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Legislature OKs Small Business Health Coverage

Beginning in 2006, employers would be required to provide insurance coverage to 1 million of the state's working poor.

September 14, 2003|Carl Ingram, Myron Levin and Gregg Jones | Times Staff Writers

SACRAMENTO — California lawmakers passed a groundbreaking health insurance measure early Saturday that would require small businesses to provide coverage to 1 million of the state's working poor, who now rely on tax-supported programs for medical care.

Advocates on both sides appealed to Gov. Gray Davis to sign or veto the landmark bill. But even though his staff had a hand in shaping the final language, the governor said he had not yet read it or formed an opinion.

In a first for California, the legislation would require employers to either purchase private health-care policies for their workers or to pay a fee into a statewide pool that would purchase insurance coverage on their behalf. The requirement would neither be immediate nor across the board: Employers with 200 or more workers would not be required to provide insurance until Jan. 1, 2006. Businesses with 50 to 199 workers would have still another year to act. And employers with fewer than 20 workers would be exempt.

Employers with payrolls of 20 to 49 people would be exempt until the state provided them with a tax credit subsidy to help offset the insurance cost. In effect, the coverage of one of five workers would depend on the subsidy.

For The Record
Los Angeles Times Sunday September 21, 2003 Home Edition Main News Part A Page 2 National Desk 2 inches; 75 words Type of Material: Correction
Health coverage -- The headline "Legislature OKs Small Business Health Coverage" and the accompanying article in Section A on Sept. 14 concerning SB 2, the bill that would expand health coverage in California, may have erroneously implied that the bill is focused on small businesses. Although the bill is expected to have a bigger effect on smaller businesses, which are less likely to provide coverage, the legislation affects all businesses with 20 or more employees.

No one knows, however, when or even whether tax credits would occur. Because of an $8-billion budget shortfall, the state has no money to spend on subsidies and no one can accurately predict when the California economy would improve and the revenue would become available.

Still, advocates for small business strongly oppose the measure as an unnecessary cost at a time when the economy is struggling. But strong support has come from doctors, insurance companies and unions that argue that the insurance would save taxpayers $650 million to $1 billion in costs they are now billed through Medi-Cal, the state health program for the poor and disabled.

At an appearance Saturday in Los Angeles, where he was campaigning to survive a recall election Oct. 7, the Democratic governor refused to reveal what action he intends to take. Davis said he had devoted most of his recent attention to advocating an overhaul of the state workers' compensation insurance program. Legislators also passed a workers' comp measure Saturday as their session adjourned for the year.

"Now, we've got workers' comp done," Davis told reporters. "I will review the [health bill] and make my own best judgment."

He has 30 days to sign or veto, or the bill becomes law automatically.

"Any comment would suggest I'm leaning one way or the other," Davis said. "I'm not leaning because I haven't read the bill yet."

Davis has long been a supporter of expanded health care for low-income Californians, but aides said that in these tough economic times he wanted to examine the potential effects of the bill on businesses.

Most large businesses already provide health care to their employees.

If Davis did sign the bill, which initially proposed covering 2.5 million uninsured workers and their families but was scaled back to make it more acceptable to business, the system would be the biggest of its type in the nation.

"We're at least hopeful and optimistic that he'll sign it," said Art Pulaski, executive secretary-treasurer of the California Labor Federation, AFL-CIO, whose unions have been favorite beneficiaries of Davis' support and were the first to rush to his side in the recall campaign.

But representatives of business organizations pleaded for a veto, warning that employers would face at least $5 billion in extra costs, which they called a new tax, and would be forced to fire workers, reduce employee benefits or move out of state. Proponents of the bill called the cost figure exaggerated.

Fred Main, senior vice president of the California Chamber of Commerce, which opposes all government mandates on employers, warned that if the bill became law, the chamber would challenge it in state and federal courts. Main said the legislation would impose a tax that "employers in the rest of the country don't pay."

It would be challenged as an illegal tax because it was enacted by a simple majority of the Democrat-dominated Legislature rather than by a two-thirds vote required for tax increases.

The chamber also would charge that the legislation violated the federal Employee Retirement Income Security Act, which forbids state regulation of employee pension and benefit plans.

However, Beth Capell of Health Access, a nonprofit group that advocates affordable health care, predicted that such a suit would fail because the measure was crafted to bypass the federal restrictions.

Proponents said the bill would affect between 2.5% and 5% of all California employers. That came as a result of compromises requested by businesses and the governor's office.

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