Davis Signs Employer-Sponsored Health Coverage Bill
As expected, Gov. Gray Davis (D) on Sunday signed a bill (SB 2) that will require some employers in the state to either provide health insurance to employees or pay into a state fund that would provide such coverage, the Wall Street Journal reports (Wall Street Journal, 10/6). The law requires employers with 200 or more employees to provide health coverage to workers and their dependents by 2006 to avoid paying into the fund. Businesses that employ 50 to 199 workers will have to offer health insurance to employees only by 2007. Employers with fewer than 20 workers will be exempt from the law, and those with 20 to 49 workers are exempt from the law unless the state provides tax credits to offset the cost of health benefits (California Healthline, 9/17). To be eligible for coverage, employees must work at least 100 hours per month and have been employed by the same business for at least three months (Jones, Los Angeles Times, 10/6). Uninsured employees will not be allowed to opt out of health insurance, and the law authorizes employers to deduct employees' share of insurance costs from paychecks. Under the law, workers with incomes of less than 200% of the federal poverty level will not pay more than 5% of their earnings for health coverage (Abate/Colliver, San Francisco Chronicle, 10/5). The law limits employee premium contributions to 20% in all other instances (California Healthline, 9/17). Employers who already offer health benefits that comply with the new law can continue offering those plans provided that the plans meet the law's minimum requirements (Kurtzman/Feder Ostrov, San Jose Mercury News, 10/6). When the law is fully implemented, it will extend health coverage to about 1.07 million of the state's approximately 6.27 million uninsured residents, according to the UCLA Center for Health Policy Research.
"We need to insure working Californians, for their health, for the health of our economy and for the health of this great state," Davis said during a signing ceremony at the Kaiser Medical Center in West Los Angeles (Los Angeles Times, 10/6). Dr. Jack Lewin, chief executive of the California Medical Association, said, "This is a historic moment. It is a dramatic step in solving not only our state's uninsured problem but also in dealing with the crisis in our emergency rooms" (Wall Street Journal, 10/6). The CMA and other health advocates have said the law will save California about $620 million in costs related to Medi-Cal in addition to reduced indigent care costs in hospital ERs (San Jose Mercury News, 10/6). The law's opponents say the cost of implementing it will range from $5.7 billion -- the amount estimated by the California Chamber of Commerce -- to the Employment Policies Institute's estimated $11.4 billion price tag (San Francisco Chronicle, 10/5). Martyn Hopper, California state director of the National Federation of Independent Business, said businesses do not offer health benefits "for one reason, and that is that they cannot afford it. It's not because they don't want to do it." Hopper said the law would stifle business growth to avoid the law's requirements for larger employers. Allan Zaremberg, president of the California Chamber of Commerce, said the group "is reviewing all options to stop SB 2 from becoming law, including court challenges and a potential referendum campaign." The chamber has said the measure might violate the Employment Retirement Income Security Act, which took effect in 1974 (Los Angeles Times, 10/6). ERISA gives states authority to regulate insurance, but stipulates federal regulation of employee benefits (California Healthline, 9/17). The chamber also has said that the law is actually a new tax on businesses, which would have required a two-thirds legislative majority to approve it, rather than the simple majority which voted in favor of SB 2 (San Francisco Chronicle, 10/5).
The California law "could be a model for the rest of the nation," the Journal reports (Wall Street Journal, 10/6). According to the Chronicle, the law will "put California at the forefront of the push to broaden insurance coverage through employer mandates" (San Francisco Chronicle, 10/5). However, the Times reports that Davis would have "risked" losing labor unions' "crucial" support in tomorrow's gubernatorial recall election if he had not signed the bill. State Senate President Pro Tem John Burton (D), who co-sponsored the law, said that "signing this bill alone would be enough (reason) to see (that) Gray Davis has another three years. He is going to be the governor another three years" (Los Angeles Times, 10/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.