California health reform passes first vote

SACRAMENTO, California (Reuters) - California's Assembly on Monday approved Gov. Arnold Schwarzenegger's plan for universal health insurance, as overhauling health care grows as a prominent issue in the 2008 presidential election.

The compromise legislation, which passed by a vote of 46 to 31, was hammered out by the Republican governor and Fabian Nunez, speaker of California's Democrat-led Assembly.

While a handful of other states have revamped their systems, California's plan for its 36 million people is seen as a potential model for a national reform.

The $14 billion plan must also win approval from the state Senate and voters even as the most populous U.S. state faces an expected $14 billion gap in its budget.

Under the plan, insurers could not deny coverage regardless of age or medical history and must spend at least 85 cents of every premium dollar on patient care.

Everyone in California would be required to buy health insurance, which would be more affordable for the low-income individuals who are among the state's 6.5 million uninsured.

The bill would provide funding for community clinics in a bid to save money and ease stress on overcrowded emergency rooms, which provide the most expensive health care and act as a safety net for the uninsured.

Revenue to pay for the new plan would come from taxes on hospitals, cigarettes and employers who do not provide health insurance.

Amid concerns about how the state will pay for the ambitious program, Senate President Pro Tem Don Perata said he ordered an analysis of the long-term fiscal effects of the bill.

"This analysis, combined with the governor's proposed budget, will help determine how we can move forward in a fiscally responsible manner," Perata, a Democrat, said.

(Reporting by Lisa Baertlein and Jenny O'Mara, Editing by Mary Milliken and Sandra Maler)