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Supreme Court ruling might undercut California's health care plan

It was just three months ago that the Brown administration, following arguments before the U.S. Supreme Court over the fate of the federal health care overhaul, promised to press forward with provisions of the law even if the court struck part or all of it down.

If the court did rule the law unconstitutional, California Health and Human Services Secretary Diana Dooley said at the time, the state might consider enacting legislation of its own.

Even a mixed ruling, she predicted, could leave some federal subsidies in place to fund a health care expansion already under way in the nation's most populous state.

Three months later – with the court's ruling now imminent – it is clear some provisions of the law will almost certainly remain intact in California no matter how the court rules. The state already has enacted its own legislation prohibiting most insurers from denying coverage to children because of pre-existing conditions and allowing people up to age 26 to remain on their parents' policies.

Yet a reversal of part or all of President Barack Obama's signature health care law could deeply frustrate the administration's broader health care goals.

The Affordable Care Act promises billions of dollars in federal aid for California's expansion of Medi-Cal, which provides coverage for nearly 8 million low-income residents, an expansion Dooley said California could not otherwise afford.

"We will press ahead to address the underlying problems, but if the full act is stricken – and by that I mean, if we don't have the federal financial participation – it will be very hard for us to make significant gains in the short run," Dooley said Wednesday.

Gov. Jerry Brown is proposing spending reductions statewide to address California's persistent budget problems. That effort, Dooley said, is "going to take us a few more years, and until we get that foundation back in place, it will be very hard for us to consider a significant initiative like making the Medicaid expansion that we would be able to do if the (Affordable Care Act) is upheld."

At issue before the Supreme Court is whether Congress can require people to buy health insurance – the so-called "individual mandate" – and whether it can pressure states to expand Medicaid coverage by threatening to withhold funding if they don't.

"If any or all of it is overturned, I think it's going to be a travesty," said state Sen. Ed Hernandez, D-West Covina, chairman of the Senate Health Committee. "Without the federal subsidies it'd be very difficult for California to move forward, not that we can't try."

In 2010, while other states watched from the sidelines or actively protested the federal health care overhaul, California became the first state in the nation to enact legislation establishing the kind of public health insurance marketplace Congress prescribed to implement the Affordable Care Act.

If the law is upheld, more than 2 million Californians – many of them currently uninsured – are expected to use the exchange beginning in 2014.

The Brown administration maintains the exchange will remain intact regardless of the court's ruling, but to what effect is unclear.

Insurers considered the individual mandate necessary to contain costs, ensuring they could cover high-risk patients by including relatively healthy people in the same insurance pools.

"If the individual mandate goes away," said Kimberly Belshé, a former Health and Human Services secretary and current member of the health benefit exchange board, "that has the potential to create a very unstable and ultimately unaffordable insurance marketplace."

Sen. Tom Harman of Huntington Beach is among Republicans who have criticized legislative Democrats for enacting legislation related to the health care overhaul before it is tested by the court.

"What happens if the court strikes this law down?" Harman asked.

He said Democrats "don't have an answer, and yet they want to expand this dramatically, to have the state pay for it, and California cannot afford to self-fund these types of programs."

The Senate Health Committee on Wednesday rejected a bill by Harman that would have required the California Health Benefit Exchange board, if any part of the federal law is overturned, to submit a plan to the Legislature for how it will continue operating – and to stop its work if it does not provide a report within 90 days.

Sen. Lois Wolk, D-Davis, acknowledged the state would have a major problem if part of the law is overturned, but she told Harman his bill was premature and overly broad.

If the federal health care overhaul is upheld, California stands to receive $45 billion to $55 billion from the federal government from 2014 to 2019 to expand coverage under Medi-Cal, the state's version of Medicaid.

"The challenge will be if any of the funding mechanisms are knocked out," said Assemblyman Bill Monning, chairman of the Assembly Health Committee. "That's where we're going to have to regroup and understand the nature of the ruling."

If part of the law is ruled unconstitutional, Monning said, "all options will be on the table."

It is unclear, however, if lawmakers and Brown could agree on a new way to cover more of California's uninsured.

Lawmakers in 2008 rejected a health care expansion program proposed by Gov. Arnold Schwarzenegger. Four years before that, voters repealed a measure signed by Gov. Gray Davis requiring employers of more than 50 people to provide their workers health insurance or pay a fee.

Hernandez said that following Schwarzenegger's failure, "The economy started tanking and we went into the recession, so we got off the discussion of health care."

Now, he said, "I believe that there's at least the will in California to have that discussion."

Patrick Johnston, president of the California Association of Health Plans, said lawmakers may be better equipped now than before to address health care comprehensively, if only for their experience.

"Both the Legislature and the administration have the benefit of the struggle to enact changes in California during the Schwarzenegger administration," said Johnston, a former Democratic state lawmaker. "They have the benefit of the debate in Washington over the Affordable Care Act."

Dooley and Belshé remain optimistic.

"We are a state that, in my judgment, is committed to making reform work," Belshé said. "Federal policy is just that. It's federal policy. It's state practice, it's state decision-making that will determine what reform looks like on the ground."