Opponents Expected To Challenge Employer-Sponsored Health Benefits Bill

Opponents of a bill (SB 2) signed Sunday by Gov. Gray Davis (D) that would require some state employers to offer employees health insurance or pay into a state fund that would provide such coverage plan to legally challenge the law, the Santa Rosa Press Democrat reports (Rose, Santa Rose Press Democrat, 10/7). 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. 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. 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. The law limits employee premium contributions to 20% in all other instances. 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 (California Healthline, 10/6).

Richard Costigan, vice president of the California Chamber of Commerce, said the group will likely file a court challenge to the measure within the next few days, the San Francisco Chronicle reports. Costigan said opponents could mount a lawsuit alleging that the law constitutes a new tax on businesses, which would require a two-thirds legislative majority to pass, rather than the simple majority which passed SB 2. In addition, he said that a federal lawsuit could be filed alleging that the new law violates federal statutes about regulation of health benefits (Gledhill/Bethelsen, San Francisco Chronicle, 10/6). The chamber has said that the law might violate the 1974 Employment Retirement Income Security Act. That law gives states authority to regulate the insurance industry but stipulates federal regulation of employee benefits (California Healthline, 10/6). Opponents may also choose to petition the state to place the law on a ballot referendum, the Chronicle reports. Under that option, they would have 90 days to gather a required 373,816 valid signatures in favor of a referendum; the law would be stayed until voters decided on the law. Peter Warren, spokesperson for the California Medical Association, cited a poll showing that 63% of California residents support the law as evidence of widespread support for the law (San Francisco Chronicle, 10/6). Jeffrey Miles, president of the California Association of Health Underwriters, said, "There will be a backlash and it will not be a pretty sight. It will go all the way up to the Supreme Court because this is a fundamental issue with business groups. But if it does pass legal muster, it will sweep like wildfire across other states" (Santa Rosa Press Democrat, 10/7).

Summaries of editorials about SB 2 appear below.

• SB 2 will place "a huge new tax on businesses at a time when the state is trying to dig its way out of a prolonged economic slump," a Contra Costa Times editorial states. The law will have an "enormous ... negative impact" on the state's economy and will likely prompt business to leave the state or refrain from hiring, according to the Times. Although the state's number of uninsured residents is "high," a "multibillion-dollar burden on business is the wrong way to solve the problem," the editorial concludes (Contra Costa Times, 10/7).
  
  
• SB 2 "further raises the cost of doing business in California" and "gives employers a perverse incentive to pare their worker rolls," according to a San Diego Union-Tribune editorial. The Legislature and Davis "did not listen" to business leaders' calls for a law allowing employers to offer a "minimum benefit plan, which would cost them considerably less," and instead "enacted a costly new mandate that places the burden of covering California's uninsured workers entirely on the back of employers," the editorial concludes (San Diego Union-Tribune, 10/7).
  
  
• Although SB 2 "appear[s] to be straightforward and noble," a mandatory benefit that lacks cost controls invites a "long-term disaster," a San Francisco Chronicle editorial states. Legislators in the next session "have an obligation" to hold hearings to "fine tune or even overhaul this rush-job measure to make sure it does not require a huge public subsidy or force a wave of job losses," the Chronicle states (San Francisco Chronicle, 10/7).