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CALIFORNIA ELECTIONS / PROPOSITION 186 : Businesses Look at Health Initiative's Bottom Line : Employers that would save money tend to favor creating a single-payer state system, while those that would pay more tend to oppose it.


When the head of Los Angeles-based Bell Industries balanced his current medical insurance costs against the new payroll taxes called for by Proposition 186, the so-called single-payer health insurance initiative, he decided he would save $835,000 annually. He likes the initiative.

But when analysts at electronics giant Hewlett-Packard did the same thing at their company, they found that the Nov. 8 ballot initiative would cost the corporation an additional $46 million a year and its employees an extra $14 million. Hewlett-Packard opposes the measure.

Up and down California, as business executives make the same kinds of dollars-and-cents assessments of Proposition 186, the conclusions they draw will have a big effect on the outcome of the election, both sides agree.

Most of the organized opposition to the initiative has come from employers, who pay the lion's share of health insurance premiums in the state.

Among the groups opposing Proposition 186, designed to replace the private health insurance system with one run by the state, are the California Chamber of Commerce, the California Manufacturers Assn., the Health Insurance Assn. of America, the National Federation of Independent Business and the California Restaurant Assn.

But sponsors of Proposition 186 have been making a concerted effort to obtain business-oriented support of their own. They claim some success, such as getting the support of Ted Williams, the chief executive officer of Bell Industries, a firm that distributes electronic components to industry and generates about $500 million a year in sales. Williams is among the 500 corporate chiefs who have endorsed Proposition 186.

Williams said he has been alarmed for years about escalating health care costs and the problems faced by the 6 million Californians who currently lack any kind of health insurance.

Part of the financing of the initiative would come from a new payroll tax on business. Under the measure, businesses would face an escalating tax rate, depending on the number of employees of each company. Firms with one to nine employees would be taxed an additional 4.4% of their payroll; those with 10 to 24 full-time or equivalent workers would pay 6%; the rate for 25 to 49 employees would be 7% and firms with 50 or more full-time employees would pay the top rate of 8.9%.

Bell Industries currently spends about 12% of its payroll providing health benefits to its 1,500 employees, Williams said.

He said his company's savings would come from lower payouts as measured by current premiums versus the tax hike, lower workers' compensation costs based on the initiative's intent to fold that system into the state health plan, and reduced payments for internal administration of health plans.

The Bell executive likes the promise of immediate savings, as well as what he believes will be a cap on future cost increases. "Our health insurance costs have gone up for the past four years at double the rate of inflation," he said.

But, at Hewlett-Packard, headquartered in the Bay Area, the experience has been quite different.

Mary Beall, the electronics firm's government affairs manager, said that Hewlett-Packard has kept health insurance costs down to about 7% of its payroll--5.9% of that paid for by the company and 1 1/2% by employees--so the 8.9% tax would represent a major increase.

The tax increases would help pay for a wide range of medical and mental health benefits, such as hospitalization, prescription drugs and some long-term care expenses. The precise benefits have not yet been established. They would be created by a state health commissioner who would be elected in a statewide vote.

Judging from the initiative's outline, however, Beall said the package of benefits promised by Proposition 186 may not equal the benefits offered by the plans her company provides to employees.

"We are not convinced the state can do as good a job managing costs as we can do. Over the last five years our costs have been held to increases of less than 5% a year. At the same time we have been able to improve our benefits," she said.

Opponents of the measure consider opposition by corporations such as Hewlett-Packard key to defeating the measure.

"I have seen very few measures where our membership--both large and small businesses--are as united as they are against 186," said Ray Remy, president of the Los Angeles Area Chamber of Commerce, which represents about 2,000 businesses. "The business community generally is concerned about a program that creates a very large state bureaucracy, a budget that would be under the control of a directly elected health commissioner, a budget which in the beginning would be the size of the current state budget and has the prospect of being twice that size. That makes people pretty uncomfortable."

Richard Wiebe, a spokesman for the opposition campaign, said similarly strong opposition was being mounted throughout the state. "Support of business is critical to defeating this initiative," he said.

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