SUPPORT
Proposition 72--Health Care Coverage Requirements.
Referendum.

In 2003, the Legislature approved and the Governor signed Senate Bill 2 (Burton) (Chapter 673, Statutes of 2003) to expand health insurance coverage beginning in 2006 for employees of certain employers and, in some cases, their dependents. The law also established a program to assist lower-income employees with paying their share of health care premiums.

The League of Women Voters of California supported SB 2 as a significant step toward the goal of providing access to a basic level of quality health care for all California residents.

The new law would have gone into effect January 1, 2004. However, Proposition 72, a referendum on this new law, subsequently qualified for the statewide ballot. As a result, SB 2 was put "on hold" and will take effect only if Proposition 72 is approved by the voters at the November 2004 election.

Health care researchers have estimated that the provisions of SB 2 could eventually result in more than 1 million uninsured employees and dependents receiving health coverage. The major provisions of SB 2 are described below.

"Pay or Play" Requirement for Employers

Senate Bill 2 enacts a "pay or play" system of health coverage for employers of 50 or more employees. These employers would be required to pay a fee to the state to provide health insurance (in other words, "pay") for their employees and in some cases, for their dependents. Alternatively, the employer could choose to arrange directly with health insurance providers for coverage (in other words, "play") for these individuals.

Both "pay" and "play" employers are required to pay a fee to the state to support a state health insurance purchasing program. Employers choosing to arrange their own health coverage (in some cases by continuing or modifying the coverage now provided to their employees) would receive a credit that would fully offset their fee. In order for an employer to qualify for a fee offset, the employer would have to provide specified types of coverage. Employers would be responsible for at least 80 percent of the cost of the fee, with the balance borne by their employees. The fee would be collected from employers and the fee requirements enforced by the Employment Development Department (EDD).

Senate Bill 2 would generally apply to both private and public employers, including state government, counties, cities, special districts, and school districts.

Federal law, known as the Employee Retirement Income Security Act (ERISA), has been interpreted by the courts to generally prohibit states from requiring certain employers to provide health insurance coverage to their employees. As a result, it is possible that the "pay or play" provisions of SB 2 could be challenged in court. The LAO's analysis assumes that the "pay or play" provisions would go into effect.

Who Would Provide and Receive Coverage?

The requirements depend on the number of employees in California.

• Employers of 200 or more employees would be required to provide health benefits for employees and dependents starting January 1, 2006.
• Employers of 50 to 199 employees would be required to provide health benefits for employees only, starting January 1, 2007.
• Employers of 20 to 49 employees would be required to provide health benefits for employees, but only if the California legislature enacts a specified tax credit to subsidize their costs. These employers are currently exempt from the provisions of SB 2.
• Employers of 19 or fewer employees would have no requirements concerning health care benefits.

Contributions by Employees

Employees would generally be required to make a contribution of up to 20 percent of the amount of the fee charged by the state to their employer. Contributions paid by employees would be collected by their employer and transferred to the state.

Low-income employees would have their contributions capped at 5 percent of their wages. Senate Bill 2 defines a low-income employee as an individual who earned wages of less than 200 percent of the federal poverty guidelines--currently about $19,000 a year in the case of an individual, and about $31,000 a year in the case of an employee and his or her family.

In addition to these contributions, employees could also be charged part of the additional costs for their coverage in the form of deductibles, copayments, or coinsurance payments in amounts determined by the state. These charges would have to be set at a level that took into account whether the persons would be deterred from obtaining appropriate and timely health care.

State Health Purchasing Program

Senate Bill 2 creates the State Health Purchasing Program to purchase health care coverage for eligible California employees (and their dependents) of employers who opt to pay a fee instead of arranging for health insurance. The purchasing program would be administered by MRMIB. The coverage would have to meet existing state standards for health insurance, such as the inclusion of hospital and primary care, and would also include coverage for prescription drugs.

State Premium Assistance

Senate Bill 2 establishes a program to pay the premiums for health coverage provided through the workplace for low-income employees who are eligible for Medi-Cal or the Healthy Families Program. This provision applies to eligible employees for all California employers, and not just those employees of employers affected by the "pay or play" requirements of SB 2. So, for example, eligible employees of employers that provide health coverage and that have fewer than 20 employees would qualify for premium assistance.

Employees and their families receiving premium assistance would also receive what is known as "wraparound" coverage from the state. In this case, it means that the state would provide and pay for any additional medical services for an employee or their family that were included in either the Medi-Cal or Healthy Families benefit package (such as dental coverage), but that were not included in the health coverage provided by the employer.

Health Insurance Marketing Provisions

Senate Bill 2 expands to medium-sized employers a series of provisions now in state law that are intended to make it easier and more affordable for small employer groups to purchase health coverage.

Fiscal Effects

The health coverage requirements of SB 2 would have a number of significant fiscal effects on state and local governments . . . [and] on individuals and businesses. These effects are complex, uncertain, and difficult to predict over time. . . . Given these uncertainties, the Legislative Analyst believes that the net savings or costs to the state and local governments are unknown.

Health Coverage in California

A majority of Californians under age 65 receive health insurance through their employer or the employer of a family member. Most Californians age 65 and over are covered by the federal Medicare Program. Others purchase health insurance for themselves. Many individuals receiving coverage share in the cost of the premiums paid for their health insurance.

Many low-income persons obtain health care services through the Medi-Cal Program, the Healthy Families Program, or other public programs operated by the state and county governments. Medi-Cal is administered by the state Department of Health Services (DHS), while the Healthy Families Program is administered by the state Managed Risk Medical Insurance Board (MRMIB). However, based upon a 2001 survey, an estimated 6.3 million nonelderly Californians lacked health coverage at some point during the year. These individuals are likely to receive medical assistance from county indigent health care programs or through the charitable activities of health care providers or pay for it themselves. Surveys indicate that of the nonelderly uninsured individuals, more than four out of five are either employed or are family members of someone who is working.

