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A flawed cure

The governor's healthcare plan doesn't sever the link between employment and insurance.

January 09, 2007

THE DEVIL, AS THEY SAY, is in the details, and that cliche was repeatedly thrown back and forth across Sacramento on Monday as lawmakers, business groups, doctors and consumer advocates studied Gov. Arnold Schwarzenegger's sweeping proposal to change the way healthcare is bought and sold in California.

But it may be a little early for this cliche. Schwarzenegger's plan is ambitious in scope and laudable in its goals, especially in its coverage for all children, including children of illegal immigrants. But the plan has a substantial chunk of devil before you even reach the details.

The problem is this: It makes no sense to legally and permanently make Californians' access to healthcare dependent on their employers. Companies hire workers and pay them for their time, talent, muscle and brains. Employers must meet certain standards to do business in the state -- complying with workplace safety laws, paying the minimum wage, providing workers' compensation insurance, etc. But they should not become the primary mechanism for the state to deliver vital services to citizens.

This is more true here than elsewhere because so many Californians who need insurance have only marginal or temporary relationships with employers. Companies, meanwhile, face plenty of challenges just staying in business and keeping up with the dynamics of the modern marketplace without being saddled with a new health insurance tax.

And make no mistake, it is a tax. Employers currently have the option of offering health insurance to entice workers, but they are not required to do so. Under Schwarzenegger's proposal, every business with 10 or more employees that does not offer workers health insurance would have to pay 4% of its payroll into a state fund. And like most employer taxes, workers ultimately will pay it -- in the form of lower wages or lost jobs.

The governor is loath to call it a tax because, like everyone else in Sacramento, he does not want to be seen as the kind of politician who proposes tax increases. He rode into office in part on his promise to slash the vehicle license fee, or car tax, and he did. He devoted much of his first term and reelection campaign to protecting California's tax-cutting heritage. But fancy wordplay doesn't change the fact.

The plan requires money -- about $12 billion -- and although some of it would come from the federal government, some from counties and presumably some from cuts in other state programs, some must come from new revenue.

Schwarzenegger has promised a new era for California, and his determination to fix the state's broken healthcare system is a welcome sign of his commitment. He should also make candor a part of the agenda. An employer tax should be out of the equation. So who should be taxed instead? Shouldn't we all? And how would it be imposed? All these questions are likely to get a full hearing in Sacramento in the next few months.

The governor certainly knows that the final version of the plan will deviate from the proposal he unveiled Monday. As for how much devil will be left in the details, only time, and plenty of intense horse trading, will tell.

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