The Fight Continues
Over Mandatory Health Insurance in California
In
one of his final acts before the recall election, Governor Gray Davis
signed Senate Bill 2 (Burton;
D- San Francisco) mandating employer provided health care coverage. Senate
Bill 2 was one of the most hotly contested pieces of legislation this
session, and was labeled a "job killer bill" by business
organizations.
The
legislation requires large companies with more than 200 employers to
provide health benefits for workers and their families by 2006. Medium
employers with 20 to 199 employees must provide health benefits for workers
by 2007. Companies with fewer than 20 employees are exempt.
The
fight over SB 2 is not over, especially with a new Governor about to take
office. Business groups recently announced plans to launch a referendum
campaign to overturn the legislation.
What SB 2 Provides
The
Health Insurance Act of 2003 (SB 2) would require employers with 20 or more
employees to either directly provide health insurance for their employees
or to pay a fee into the newly created State Health Purchasing Program
("the Program") - - a health insurance pool. The Program would
then purchase health insurance for eligible employees
"Large
employers" – those with 200 or more employees – would be required to
provide coverage or pay the fee for both employees and dependents.
"Medium
Employers" – those with at least 20 but not more than 199 employees –
would be required to provide coverage or pay the fee only for employees
themselves, not dependents.
Medium
employers with 20-49 employees will not be required to comply with the new
law unless a 20 percent tax credit is first enacted to help them offset the
cost.
Employers
with less than 20 employees are not covered by the legislation.
A
Managed Risk Medical Insurance Board ("the Board") would be
established to manage the program. The Board would be authorized to set the
fee amount based on the cost of providing coverage to eligible employees
(and dependents) and related administrative costs. The Board would also set
deductible, coinsurance and co-payment levels for specific benefits and set
limits on total out-of-pocket costs.
Employers
are required to pay at least 80 percent of the monthly fees - - employees
can not be required to contribute more than 20 percent. Certain low-income
workers (workers whose wages are less than 200 percent of the federal
poverty guidelines) can only be asked to contribute 5 percent.
The
fees will be collected by the Employment Development Department and will be
deposited in a newly created State Health Purchasing Fund. The moneys in
the fund will be continuously appropriated to the Board for use in the
health insurance pool.
Employee Eligibility
SB
2 would require coverage for "enrollees" - - persons who have
worked at least 100 hours per month for any individual employer and have
worked for that employer for three months.
The
legislative findings state that it is the "intent of the Legislature
that workers who work on a seasonal basis, for multiple employers, or who
work multiple jobs for the same employer should be afforded the opportunity
to have health coverage in the same manner as those who work full-time for
a single employer."
Large
employers, as noted, would also be required to provide coverage for
dependents. "Dependent" is defined to include the employee's
spouse, domestic partner, or minor child. The tem also includes an
employee's child over the age of 18 if the child is dependent on the
employee. However, the bill states that the term "dependent" does
not include a dependent who is provided coverage
by another employer.
Acceptable Employer Provided Coverage
Employers
who provide acceptable coverage to their employees and dependents could
avoid paying the fee to the health insurance pool. This is referred to as a
"credit against the fee." Employers would have to prove to the
Employment Development Department that they have acceptable coverage for
their employees and dependents. Acceptable coverage would include:
- Any health care
coverage that satisfies the minimum requirements of a California
Health Care Service Plan (a California
managed care plan).
- A group health
insurance policy as defined under Insurance Code section 106 that
covers hospital, surgical and medical care expenses, provided the
maximum out-of-pocket costs for insureds to
not exceed the maximum out-of-pocket costs for enrollees in California
Health care Service Plans providing benefits under a preferred
provider organization policy. A group health insurance policy in this
instance does not include Medicare supplement, vision-only,
dental-only, and Champus-supplement
insurance or hospital indemnity, accident-only, and specified disease
insurance that pays benefits on a fixed benefit, cash-payment only
basis.
- Any collectively
bargained health plan.
- Any employer-sponsored
ERISA plan, as long as it meets the benefits required in either of the
first two bullet points listed above.
- Any coverage
provided under the Public Employee's Medical and Hospital Care Act
that satisfies the benefits required in either of the first two bullet
points listed above or is otherwise collectively bargained.
- Health coverage
provided by the University
of California to
students who are also university employees.
Projected Costs of SB 2
Business
groups believe that the cost to Californians of SB 2's mandated health care
program will exceed $7 billion.
A
report prepared by the Los Angeles Economic Development Corporation states
that the legislation will cost business $5.7 billion and cost employees
approximately $1.5 billion.
The
report further states that nearly half of small and medium business
surveyed believed they would have to reduce other benefits due to SB 2, and
some feared they would have to layoff workers, close down or move to
another state.
The
report further detailed the experience of other states with similar
programs. For instance, a plan in Massachusetts
collapsed in the early 1990s.
The Ongoing Battle
As
stated, a coalition of business groups intends to put the issue on the
ballot. Californians against Government Run Healthcare - - which includes
the California Chamber of Commerce, California Restaurant Association, the
California Taxpayers Association, the California Retailers Association, and
the California Business Properties Association - - is in the process of
collecting signatures to put the bill on the March, 2004 ballot. At least
373,816 signatures of registered voters are required. The coalition has 90
days to collect signatures.
Business
groups contend that the legislation amounts to a tax on businesses - - a
tax that was not adopted with the two-thirds vote required by the
California Constitution. Business groups further believe that SB 2 will
merely create a growing economic burden for taxpayers and businesses in
future years.
Moreover,
business groups claim that SB 2 is preempted by ERISA. Hawaii, which also mandates employer
provided health care coverage, has a statutory exemption from the ERISA
preemption rule.
In
addition, many argue that experience in other states, such as Hawaii, shows that
the system fails without cost control measures in place. The bill does not
contain cost control provisions.
According
to an article in the October 27, Contra Costa Times, Gov.-elect Arnold
Schwarzenegger has not come out in direct support for the referendum to
overturn SB 2. However, according to Schwarzenegger spokesman H.D. Palmer,
Schwarzenegger opposes the concept of SB2 because it's an additional burden
for businesses. (Business Coalition Takes Aim at SB2, Judy Silber, Contra Costa Times)
On
the other hand, supporters of the legislation note that it provides needed
coverage to approximately 1 million uninsured employees in the State of California. The
California Medical Association sponsored the bill, along with the California
Labor Federation. They believe health care is a vital issue to working
families and that the referendum will fail.
One
thing is certain: the battle over mandated health coverage is not over.
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