State lawmakers are engaged in special sessions to discuss water and health issues. Here's a primer on the health care debate.

Q: Why is the Legislature holding a special session on health care issues?

A: Gov. Arnold Schwarzenegger called the special session after he was unable to reach agreement with legislative leaders on a plan to reduce the number of Californians without health insurance, now estimated at 6.7 million. The Republican governor and Democratic lawmakers blamed the 52-day state budget impasse for their failure to reach a compromise during the regular session. But serious differences remain about how to pay for health care expansion. Republican lawmakers oppose any fee increases and are calling for an incremental approach rather than the sweeping changes proposed by the governor and the Democrats.

Q: How does the special session work?

A: The special session will work much like state budget negotiations. The governor has been meeting privately with the two Democratic leaders Assembly Speaker Fabian Nzqez and Senate President Pro Tem Don Perata and Assembly Republican leader Mike Villines and Senate Republican leader Dick Ackerman. The chairmen of the Assembly and Senate health committees and administration health care officials and staff members in the Legislature are also lending their input. Even without the support of any Republican lawmakers, the Democratic-dominated Legislature could pass a health care bill on a simple majority vote. But without a two-thirds vote in the Legislature, voters would have to approve tax or fee increases to fund any proposal. Schwarzenegger and Democrats say voters will ultimately make the decision. Signatures would have to be collected to qualify a ballot initiative, with the November 2008 general election the likely target. The special session designation allows the suspension of some legislative rules and allows measures approved with a majority vote to take effect 90 days after the session closes.

Q: What are Republicans proposing?

A: Republican lawmakers say the state should encourage market-based solutions instead of dramatically expanding the role of government in health care. Among their proposals is creating state health savings accounts, which the federal government has done. Republicans also want to encourage expansion of neighborhood clinics, which provide lower-cost care than hospitals and doctors. They also want to expand the state program of guaranteeing coverage for people with pre-existing medical conditions.

Q: What is the Democratic proposal?

A: Democrats would require employers to spend 7.5 percent of their payroll on health care and insurers to cover people with pre-existing conditions. Insurers would also be required to spend at least 85 percent of premiums on medical care. Their proposal would cover two-thirds of the people in the state without insurance, including all 800,000 children. The cost of employee contributions to insurance premiums would be capped at 5% of income. Lurking in the background is a bill by Sen. Sheila Kuehl, D-Santa Monica that would create a health care system run by the government and financed by employers and individuals. Kuehl's plan would cover all Californians and do away with the role of private insurance companies. Her legislation is similar to the one vetoed last year by Schwarzenegger, who favors more involvement by private markets. Separately, the California Restaurant Association, which opposes both the governor's and Democratic proposals, has proposed a ballot initiative that would create a 1-cent sales tax to fund health care reform.

Q: What is the governor proposing?

A: The governor's $12 billion-a-year universal health care proposal aims to spread the financial burden among employers, hospitals and doctors. Many small businesses oppose the requirement that employers spend 4 percent of payroll on health care. Hospitals have agreed to Schwarzenegger's proposal to contribute 4 percent of their revenues. But doctors have adamantly opposed his proposal that they chip in 2 percent of their revenues. Schwarzenegger would also require individuals to contribute to their health care, with the state subsidizing the poor.

Q: Isn't it the federal government's job to provide health care? What is it doing and how will that affect the state's efforts?

A: The federal government provides matching funds for money spent by states on health care and the proposals under consideration in California call for maximizing those funds. But federal efforts to reduce the number of Americans without insurance have been stymied since a universal health care proposal championed by President Clinton and his wife, Hillary, was resoundingly defeated 13 years ago. This week, Hillary Clinton, now a candidate for the Democratic presidential nomination, unveiled another health care plan. It would require every American to have health insurance, offer generous subsidies to help pay for the policies and seek to tamp down on rising medical costs. Republican presidential contender Mitt Romney, who as governor of Massachusetts signed a universal health care bill that served as a model for Schwarzenegger's proposal, dismissed Clinton's proposal as "European-style socialized medicine."

What is a pre-existing condition?

A pre-existing condition in CA individual health insurance is really any health issue within the last 10 years of the date of the health application (this is not a hard and fast rule but generally speaking 10 years is the absolute furthest back that an insurance company will look when in the underwriting process. Also, many companies will only look back 2 years or 5 years for specific types of pre-existing conditions). A pre-existing condition in CA group health insurance is any health issue within the last 6 months.

What different types of pre-existing conditions are there?

There are two main types of pre-existing conditions in the state of California; minor pre existing conditions and major pre existing conditions. Minor pre-existing conditions are things like high blood pressure, high cholesterol, and mild asthma. Major pre-existing conditions include cancer, heart disease and diabetes. The severity of the conditions, the frequency of the occurrence, and the timeline of the condition are all important factors that an insurance company takes into consideration when determining whether a particular health problem is a minor or major pre-existing condition.

How are pre-existing conditions handled?

