BILL ANALYSIS 1
SENATE COMMITTEE ON INSURANCE
Senator Jackie Speier, Chair
SB 2 (Burton/Speier) Hearing Date: April
30, 2003
As Amended: March 18, 2003
Fiscal: Yes
Urgency: No
SUMMARY
The bill would require employers to provide health care
coverage (coverage) to employees and dependents, as
specified, by purchasing coverage from any health care
service plan (plan) or by paying a fee to the State Health
Purchasing Program (SHPP) which would use a purchasing pool
to provide coverage.
DIGEST
Existing law
1. Provides for the creation of various programs to
provide coverage to persons who have limited incomes
and meet various eligibility requirements. These
programs include the Healthy Families Program
administered by the Managed Risk Medical Insurance
Board (MRMIB), and the Medi-Cal program administered by
the Department of Health Services.
2. Provides for the regulation of plans by the Department
of Managed Health Care (DMHC) and health insurers by
the Department of Insurance (DOI).
This bill
1. Would require that employers shall provide coverage to
each employee who has qualifying wages under the
Unemployment Insurance Code and to any dependent of an
employee who is not receiving coverage from a different
employer, but would not require coverage for the
dependent spouse or domestic partner if eligible for
coverage from another employer.
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2. Would require the coverage to be equivalent to
coverage required to be provided by plans plus
inclusion of basic prescription drugs.
3. Would allow an employer to provide coverage by
choosing to:
(a) Select and purchase that coverage from any
plan.
(b) Provide coverage through self-funded,
employer-sponsored plans.
(c) Pay a fee to the Employment Development
Department (EDD) for similar coverage.
4. Would define an employer as employing, for wages or
salary, ____ or more persons to work in this state.
5. Would not require an employer to provide coverage if:
a. The employer is not the principal employer of
the employee in terms of monthly hours worked.
b. The employee is provided other coverage
established under any law of the United States or
this state.
c. The employee is covered as a dependent under a
plan, health insurance policy, or self-funded
employer-sponsored plan that has coverage benefits
meeting the requirements of the bill.
6. Would allow an employer to require an employee to pay
up to 20% of the cost of the coverage.
7. Would create SHPP, to be managed by MRMIB, which would
use a purchasing pool to provide coverage for employees
and their dependents for which the employer pays a fee
rather than purchase coverage.
8. Would require MRMIB to:
a. Annually determine the level of the fee to be
paid by an employer who chooses to participate in
SHPP, and to take into account the wages of the
employees and other relevant factors.
b. Determine the employee contribution, not to
exceed 20%.
c. Establish the required enrollee deductibles or
copayment levels.
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9. Would authorize MRMIB to coordinate coverage under
SHPP with coverage available under the Medi-Cal program
and the Healthy Families Program, and require enrollees
obtaining coverage arranged through SHPP to provide
certain information to MRMIB relative to income and
eligibility.
10.Would require MRMIB to develop and utilize appropriate
cost containment measures to maximize the
cost-effectiveness of coverage offered under SHPP which
may include:
a. Limiting the expenditure of funds for this
purpose to the price to SHPP for the lowest cost
plan contracting with SHPP.
b. Creating rules that restrict the ability of an
employer or applicant to drop existing coverage in
order to qualify for SHPP.
c. Other measures that the board deems necessary
to ensure the affordability of coverage for
employers, employees, and their dependents.
d. Obtaining information sufficient to assist it
in determining whether the price paid for coverage
is appropriate to ensure access to quality care, and
whether a different price may be appropriate.
COMMENTS
1. Purpose of the bill . The authors believe working
Californians and their families should have health
insurance coverage and that most working Californians
obtain their coverage through their employment. In
2001, more than 6 million Californians lacked coverage
at some time, 3.6 million had no coverage at any time,
more than 80% of these were working people or their
families, and most of these working Californians
without coverage work for employers who do not offer
health benefits. The authors note people who have
coverage have better health outcomes than those who
lack coverage, are more likely to be in poor health,
more likely to have missed needed medications and
treatment, and more likely to have chronic conditions
that are not properly managed.
