Calif. Businesses Vow To Fight Coverage Law

A new law that makes employers extend health benefits to about a million uninsured Californians will be watched carefully. Opponents of the law, signed by Gov. Gray Davis two days before the recall vote that ousted him, vow to challenge it in the courts.

“The California Chamber [of Commerce] agrees that uninsured Californians need help, but the multibillion-dollar health care tax … is the wrong approach,” says Allan Zaremberg, the chamber's president. “It is a job killer that will force new expenses on employers already struggling with rising workers' compensation costs and a looming unemployment insurance tax increase. Rather than swelling the ranks of the insured, [it] will swell the ranks of the unemployed.”

The law requires that some employers either provide insurance to employees or pay into a state fund that will provide coverage. Businesses with 200 or more employees will have to cover workers and dependents by 2006 to avoid paying into the fund.

Businesses that employ 50 to 199 workers must offer health insurance to employees (not dependents) by 2007. Employers with fewer than 20 workers are exempt, and those with 20 to 49 workers are exempt unless the state acts to provide tax credits to offset the cost of health benefits.

The chamber is weighing a challenge on the grounds that the fee employers must pay if they choose not to provide health insurance is an unlawful tax. It argues that a new tax on business requires a two-thirds legislative majority. This law was enacted by simple majority.

The chamber also is looking into whether the law violates federal ERISA provisions.

The ramifications might be wide if the law weathers these challenges. It “could be a model for the rest of the nation,” says the Wall Street Journal. The San Francisco Chronicle predicts that the law will “put California at the forefront of the push to broaden insurance coverage through employer mandates.”