Pre-existing conditions are handled a number of different ways in the state of California. On the group health insurance side as long as someone maintains continuous health insurance coverage then the insurance company will not exclude any pre-existing condition. If someone begins group health insurance without having had continuous coverage then the insurance company offering the group health plan has the right to look back 6 months and exclude any pre-existing conditions within those prior 6 months. In any case the insurance company offering the group health plan is unable to decline an individual based on their health history (this is why group health insurance in CA is approximately 2-3 times the cost of a comparable individual CA health plan).

On the individual health insurance side insurance companies can decline a person’s application based solely on the applicant’s health history. Most major pre-existing conditions will result in an automatic decline for individual health insurance in the state of California (unless the individual meets the requirements for a guaranteed issue California HIPAA health insurance plan).

Minor pre-existing conditions are typically handled one of two different ways: either the insurance company will cover everything and charge extra to cover the pre-existing conditions or the insurance company will rider (exclude) the pre-existing conditions and cover everything else (riders can be either for an indefinite time period or they can last for 6 months, 12 months, or some other time period). 

Looking for new ways to trim the fat and boost workers' health, some employers are starting to make overweight employees pay if they don't slim down, others, citing growing medical costs tied to obesity, are offering fit workers lucrative incentives that shave thousands of dollars a year off healthcare premiums.

In one of the boldest moves yet, an Indiana-based hospital chain last month said it decided on the stick rather than the carrot. Starting in 2009, Clarian Health Partners will charge employees as much as $30 every two weeks unless they meet weight, cholesterol and blood-pressure guidelines that the company deems healthy.

"At first, I was mad when I thought I would be charged $30 for being overweight," said Courtney Jackson, 28, a customer service representative at Clarian. "But when I found out it was going to be broken into segments like just $10 for being overweight it sounded better."

Jackson said she was going to try to slim down before the plan took effect. "If I still have weight to lose when it starts," she said, "I'll deserve to pay the $10."

Employers are getting serious about penalizing workers "because they've run out of other options" said Joe Marlowe, senior vice president at Aon Consulting, a national benefits consulting firm.

Locally, the Los Angeles Unified School District, which has 90,000 employees, is researching financial incentives and disincentives to help bring down healthcare costs.

UnitedHealthcare, a nationwide insurer, introduced a plan this month that, for a typical family, includes a $5,000 yearly deductible that can be reduced to $1,000 if an employee isn't obese and doesn't smoke.

Last summer, a similar plan was offered to county workers in Benton County, Ark. The $2,500-a-year deductible can be reduced to $500 if a worker meets low height-to-weight ratios during yearly on-site physicals. (According to federal guidelines, a man who is 6 feet tall is considered obese if he weighs 221 pounds or more. A 5-foot-6 woman is obese if she weighs more than 185 pounds.)

Thomas Dunlap, the county's benefits administrator, said the plan had witnessed a nearly 30% drop in claims and provoked changes in the workplace.

Workers can take free weight-reduction classes and there are now regular competitions betweens departments to see who can lose the most weight.

"When we have birthday parties now," Dunlap said, "people don't want sugar-laced cake and candy; they want fruit and deli trays." Acknowledging that it could be partially the result of the new deductible, he noted that the county didn't have to raise its insurance premiums this year and probably won't next year.

Critics of the lose-it-or-pay trend say that companies that charge overweight employees more for their medical coverage are turning the healthcare system into a police state and, just as worrisome, are working off of a false assumption that it's easy for people who are obese and have other health issues to change their situations.

According to a 2005 Stanford University study, obese people with health coverage may already be punished on the job. Those surveyed were paid an average of $1.20 less per hour than non-obese workers, perhaps because employers intentionally adjust their wages to account for healthcare costs.

"It's reprehensible to punish and emasculate someone for having a disease like obesity," said Walter Lindstrom, director of the Obesity Law and Advocacy Center in Chula Vista, Calif. "Anyone who penalizes workers for being overweight should brace themselves for a backlash."

Lewis Maltby, president of the National Workrights Institute, a Princeton, N.J.-based employee rights group, called the trend "a very dangerous road that could lead to employers controlling everything we do in our private lives."

"To penalize for things that are beyond some people's control is just wrong," Maltby said. "Some people are fat because that's how God made them."

As the number of obese Americans continues to soar it's now 1 in 3 employer healthcare premiums are growing twice as fast as inflation to nearly double their cost at the beginning of the decade. Employers have been struggling with how to hold down costs without offending or pushing away workers.

Sixty-two percent of 135 executives responding to a PricewaterhouseCoopers survey this spring said unhealthy workers such as those who smoke or are obese should pay higher benefit costs, compared with 48% in 2005. Employers might be motivated by new federal rules.

In January, the Department of Labor implemented final clarifications on the Health Insurance Portability and Accountability Act of 1996 that said employers could use financial incentives in wellness programs to motivate workers to get healthy. Still, some lawyers say weight-based compensation plans may run afoul of other employment laws.