Ed Hernandez, who derailed legislation opposed by
the nonprofit health group, leases office space to Kaiser Permanente.
An advocacy group seeks his ouster from the chairmanship.
By Patrick McGreevy, Los Angeles Times
September 18, 2011
Reporting from Sacramento
A Southern California lawmaker who helped defeat
legislation opposed by Kaiser is benefiting from a business
relationship with the nonprofit health group.
The proposal, which died in the Legislature earlier this month after a
dispute over its provisions, would have required state approval for
health insurers including Kaiser to raise their rates.
State Sen. Ed Hernandez (D-West Covina),
chairman of the Senate Health Committee,
owns a corporation that leases an office building to Kaiser Permanente in
Baldwin Park. Since 2006, Kaiser has paid Hernandez's firm
about $387,000 to lease the building. The current rent is $5,752 a
Most elected officials in California are disqualified from actions that
could affect a source of their income, but state legislators exempted
themselves from that restriction in 2002. Such dual interests amount to
"what a common-sense person would consider to be wrong," said Kathay
Feng, executive director of California Common Cause.
Hernandez, an optometrist, said he had done nothing improper.
"I place my votes on what's in the best interest of the community," he
said in an interview. "I don't base it on my income."
Because his role as Health Committee chairman gives Hernandez
considerable power over many bills that affect the health industry, a
consumer advocacy group has asked Senate leader Darrell Steinberg (D-Sacramento)
to remove him.
"This level of income from a company that is constantly before his
committee, and whose interests touch upon every level of the
committee's work … compromises Senator Hernandez's ability to
independently chair the committee," wrote Jamie Court,
president of the nonprofit group Consumer Watchdog.
Kaiser's payments were disclosed in Hernandez's annual financial
interest report on file with the state. But there was no mention of the
business relationship when a Kaiser representative appeared at a June
committee hearing presided over by Hernandez.
Kaiser Foundation Health
Plan lobbyist Teresa Stark told Hernandez's committee that
the nonprofit opposed the rate-hike restriction because it might lead
to rate caps that could "impede access to healthcare."
It would divert "tens of millions of dollars" from the healthcare
system to pay for a new bureaucracy, Stark said.
Hernandez voted for the bill when it passed his committee. But he said
he would oppose it on the Senate floor unless it was changed so a panel
of actuaries, rather than California's elected insurance commissioner
and the director of the state's Managed Health Care Department, would
rule on any rate increases.
The bill's author, Assemblyman Mike Feuer
(D-Los Angeles), said such revisions would have left
consumers unprotected from excessive rate hikes and, without enough
votes to support his version, he shelved the legislation, AB 52.
"The issues far transcend whether something is actuarially sound,"
Hernandez said he proposed the change because "I wanted to
depoliticize" the rate-setting process and make it more transparent.
Kaiser spokeswoman Kathleen Golden said Hernandez "hasn't shown any
preference" toward the health group on the legislation. Hernandez said
he is willing to work with Feuer on the issue next year.
Noting that Kaiser opposed two of his own bills this year, Hernandez
said his business holdings, which include other commercial properties,
should not prevent him from serving as committee chairman.
"When I got elected, I had already owned all those properties,"
Hernandez said. "Who would have known I was going to have been chair of
Steinberg is standing by the senator.
"Darrell believes that Sen. Hernandez is a good chair, is honest, has
integrity and is effective," said Steinberg spokesman Nathan Barankin.
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