Some of the medical costs incurred by uninsured persons are indirectly shifted by health care providers to others who have health coverage, in effect adding to the cost of their health insurance. There are also indications that the number of employees who are uninsured may be adding to the costs of workers' compensation insurance, which includes medical coverage for on-the-job injuries.

LWVUS position on Health Care: GOALS: The League of Women Voters of the United States believes that a basic level of quality health care at an affordable cost should be available to all U.S. residents. Other U.S. health care policy goals should include the equitable distribution of services, efficient and economical delivery of care, . . .

Every U.S. resident should have access to a basic level of care that includes the prevention of disease, health promotion and education, primary care (including prenatal and reproductive health), acute care, long-term care and mental health care. . .

As the United States moves toward a national health insurance plan, an employer-based system of health care reform that provides universal access is acceptable to the League. . . .

The League believes that efficient and economical delivery of care can be enhanced by . . . consumer accountability through deductibles and copayments.

IMPORTANT POINTS

• At any given time, some 4.5 million Californians have no health insurance; 80 percent of them are working people or their dependents. Under Prop. 72 about one million uninsured employees and family members will start getting health insurance paid for by employers.
• The uninsured often delay or avoid getting the care they need and are more likely to die prematurely than insured patients with similar problems. They are more likely to face financial ruin as the result of health problems or large medical bills. The cost of providing health care to most of the uninsured is absorbed by those who pay private insurance premiums and the taxpayers who pay for publicly-funded programs.
• About 80 percent of the employees who would be covered by Prop. 72 work for large companies with 200 or more employees.
• Businesses with under 50 employees-small businesses-are exempt from Proposition 72.
• Prop 72 will control health care costs paid by employees by limiting premiums and out of pocket costs; it gives employers marketing power to lower premiums.
• Prop 72 provides a state purchasing pool for employers who choose not to purchase health insurance directly.
• Fast food chains are major opponents of Prop. 72; they don't want to provide the health care insurance required of employers of 200 or more. Some of their competitors do provide this level of health insurance.
• The escalation in health insurance premium costs is making it harder for employers and unions to sustain current benefit levels. Prop. 72 moves to correct the problem that employers who provide coverage to their employees and dependents are at a competitive disadvantage compared to those who do not insure their employees.
• The health care coverage law (SB 2) went through the careful scrutiny of the regular legislative process. Witnesses from the California Restaurant Association, the Chamber of Commerce, California Manufacturers and Technology Association, National Federation of Independent Business, California Farm Bureau Federation, and Wal-Mart testified on the bill, as did consumers, labor, seniors, health care providers and others.
• Proposition 72 is tied to a law that creates a commission to find ways to control healthcare costs while maintaining access to and quality of care.
• Some companies are going to pay for the minimum, 80% of premiums. But some companies already provide more than that, and can continue to do so-up to 100%, in which case the employee continues to pay nothing. Even the opponents of the law admit that the law "sets a floor for employer contribution of 80 percent of the cost, not a ceiling."
• California families will save money. The average family in California already pays nearly $2500 annually in premiums. Opponents of Prop 72 estimate that 72 will cost the average family up to $1,700 per year. Even by the opposition's own estimates, Prop 72 will save money for the average family right now.

 

SUPPORTERS Signing ballot arguments for	OPPONENTS Signing ballot arguments against:
Richard Holober, Executive Director Consumer Federation of California	Allan Zaremberg, President California Chamber of Commerce
Deborah Burger, RN, President California Nurses Association	Sandra Carsten, President Association of California School Administrators
Richard F. Corlin, M.D., Past President California Medical Association & American Medical Association	James G. Knight, M.D., 2003 President San Diego Medical Society

The rebuttal to the opponents' argument was signed by Paul Kivela, M.C., President, California Chapter American College of Emergency Physicians; Barbara E. Kerr, President, California Teachers Association; and Tom Porter, California State Director, AARP.

RESOURCES

Marion Taylor, LWVC Legislation Director, mtayl0r@sbcglobal.net

Trudy Schafer, LWVC Program Director/Advocate, 801 12th Street, Suite 220, Sacramento 95814, 916-442-9210, tschafer@lwvc.org

Save Your Healthcare, 916-442-2308, www.YesonProp72.com. Visit the Web site for information and ideas for action; individuals can send an e-card about Prop. 72 to their personal e-mail lists.

GET INVOLVED

Note: Please adapt this letter to your own community and check your local paper's word limit for published letters.

Editor:

A yes vote on Proposition 72 (Health Care Coverage Requirements) will provide health insurance for about a million of the 4.5 million uninsured Californians.

A majority of Californians under 65 receive health insurance through their employer or the employer of a family member.

A new law (SB 2) passed in 2003 requires employers of 200 or more to provide health insurance to their employees and their dependents. Employers of 50 to 199 employees must provide health insurance for those employees. There are no requirements for employers of 49 or fewer.

Opponents of this law, especially some fast food chains and department stores, placed a referendum on the ballot, and the law will take effect only if Prop. 72 is approved by the voters. Some of their competitors already give their workers health insurance. Prop. 72 levels the playing field for large employers in California, removing the unfair competitive advantage some have because they don't provide insurance.

Prop 72 will control employees' health care costs by limiting premiums and out-of-pocket costs; it gives employers marketing power to lower premiums.

Vote YES on Prop. 72 which requires those large employers not now providing minimum health care benefits to do so.

Sincerely,

(your name)

For more information on this proposition, go to Smart Voter's coverage.