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American Health Line

The New York Times today considers the debate over a bill (SB 2) passed Friday by the California Legislature that would require businesses with 50 or more employees to offer health insurance or pay into a fund that would provide such coverage (Freudenheim, New York Times, 9/17).

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 measure 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 (American Health Line, 9/15).

Supporters of the bill, including the California Medical Association, say it would expand health insurance to about one million of the state’s seven million uninsured residents and reduce the estimated $2.1 billion cost of uncompensated care, the New York Times reports. However, opponents of the bill say it would cost businesses “billions of dollars, undermine jobs and economic recovery and drive some companies out of the state,” according to the New York Times. Allan Zaremberg, president of the California Chamber of Commerce, said business groups may challenge the measure in court. Opponents argue that the bill is “really a new tax” that did not meet a state constitutional requirement of a two-thirds majority in the state Legislature and that it violates ERISA, the New York Times reports (New York Times, 9/17).

ERISA gives states authority to regulate insurance, but stipulates federal regulation of employee benefits (American Health Line, 9/15).

State officials said Gov. Gray Davis (D) is expected to sign the bill early next month (New York Times, 9/17).


Summaries of an editorial and opinion piece in the Los Angeles Times about SB 2 are provided below.

– Davis should veto the bill and ask lawmakers to reconsider the issue, a Los Angeles Times editorial states. While “[e]mployer-provided health insurance is a good idea,” it is not feasible to require companies to offer health coverage without state “cost controls or incentives,” according to the editorial. “Californians are not blind to the plight of the state’s 6.3 million uninsured,” but SB 2 provides only an “expensive system” that lacks “even the most basic controls on prices and utilization,” the editorial states (Los Angeles Times, 9/16).

– Although the bill is “good in theory,” its “fatal flaw is the absence of price controls,” Jamie Court, executive director of the California-based Foundation for Taxpayer and Consumer Rights, writes in a Los Angeles Times opinion piece. Davis should sign the bill, but only with the stipulation that the state Legislature establish cost controls — including mandatory state approval for health insurers to raise premiums; fee schedules for physician and hospital costs; and the formation of a state purchasing pool to buy prescription drugs in bulk — before the law would take effect, Court writes. These measures would prevent “price gouging and possibly employee layoffs” that the bill in its current form would encourage, Court writes (Court, Los Angeles Times, 9/17).

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