Inside SB 2: mandatory health coverage for employees.

• Author: Allen, Bruce C.
• Position: Government relations

Before the Oct. 7 recall election, Gov. Gray Davis signed into law the hotly debated SB 2 (Burton, Speier), which mandates employer-sponsored health insurance for many California businesses.

Business interests had vigorously opposed the bill, while unions and health care providers supported it. Proponents say that the mandate will provide health care coverage to more than 1 million California workers and their dependents, about 28 percent of the working uninsured according to the Kaiser Family Foundation.

Opponents estimated an increased cost to California's employers of $5.7 billion to $11.4 billion.

Unintended Consequences?

When Hawaii enacted similar legislation, many workers found that they could no longer find full-time work and had to make do with multiple part-time jobs with no benefits.

California's new health plan may result in decreased benefits for many workers and restrictions on offering coverage to dependents who are subject to their own employer-mandated coverage.

Part of the impetus for SB 2 was the increase in the number of uninsured California workers as struggling companies cut back on benefits or require employees to make larger contributions to retain health insurance. Some workers faced with feeding their family or paying health insurance premiums have chosen to go without health insurance. The measure's supporters argued that these workers were using public health care programs and the cost was being passed on to taxpayers.

After vigorous debate, employers of fewer than 20 employees were exempted and those with between 20 and 49 employees may be exempted if an offsetting tax credit of 20 percent of the cost is not enacted.

The Nitty-Gritty

Effective Jan. 1, 2006, all large employers, defined as those employing 200 or more people in California or a "controlled group of corporations" employing 200 or more individuals who work in California, are required to pay a fee to the Employment Development Department for each employee who works more than 100 hours per month.

A newly empowered board will set the fee that will cover the cost of insurance for employees, as well as enforcement and administration by the state agencies responsible for collecting the fees and administering a purchasing pool.

The requirement will apply to medium-sized employers (50 to 199 employees) Jan. 1, 2007. It also will apply to employers with 20 to 49 employees if the tax credit has been adopted.

Employers who choose to provide health insurance to...