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The San Francisco Chronicle

Health bill under attack

by Tom Abate
October 2, 2003

A controversial health insurance bill that awaits Gov. Gray Davis' signature could cost California employers twice as much as opponents had previously estimated, according to a study released Wednesday by an industry group that opposes the measure.

The Employment Policies Institute, a Washington group that has fought minimum wage increases, said it could cost California companies $11.4 billion to cover the 2.3 million people that the study's authors think would be covered by the bill that passed the Legislature on Sept. 12.

That price tag, which is twice as high as the $5.7 billion cost estimated by the California Chamber of Commerce, was immediately refuted by supporters of the bill, who say the institute grossly inflated its figures as a last- minute pressure tactic.

Even if the study's timing and calculations are suspect, Davis faces a difficult decision about whether to sign it with less than a week to go before the recall election.

Davis' press office said Wednesday that the governor has not yet taken a stance on SB2, which organized labor has made a political priority.

"If I were a betting woman, I'd say he signs it,'' said state Sen. Jackie Speier, D-Hillsborough, who co-sponsored the bill. Beginning in 2006, it would phase in rules that could eventually require all businesses with 20 or more employees to offer health insurance to regular workers.

Speier said that although Davis hasn't tipped his hand, she thinks he's basing his decision on more than the election calculations of whether his need for labor support outweighs the risks of incurring business wrath.

"For him, it's about legacy,'' said Speier, who argued that SB2 will bring health insurance to more than a million currently uninsured Californians.

But the study pours more fuel on the debate over how much that coverage will cost California businesses, and whether the mandate would further cloud the state's business climate.

The institute's research director, Craig Garthwaite, said the study's cost findings were based on health insurance figures from the Current Population Survey, which is jointly run by the Census Department and the Bureau of Labor Statistics.

He said the institute's main complaint, other than the huge price tag it placed on SB2, was that even at that cost, the bill would only reach one-third of what it estimated to be 6.7 million uninsured Californians -- many of whom are children and therefore outside the workforce.

"An employer mandate is not an efficient way to target the uninsured,'' he said.

Health economists who supported SB2 said the report was flawed from the start because it was based on the Current Population Survey, which offers a far less detailed snapshot of the state's health insurance situation than a measure called the California Health Interview Survey.

"In my view, this guy's numbers are way over the top,'' said E. Richard Brown, director of the UCLA Center for Health Policy Research.

For instance, Brown said his own analysis suggests SB2 mandates will cover a little more than a million uninsured people, instead of the 2.3 million that the study said would fall under the bill's eligibility definitions.

"He's using numbers that paint the worst imaginable picture,'' said Brown, who did not put his own price tag on the program.

But the study was welcomed by Richard Costigan, a lobbyist for the California Chamber of Commerce, which has opposed SB2 and released its own study last month.

The chamber's report, prepared by the Los Angeles County Economic Development Corporation, said California businesses will have to spend more than $5.7 billion to cover uninsured workers and their dependents. "This bill is a job killer,'' Costigan said.

But UC Berkeley economist Michael Reich, chair of the Institute for Labor and Employment Studies, said he supports SB2 in part because his analysis suggests that the net cost of providing the newly required insurance would be about $1,300 per employee - far less than the estimates from the chamber, much less the institute.

Even supporters of SB2 say the bill has flaws, however. Jerry Flanagan, a health care advocate with the Foundation for Taxpayer & Consumer Rights in Santa Monica, said his group has urged Davis to sign the measure and then put in cost controls on insurers, hospitals and medical providers.

"As a general consumer rule, it's not a good idea to impose a requirement without putting in some cost controls,'' Flanagan said.

Davis' Cabinet secretary, Daniel Zingale, has said that Davis is still evaluating SB2 and will make a decision before the recall.

Candidate Arnold Schwarzenegger, who hopes to replace Davis after next week's recall, has said he opposes the bill. A spokeswoman for the candidate said, "He recognizes there are a number of Californians who do not have health insurance and wants to close the gap,'' but thinks a new mandate on business is not the way to do it.

If Davis does sign the measure, opponents have said they'll challenge it in court, saying that SB2 violates the 1974 Employee Retirement Income Security Act, a federal law that restricts what sort of benefits states can order employers to provide.