SACRAMENTO, California (Reuters) — Gov. Arnold Schwarzenegger unveiled plans on Monday to require all Californians to have health insurance and to extend coverage to an estimated 6.5 million state residents without insurance.Under his plan, insurers would not be able to deny coverage based or age or pre-existing health conditions, healthy lifestyles would be rewarded and the state would expand its existing health insurance for the poor, which may bring in more federal funds to the state.

“My solution is that everyone in California must have insurance,” said Schwarzenegger, who was inaugurated to a second term on Friday after time in the hospital to repair a broken leg. “If you can’t afford it, the state will help you buy it, but you must be insured.”

Americans are not guaranteed health care and millions of working people are without coverage because they cannot afford private insurance but earn too much to qualify for public programmes.

Some federal lawmakers have proposed a nationwide health care system, but so far such efforts have faltered. Last year, Massachusetts became the first US state to pass a law requiring all individuals to buy health coverage.

A handful of states, including Illinois, Maine and New Jersey, already provide health coverage to all children through state programmes. New York Gov. Eliot Spitzer has signalled he wants to guarantee all of New York’s 500,000 uninsured children access to health insurance.

California’s actions could inspire other states to act. The state has often taken the lead on public policy issues. It recently enacted a law designed to curb greenhouse gas emissions.

“My proposal is a beginning,” Schwarzenegger said. “Everything will be on the table and I want to hear from everyone. If we have the will, and I believe that we do, we can heal our broken system.”

Under Schwarzenegger’s proposal, firms with 10 or more workers would offer health insurance to employees or pay four percent of payroll to the state so it can provide medical coverage. Firms with fewer than 10 employees would be exempt.

Additionally, doctors would pay the state two percent of revenues and hospitals would be taxed four percent of their revenue to support a new state insurance pool. Since taking office in 2003, Schwarzenegger has opposed any new taxes.

“There is no debate about whether to provide medical care for people who are in California illegally,” he said. “I know this is controversial, but federal law requires us to treat anyone who shows up at an emergency room in need of care.”

“So the decision for my team was, do we treat them in emergency rooms at the highest cost available or do we do it right and do it efficiently?”

Democrats, who control California’s Legislature and who have urged increased state involvement in directing and providing medical services, have cheered Schwarzenegger’s vow to make health care policy a top priority this year.