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United Press International

Commentary: California insurance squeeze

September 17, 2003

LOS ANGELES, Sept. 17 (UPI) -- Small companies in California and their low-wage workers are caught in the middle of a brewing political maelstrom as the cash-strapped state struggles to throw the poor a healthcare lifeline while at the same time not upsetting the already fragile economy.

Gov. Gray Davis has on his desk new legislation that would require employers to either provide health insurance for their workers or pay into a fund that would provide healthcare coverage for them, and the political heat radiating from both sides in the debate is difficult for anyone, least of all the embattled governor, to ignore.

Senate Bill 2 at least attempts to do something to address the problem of more than 1 million uninsured blue-collar workers who have long been considered a burden on urban hospitals that are required to tender care whether the patients can pay or not.

At the same time, the business community sees the bill as a potential "job killer" that will deal a body blow to the beleaguered California economy, which is still seeing stars after being knocked to the canvas by the great dot-bomb Internet swoon.

"The California Legislature had an opportunity to stop 'job-killer' legislation and work toward reinvigorating our economy," warned Allan Zaremberg, president of the California Chamber of Commerce. "Instead, there are numerous bills heading to the governor's desk, which will severely harm our already stagnant economy, and drive businesses out of the state. Instead of providing leadership in tough economic times, leaders in the legislature approved a new multi-billion-dollar healthcare tax on employers."

The political reality is that Davis will most likely sign the bill since he would be wise not to cross its sponsor, Senate President Pro Tempore John Burton, a prominent leader of the state's liberal Democrats. The measure is also backed by organized labor, a vital bloc of support as Davis scrambles to survive the recall campaign that could now stretch well into next winter.

The other political rally is that signing the bill puts Davis back in the crosshairs of the business community and their Republican allies who accuse governor and the Democrats of tax and regulatory policies that are driving companies and jobs out of the state.

The healthcare plan requires companies employing more than 200 workers to either pay 8 percent of the cost of a health plan for them or to pay into a state-run pool that will provide the coverage. The threshold goes down to 50 workers next year, with employers still being able to reap a state tax credit.

Backers of the plan say the tax credit alone will be enough to compensate companies for their trouble, and that it repairs a fundamental unfairness that sees the state and hospitals having to pay the costs of caring for workers whose companies are too cheap to provide health insurance coverage.

"Our colleagues in labor who have benefits have concluded that it is time to have the freeloaders chip in their fair share," Dr. Jack Lewin, chief executive officer of the California Medical Association, told United Press International on a conference call this week.

"California's healthcare environment has been destabilized by rising uncompensated care costs, since the uninsured use emergency rooms as their medical home," explained Lewin. "Having people who are working being covered by insurance is going to save us a ton of money. The uninsured tend to seek care later and have more adverse outcomes, and frankly, they cost society more money."

Lewin's contention was boosted this week by a study in the Journal of the American Medical Association that children enrolled in private medical plans received better preventative and routine care than they would under Medicaid. The National Committee for Quality Assurance released a report by coincidence on Wednesday that said the toll low-end -- or non-existent -- healthcare has on productivity boils down to $11 billion or 41 million sick days nationwide per year.

Critics of the California plan, however, say that the costs are simply too high for most smaller companies to bear. The Chamber of Commerce has concluded that the plan will initially cost companies nearly $6 billion and the workers who are being covered about $1.5 billion for their share. In addition, weaknesses in the bill could set the stage for rampant premium inflation as workers flock into the medical system.

"The plan's fatal flaw is the absence of cost controls," the Foundation for Taxpayer and Consumer Rights said in an op-ed piece in Wednesday's Los Angeles Times. "Employers would be required to pay the premiums, but there is nothing to stop insurers, doctors, hospitals and pharmaceutical companies from charging as much as they like for medical services."

The Times and other California newspapers have been running articles recently outlining the fear and loathing SB2 has caused in the business community. Employers' reactions range from being outright devastated to merely discouraged, with plenty of talk of putting off expansion or even moving their businesses out of the on-the-ropes Golden State.

The backers of the bill respond that it is unlikely that enterprises such as restaurants, dry cleaners and other small businesses catering to a local crowd would move to Vegas or Arizona. They also predict that benefits will help them retain their most productive workers.

The true impacts of the bill are likely somewhere in between, although more such sob stories from the small business community will no doubt be added to the litany of perceived Davis missteps in the arsenal of the pro-recall forces.