CalPERS Recommends Upholding Employer-Sponsored Health Coverage Law

CalPERS, the nation's third-largest purchaser of health benefits, on Friday said it supports a "yes" vote on Proposition 72, the Sacramento Bee reports (Rapaport, Sacramento Bee, 10/23). Under Proposition 72, California residents can vote "yes" to uphold or "no" to repeal SB 2, a state law that will require some employers to provide health insurance to employees or pay into a state fund to provide such coverage.

SB 2, which is scheduled to take effect Jan. 1, 2006, would require employers with 200 or more employees to provide health insurance to workers and their dependents by 2006 or pay into the state fund. Employers with 50 to 199 employees will have to provide health insurance only to workers by 2007.

Companies with fewer than 20 workers will not have to comply with the law, and the law also will exempt employers with 20 to 49 workers unless the state provides them with tax credits to offset the cost of health coverage (California Healthline, 10/22).

CalPERS "rarely takes a position on ballot measures" but "threw its support behind Proposition 72 because [it] blames its steep insurance premium increases of recent years in part on the rising costs of treating the uninsured," according to the Bee.

CalPERS President Sean Harrigan said, "The costs of the uninsured who use emergency rooms are passed onto us. CalPERS is the largest subsidizer for employers who do not provide health care for their employees" (Sacramento Bee, 10/23).

The Sacramento Bee on Sunday examined the role that the Managed Risk Medical Insurance Board would assume if SB 2 is upheld. The "little-known" state agency, created in 1990 and governed by a five-member board appointed by the governor and Legislature, purchases health insurance for about 682,000 children in Healthy Families and 30,000 beneficiaries of other programs. If SB 2 is upheld, the agency would set insurance fees for employers that join the state purchasing program, negotiate insurance contracts and "flesh out ambiguities" in the law.

Emery Dowell, who served on the MRMIB board for 12 years, said the agency has "successfully negotiated contracts for health care, for dental care, for vision care," adding, "They have been within their budget from the beginning and never have they had to go back to the Legislature to ask for money."

However, John Ramey, the first executive director of MRMIB and a paid consultant for the "no" campaign for Proposition 72, said the state purchasing pool could become a "high-risk" pool for employees with high medical expenses. "The (employers) that are quoted high prices in the open market will come into the pool. The ones that are quoted low prices will stay out in the open market," Ramey said (Rojas, Sacramento Bee, 10/24).

The Los Angeles Times on Sunday looked at the effects of a mandatory health insurance law that Hawaii approved about 30 years ago. Under the law, employers must provide health insurance to employees who work at least 20 hours for four consecutive weeks, according to the Times.

Hawaii has one of the nation's lowest rates of uninsured residents, with only 10% of the population uninsured, compared with 19% of California's population. However, "[a]s premiums have escalated ... [s]ome [employers] have found ways -- legal and not -- around the mandate, and there are growing calls to relieve the burden on businesses," the Times reports.

Some employers in Hawaii hire employees to work fewer hours so they will not have to provide health coverage, which has led the state to have a disproportionate number of employees who work less than 20 hours a week, according to the Times (Rau, Los Angeles Times, 10/24).

The "story" of SB 2 should have ended when former Gov. Gray Davis (D) signed the bill into law, but the California Chamber of Commerce, the California Restaurant Association and "their corporate allies" are spending millions of dollars to try to repeal the law with Proposition 72, Eric Schlosser, author of the book "Fast Food Nation," writes in a Los Angeles Times opinion piece. He adds that the fast-food industry is the "nation's largest employer of minimum-wage labor" and that it has "pioneered a work force that earns low wages, gets little training, receives few benefits and has one of the highest turnover rates of any trade."

The industry, the "largest private employer" in California, provides health coverage to its executives "and should now do the same for all full-time employees," Schlosser writes, concluding, "Proposition 72 isn't a panacea. But it would provide insurance for more than one million people" (Schlosser, Los Angeles Times, 10/24).

Additional information on Proposition 72 is available online.