Policy analysts, lobbyists and lawmakers say they have no problem with the federal government creating national standards on health care reform. The problem arises, they say, when the federal government preempts state law.

"We welcome national standards," said Michael Shapiro, staff director for the state Senate Insurance Committee. "But California and other states do not want to be preempted by federal law. We want to be able to go beyond the minimum federal protection. We are OK with the floor, but we don't want the ceiling (to be set by the federal government)."

One example of the state going beyond federal standards is AB 1129. The bill was signed into law this month and allows chronically ill patients to keep their doctor (at the pre-existing level of coverage) for 90 days or as long as medically necessary, if they have to change health plans involuntarily. The various federal proposals would only allow patients to keep their doctor for up to three months.

But in most cases, the federal proposals are simply a duplication of what already exists in California, creating broad federal standards for the nation.

Health care experts said the differences between the state provisions and the federal bills lie in the legal liability issue quite possibly the most controversial part of the health care debate.

Currently, if an employee tries to take an HMO to court, the HMO is protected by the Employee Retirement Income Security Act (ERISA), the federal law governing employee-employer benefits. The law prohibits patients from suing HMOs in state court where punitive damages are available. Most HMOs are protected under the ERISA provision.

Both Republicans and Democrats plan to make changes in the ERISA provision as it pertains to HMOs. The state Legislature has no power over the ERISA.

But whether the debate is over legal liability, direct access to specialists or fuller disclosure by HMOs, the end result will be that the state and federal governments are going to significantly change the managed care system.

"The impact could be substantial," said Carl Volpe, vice president for health policy and analysis at Woodland Hills-based managed care company WellPoint Health Systems Inc. "The more mandates that get put on us, the higher the premiums will go."

Managed care companies are predicting a 5 percent to 10 percent increase in premiums if all the proposed federal and state mandates get pushed through. Health care reform proponents argue the increases would be more like 1 percent to 2 percent.

The managed care companies claim that if they are forced to pay for mandatory 48-hour hospital stays for new mothers, offer direct access to specialists and be at risk for punitive legal action, their costs of doing business will rise dramatically. And that will ultimately hit patients' pocketbooks.

"Whether we are under scrutiny in Sacramento or in Congress, we need to think about ways to do a better job providing services," said Jeff Shelton, director of state government relations for Health Net, an HMO based in Woodland Hills. "But that is going to come with a price. And when push comes to shove, people don't want more money coming out of their pocket."


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