Outcome of Referendum on Employer-Sponsored Health Coverage Law Leans Toward Repeal

Both proponents and opponents for Proposition 72 -- a referendum on SB 2, a state law requiring some employers to provide health care benefits to workers -- on Tuesday said election results are "too close" to call, the Sacramento Bee reports (Benson, Sacramento Bee, 11/3). However, with all precincts reporting, 50.9% of state residents voted to repeal SB 2, and 49.1% of state residents voted to uphold the law (Secretary of State Web site).

Under SB 2, scheduled to take effect Jan. 1, 2006, employers with 200 or more employees will be required to provide health insurance to workers and their dependents by 2006 or pay into a state fund to provide such coverage. Under the law, 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 (California Healthline, 11/2).

Under the law, employers would have to pay at least 80% of the cost of health insurance. For low-wage workers, contributions would be limited to 5% of their pay (Colliver, San Francisco Chronicle, 11/3).

If the initiative is approved, California would join Hawaii as the only states that require employer-sponsored health coverage. Analysts estimate the measure could extend health care insurance to an addition 1.4 million state residents. Currently, the state has 5.3 million uninsured residents (Rau, Los Angeles Times, 11/3). However, even if Proposition 72 is approved, "it could be headed for a federal court challenge," according to the Chronicle.

Business groups placed Proposition 72 on the ballot in hopes of overturning SB 2, which they called a "$7 billion tax on workers" that could force many firms out of business or lead them to lay off workers, the Chronicle reports (San Francisco Chronicle, 11/3). The No on 72 campaign, which raised more than $16 million, was financed largely by the state Chamber of Commerce, the California Restaurant Association and Wal-Mart.

Although polls indicated a high level of support for Proposition 72 in the weeks prior to the election, "support waned" once Gov. Arnold Schwarzenegger (R) came out against the measure, the Contra Costa Times reports.

The "Yes on 72" campaign raised $10 million and was supported by organized labor, the California Medical Association and the Consumer Federation of California (Silber, Contra Costa Times, 11/3). Supporters of SB 2 say that "taxpayers are picking up the tab" for uninsured residents' care even though large businesses "should be able to afford health care" for their workers, the Chronicle reports (San Francisco Chronicle, 11/3).

Chamber of Commerce President and CEO Allan Zaremberg said that data indicating a small lead for the repeal of SB 2 reflected state residents' concern that the mandate could negatively affect businesses, the Bee reports (Sacramento Bee, 11/3).

CRA President and CEO Jot Condie said that if residents voted to uphold SB 2, Proposition 72 would "punc[h] a hole through California's economy like no other item on the ballot" (Contra Costa Times, 11/3).

Yes on 72 spokesperson Anthony Wright said that regardless of the outcome on the measure, SB 2 has advanced health care reform, according to the Bee (Sacramento Bee, 11/3).

Art Pulaski, executive secretary-treasurer for the California Labor Federation, said large corporations "like Wal-Mart and McDonald's spent millions" on a "campaign of scare tactics" about workers' job security. He added, "Fact is, they've made the same claims about everything, from increases in the minimum wage to restaurants having to ban smoking" (Contra Costa Times, 11/3).

Additional information on Proposition 72 is available online.