Editorial Recommends Rejecting Proposition 72
The "fundamental flaw" of Proposition 72 -- a Nov. 2 statewide ballot measure that will determine the fate of SB 2, a state law that will require some employers to provide health insurance to workers or pay into a state fund to provide such coverage -- is that it is based on a "static analysis" that assumes "Sacramento can impose $5 billion or so in health care costs on employers and they will just grin and bear it," a San Diego Union-Tribune editorial states (San Diego Union-Tribune, 10/5).
Proposition 72 will allow California residents to vote "yes" or "no" to repeal SB 2, which will 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. Employers with fewer than 20 employees 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.
Gov. Arnold Schwarzenegger (R) last month announced that he supports repealing SB 2, which is scheduled to take effect on Jan. 1, 2006 (California Healthline, 9/27).
According to the editorial, state voters in 1992 "wisely rejected" a similar ballot measure because "they recognized that the so-called 'play-or-pay' mandate would have raised labor costs for small employers, forcing many to shed workers." The editorial states that employers, already faced by some of the nation's highest labor costs, "almost certainly would take steps to avoid the costly new health mandate."
The editorial cites a study by the Los Angeles County Economic Development Corporation that found the measure would compel employers "not to hire new workers, to lay off current workers or to cut back on worker hours." Businesses that could not avoid the requirements of the new law "would pass along their higher health costs to consumers by way of higher prices and to workers by cutting back on hours and wages," the editorial states.
The editorial concludes that the measure "is not the answer" to solving the "travails of California's uninsured" because it would ultimately "reduce overall economic activity in California, causing declines in personal income taxes and sales taxes" (San Diego Union-Tribune, 10/5).
Additional information on Proposition 72 is available online.