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The Oakland Tribune

Devil in details of state health care mandate

by Rebecca Vesely - Staff Writer
September 29, 2003

When Hortense Randolph applied for a job driving buses in Oakland, the newspaper ad promised 35 hours a week and health insurance. But at the interview, Randolph learned she would only work 30 hours a week, with no benefits.

Unsure when the next opportunity would come along, she took the job anyway. Over the next two years she shuttled seniors and disabled children for First Transit on a "split-shift'' in the rush of mornings and evenings.

Living without health insurance kept Randolph in constant fear, said the 35-year-old, although she only sought medical care once during that time for an eye infection. She went to the outpatient clinic at Fairmont Hospital for treatment, but said the waiting room was so depressing that she left before seeing a doctor.

"Anything could have happened,'' Randolph said recently. "You're out there driving, you could get into an accident or you could get sick and you wouldn't have health insurance."

Part-time workers like Randolph could benefit greatly from California's new health insurance mandate, dubbed SB2, which Gov. Gray Davis is expected to sign soon.

But questions remain about how affordable the benefit will be to part-time employees and how the state will enforce non-compliance.

The bill requires companies with at least 20 employees to provide health insurance to workers logging at least 100 hours a month, or 25 hours a week. The mandate goes into effect for employers with 200 or more workers in 2006, and for those with 20 or more employees in 2007.

At least one-third of the California workforce is part-time, and two-thirds of these workers don't have health insurance, according to a 1999 population survey by the Employee Benefits Research Institute.

The majority - or 60 percent - of part-time workers in the state make less than $15 an hour, and so are less likely to afford coverage. Twenty-three percent of part-time workers make less than $7 an hour, according to the California HealthCare Foundation.

For Amy Nickum, a 27-year-old college graduate who works part-time at Banana Republic in San Francisco, the mandate is good news.

Nickum has logged between 28 and 38 hours a week for the clothing retail giant over the past five years.

"If I could pay for health insurance, I would,'' she said. "But I just can't afford it."

Like many of her peers, Nickum relies on free clinics when she gets sick. But last August, she was diagnosed with a hernia that required surgery. Suddenly, she was faced with the prospect of thousands of dollars in medical bills. She turned to the charitable organization Operation Access that connects Bay Area patients with physicians who do pro bono outpatient surgeries.

"Had it not been for Operation Access, I really would have been in a bind," Nickum said.
"There are a lot of people in blue collar and retail jobs who are left out of the health care loop.

Jill Yegian, senior program officer at the California HealthCare Foundation, said Nickum and Randolph could still be priced out of health benefits under the pending legislation.

"My understanding of the requirement is they need to be offered the insurance, but they may have trouble affording it," Yegian said.

This is because part-time employees would likely pay the same premiums as a full-time worker, but make less money.

There's also the question of whether employers would drop part-time workers, who already have flexible hours, down to 20 hours a week to avoid providing coverage at all. This would be illegal under the mandate, but difficult to track.

"Who gets to decide what your business needs?'' Yegian said. "It's not obvious how you would enforce it."

The only other state with a health insurance mandate - Hawaii - also has the highest number of part-time workers of all states, Yegian said, and research suggests there is a link between the two as employers attempt to avoid paying for coverage.

In any case, it is unclear how many part-time workers will benefit from the legislation. Experts put the total number of uninsured who will qualify at 1 million. About 6.4 million Californians are uninsured, and about 80 percent of those are working families.

Wal-Mart has 54,000 workers in the state, 78 percent of whom are full time. Wal-Mart spokesman Bob McAdam said it's unclear how much the mandate will end up costing the world's largest retailer because so many of its workers are young people and senior citizens covered under either Medicare or as dependents on their parents' plans.

Wal-Mart offers plans to full and part-time workers, McAdam said, although part-timers must work for a more extended period to qualify.

"There are so many variables in the legislation, we just don't know what the cost will be," McAdam said.

E. Richard Brown, professor at the UCLA School of Public Health who supports SB2, said although some workers won't qualify, the plan is an "effective and incremental solution to the problem."

"We will see improved access and better health, as well as reduced costs to taxpayers and employers that provide benefits," Brown said.

Brown, along with the California Medical Association and other supporters, estimates the new regulations will cost employers about $1.5 billion a year. These costs, he said, would be offset by billions in savings in emergency care, as more people have access to preventative medicine. The savings would ultimately result in lowered premiums, supporters say. The California Chamber of Commerce puts the cost at $7 billion a year, and critics are skeptical of savings leading to significant premium reductions.

Wayne Kelder, chief financial officer of Koffler Electrical Mechanical Apparatus Repair in San Leandro, said he doesn't see how the mandate will bring down premium costs for his 75 employees.

"We're providing health care because we feel it breeds employee loyalty," Kelder said. "But costs are going up 15 percent every year. It's a tough pickle."

A survey by the Kaiser Family Foundation found that employer-sponsored premiums nationwide rose by nearly 14 percent from 2002 to 2003.

Up until three years ago, Koffler Electrical paid 100 percent of its employees' health care costs. But with premiums on the rise, it began passing some costs over to employees, Kelder said. The company now pays 80 percent of the costs, while workers pick up the remaining 20 percent, the maximum allowed under the new mandate.

Kelder said he is switching this fall from Blue Cross of California to Health Net, after learning rates would cost the company $3,000 more a month, and the co-pay would jump from $10 to $15 per doctor's visit. Health Net's policy is still high, but workers will hang onto their $10 co-pay, he said.

"It's a huge battle for us at a time when we didn't give raises because of the economy," Kelder said. "I question the timing and I question the principle of the government mandating this without price controls."

Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, a consumer advocacy group, said an unlikely alliance between consumers and business could form over the mandate.

"This bill is devoid of anything to make it affordable," he said. "The hard work is going to be whether we can lower the costs of health care."

Court worries that employers might refrain from hiring new workers - full and part time - to avoid the mandate if the price of health benefits continues to rise.

A separate new law will establish a panel to recommend cost-containment measures next year, Brown said, well before the law takes effect.

"By the time the smaller businesses are added a year later (in 2007), there will be some experience with cost containment," Brown said.

For part-time workers Nickum and Randolph, the new mandate comes not a moment too soon.

"This bill will have a huge impact on people in my position," Nickum said.
Contact Rebecca Vesely at [email protected]