Legislature Passes Employer-Sponsored Coverage Bill

The Legislature late Friday passed a "landmark health bill" (SB 2) that would require some employers to either purchase health insurance for employees or pay into a state fund that would provide such coverage, the Sacramento Bee reports (Chan, Sacramento Bee, 9/13). The measure, proposed by state Senate President Pro Tem John Burton (D), passed the Senate 25-14 and the Assembly 46-30 less than three hours before their scheduled midnight adjournment, the San Francisco Chronicle reports (Gledhill/Martin, San Francisco Chronicle, 9/13). If enacted, California would become the first state to require employers to provide specified health benefits to employees since the federal Employee Retirement Income Security Act took effect in 1974, the Bee reports. ERISA regulates employee benefits, but gives states power to regulate health insurance (Sacramento Bee, 9/13). SB 2 would limit employee premium contributions to 20%, and would require 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 would have to offer health insurance to employees only by 2007. Employers with fewer than 20 workers would be exempt from the law, and those with 20 to 49 workers would be exempt from the law unless the state provides tax credits to offset the cost of health benefits (California Healthline, 9/11). However, because of the state's estimated $8 billion budget deficit, it remains unclear "when or even whether tax credits would occur," the Los Angeles Times reports (Ingram et al., Los Angeles Times 9/14). Although the measure "isn't universal coverage," it is expected to expand access to health insurance to about one million of the state's seven million uninsured residents, the Wall Street Journal reports (Rundle, Wall Street Journal, 9/15). Gov. Gray Davis (D) on Saturday said he has not decided whether to sign the bill because he has not yet read it. If he does not sign the legislation within 30 days, it will automatically become law, the Times reports (Los Angeles Times, 9/14).

Burton said the law would "put California on the forefront for health care," adding, "It's a good thing for employees." However, Republican lawmakers in both the state Senate and Assembly "branded the program as socialized medicine and argued it would drag down an economy struggling to rebound," according to the Bee (Sacramento Bee, 9/13). State Sen. Tom McClintock (R), who also is running for governor, said, "A lot of people will have neither health insurance nor jobs" (San Francisco Chronicle, 9/13). However, the bill's supporters said that it would reduce spending for Medi-Cal -- the state's Medicaid program -- by approximately $650 million to $1 billion each year. Dr. Jack Lewin, chief executive of the California Medical Association, said, "Emergency and on-call services will no longer be needed for more than one million uninsured people." Fred Main, senior vice president of the California Chamber of Commerce, said that if the bill is enacted, the chamber will challenge it in state and federal courts (Los Angeles Times, 9/14). The state bill "falls into an ERISA gray area" about whether the state or federal government has the authority to regulate health insurance benefits, according to the Bee (Sacramento Bee, 9/13).

The passage of the California legislation "may give new traction to sputtering efforts in other states to expand health coverage," the Los Angeles Times reports. While federal legislators "have largely shied away" from such efforts because of the failure of former President Clinton's proposed health care reforms in the 1990s, several states are considering measures to expand access to care, according to the Times. Hawaii currently is the only state to require businesses to provide health insurance (Ornstein/Fox, Los Angeles Times, 9/15). Maine Gov. John Baldacci (D) in June signed a law that will establish a public-private health insurance program called Dirigo Health, which will offer lower-cost health plans to self-employed individuals and to employees of small businesses (American Health Line, 6/19). In addition, lawmakers in Maryland, Massachusetts, Illinois, New Mexico, Oregon and Wisconsin have considered health insurance bills. According to the Times, state budget shortfalls are the "latest roadblock[s]" to such measures. However, E. Richard Brown, director of the Center for Health Policy Research at the University of California-Los Angeles, who helped draft the California bill, said, "I think there's a growing sentiment that states need to do something" about the "huge number of uninsured people" (Los Angeles Times, 9/15).