lottery, sales tax, property tax reform, cost containment, or what? Subsidies and the employer payroll tax: Splitting the difference? Nixon to China? A deal can be cut: will leaders compromise and risk antagonizing their bases?