Recall's Side Effects

Compelled by the uncertain outcome of the recall election, state lawmakers are pressing for legislation requiring private employers to provide health insurance, which would put California in the vanguard of national health-care reform.

“California is at the forefront of the effort to achieve universal health care at the state level,” said Rachel DeGolia, operations director for the Cleveland-based Universal Health Care Action Network. “California would be the first state to pass an employer mandate since Hawaii in the 1970s.”

Hawaii is the only state that has ever required employers to provide health insurance. A handful of other states are expanding health coverage through other methods. And voters in Oregon last year rejected an even more aggressive reform — government-provided health insurance for all. The California plan exempts small businesses — those with fewer than 20 employees — but the measure still would be sweeping as well as influential, given that California is the world’s fifth-largest economy.

Under a draft proposal being debated this week, medium-sized businesses, with 20 to 200 employees, would either insure the employee or pay into a state fund that would purchase coverage. Larger businesses also would be required to insure an employee’s family members or, alternatively, pay into the state fund for them. A state agency would govern the system and set fees that businesses would have to pay. Backers refer to this employer mandate as “pay or play.”

“We have about 21 percent of Californians who have no health insurance, the third worst record in America on the uninsured,” said Assemblyman Dario Frommer (D-Glendale), a backer of reform legislation who sits on the six-member committee that is hashing out the bill’s final form. “Only Texas and New Mexico have a greater percentage of their population uninsured. That is a shameful record.”

Supporters were not able to reach consensus on how to cover all workers and their families. “We’re hitting about 75 percent of the California work force,” said Frommer. Many other Californians — though not all — would still be covered by existing programs for the elderly, children or the poor. “I don’t believe we’ll be able to solve the entire thing this session,” conceded Frommer. “We have to consider the economic situation, which is not the best. This is a compromise.”

The draft legislation limits the employee share of the premium cost to 20 percent. Low-wage employees would not have to pay more than 5 percent of their wages toward an insurance premium.

The law would benefit an estimated 1.2 million of California’s 6.7 million residents who lack health insurance, said Ken Jacobs, labor policy specialist at the UC Berkeley Labor Center. “What isn’t in any of these numbers is that the legislation would protect many people who have insurance from losing insurance. Compared to 2001, double the number of employers said in 2002 that they had workers who had refused coverage they couldn’t afford. And in the Bay Area in the last four months, there were 10 strikes or work stoppages over health care.”

Opponents of the reforms include leading Republican lawmakers and chambers of commerce, who want no part of an expanded state bureaucracy, not to mention a government mandate telling businesses what they have to do. Democrats carry a majority in each house of the Legislature, so they need no Republican support, but they have been stymied in the past by diverging views within their own ranks and by the cacophony of competing lobbyists.

Skyrocketing health-care costs helped stimulate this renewed focus, but so has the gubernatorial recall election. A Republican governor would be under considerable pressure from party stalwarts to reject an employer mandate, which is why supporters say it’s urgent to give Governor Gray Davis a bill he is willing to sign by the end of the legislative session on September 12. The recall election takes place on October 7.

“If we have a Republican governor, we may not be able to get sweeping health-care reform legislation signed,” said Frommer. “And nobody thinks Congress in Washington is ever going to get its act together.”

For that matter, getting this reform past Davis is not automatic either. As one liberal activist put it: “People on Davis’ staff get brownie points to come up with ways of watering down legislation. His people find 20 excuses at the last minute.”

But this could be the last time around for Gray Davis, who might be especially motivated to get things done. And if he wants to survive the recall, passing health-care reform could help him reconnect with his Democratic base. If Davis beats the recall, however, he could return to the cautious, incremental centrist of the past.

“This is the year he’s going to sign progressive legislation,” said Assemblyman Fabian Nunez (D-Los Angeles). “All of us are in a hurry to get our bills to him. This is when we have to do it. If we make some mistakes, we can tweak it later.”


In the midst of this health-insurance crisis, employers already have to provide workers with one type of health insurance — workers’ comp, which kicks in when a worker sustains an injury on the job. The workers’-compensation system has become California’s shadow health insurance — with its own rules, its own doctors, its own funding and even its own parallel crisis.

Insurance-rate increases are threatening to drive businesses out of state or out of business entirely. Nor do employee benefits match those in some other states, say analysts. But for many employees, worker’s comp is their only insurance; thus, there’s incentive for workers to blame injuries on the workplace to get treatment. Part of the system’s cost is consumed by this misuse, as well as by challenges to coverage either by the worker or by the employer. A whole industry of lawyers has sprung up to service a so-called lawyer-free, no-fault system in which workers are supposed to receive all necessary care and compensation in exchange for a ban on litigation.

So this week, a committee of six legislators is looking at dozens of proposals from a score of bills to deal with workers’ comp, even as another group of six tackles health-care reform.

On the workers’-comp side, the driving goal is to cut costs — by the billions. The morass has engendered uncharacteristic recent cooperation between Democrats and Republicans, despite broad differences in approach. In general, Republicans are more inclined to cut costs by limiting benefits. But both sides talk of reducing waste and fraud and of limiting fees that doctors and clinics can charge. Many Democrats also lean toward giving the state authority to control insurance rates.

“What good is it if we achieve $5 billion in cost savings for the system if the insurance companies don’t reduce rates?” said state Senator Richard Alarcon (D-Van Nuys), a key member of the worker’s-comp committee. Alarcon said it’s vital to head off a 12 percent increase in already exorbitant rates that is scheduled to take effect in January.

For the most part, the twin disasters of health insurance and workers’ comp have been handled as though they have nothing to do with each other. In fact, both systems are essentially health plans funded through payments to an insurer, with costs out of control in both places.

“The first problem is the high cost of medical care,” said Alarcon, “and our constant battle to keep prices down in the medical system. If we could reduce the cost of medical care, both health-care costs and workers’-comp costs would go down.”

State Senate leader Jim Burton (D-San Francisco) has his hand in both the health-care and worker’s-comp negotiations. He’s been trying to make sense of the nexus between the systems in ways that could cut costs and improve benefits. But he’s running out of time in this legislative session.

A more radical solution for the future is a single-payer system — a Canadian-style government-provided insurance. Voters in Oregon recently rejected single payer after a blitz of negative ads from the insurance industry. Single payer would mean higher taxes, but supporters contend the total cost would be lower than what people are, in essence, already paying for health care. To state Senator Sheila Kuehl, who has introduced a single-payer bill, the proposals currently in the running fall short of real change.

“Expansion of coverage is a large step forward,” she said. “It is not a reform of the system. You still have the same high administration costs, the same 9,000 health plans to choose from, and the same problems with those who remain uninsured.”

Single payer has an impressively long list of supporters, even at this early stage, but also substantial philosophical and corporate opposition. Burton’s “pay or play” compromise, by contrast, has the backing of powerful business interests that would oppose single payer. And it has support from many employers who already provide health insurance. The combination could prove an irresistible and momentous consonance of forces for Gray Davis, if legislators don’t stumble on the home stretch.

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