The authors state employers who do not provide coverage
to their workers have an unfair competitive advantage
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over those employers who provide coverage, and that
employers who provide coverage to dependents often pay
directly for the failure of other employers to provide
coverage for those dependents. Employers who provide
coverage also pay directly when a previously uninsured
person becomes an employee and the accumulated health
costs due to lack of insurance burden the employer
providing coverage.
The authors add that controlling health care costs can
be more readily achieved if all working people and
their families have coverage so that cost shifting is
minimized.
2. Support . The California Labor Federation, AFL-CIO
(CLF) is sponsoring the bill because taxpayers and
those already covered pay the price for the uninsured
through emergency rooms, publicly funded health
programs and higher premiums. CLF states that our
health care system is built on a foundation of
employer-provided coverage, and that employers who do
not provide coverage create a burden on good employers.
California Medical Association believes the bill would
address the burgeoning crisis in our health care system
by providing coverage to approximately 80% of the
uninsured resulting in a healthier and more productive
workforce.
California Association of Public Hospitals and Health
Systems and others believe the bill would address the
crux of the issue facing our state's health care system
and provide coverage to the uninsured.
California State Employees Association and others state
that uninsured workers must either turn to government
programs, hope for coverage under a spouse's employer
or simply go without coverage and pray that nothing
serious goes wrong.
Consumers Union notes that since California for many
years has had lower health insurance costs than other
states, one would expect significantly more employers
offering coverage. Yet this is not happening because
market forces are not working, and the bill is needed
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to level the playing field for all employers.
Health Access states 80% of the millions of
Californians without coverage are working people and
their families, and that most of these workers are
low-wage workers who cannot afford to purchase coverage
and often cannot afford the worker share of coverage
for employer-provided coverage, especially for their
dependents. Health Access notes the bill takes into
account the need for coverage to be affordable by
allowing MRMIB to implement needed cost control
mechanisms and to regulate out of pocket costs for
workers and their families.
The Service Employees International Union (SEIU)
believes the bill would create a minimum health benefit
standard that is equivalent to the minimum wage and
would create a floor it can negotiate up from. SEIU
states that currently the cheapest thing for an
employer to do is to fail to offer coverage, and this
unfairly disadvantages employers who do the right thing
and provide coverage.
3. Support if amended . California Association of Health
Underwriters (CAHU) states it is in strong support of
the goals of the bill, but believes the coverage should
be affordable for all size employers, and that coverage
similar to the State employee or the Healthy Families
program is simply not affordable for small and medium
sized businesses. CAHU also believes there should be
provisions for subsidizing small employers, that the
incentives should be significantly stacked to encourage
employers to remain in the commercial market, that
eligibility for coverage should be restricted to full
time employees (more than 30 hours per week), and that
SHPP should be phased in.
4. Opposition . Blue Cross believes the bill cannot
achieve its aims due to ERISA preemption problems that
may result in higher rates. Under the federal ERISA
preemption act, state law cannot dictate what benefits
an employer provides if the employer is self-insured.
Blue Cross states many larger employers are
self-insured which means the mandates for coverage and
benefits do not affect them, and that the extremely
rich mandates in the bill will force even more
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employers into self-insurance to avoid its mandate. As
the healthier employer groups with fewer claims
increasingly self-insure, the remaining employers will
have higher rates since the pool would be sicker.
Californians for Affordable Health Reform (CAHR) and
others state that cost is the primary reason employers
do not offer coverage, and that the bill would have a
disproportionate impact on small businesses which are
the ones that cannot afford coverage. CAHP notes the
recent increases businesses have incurred in workers'
compensation costs, the increase in the unemployment
insurance tax contribution employers will pay effective
in 2004, and other currently proposed fee and tax
increases. CAHR believes mandating coverage will lead
to many businesses deciding to lay off employees, delay
expansions or cause employers to consider relocating
portions of the business to other states.
5. Related legislation .
SB 2123 (Lee & Watson), introduced in 1998, would
have established a short, modified framework for a
California single payer system, but the bill failed in
the Health and Human Services Committee.
SB 480 (Solis-Chapter, Statutes of 1999) required the
secretary of the California Health and Human Services
Agency to report to the Legislature concerning options
for achieving universal health care coverage and to
establish a process to develop those options.
SB 1414 (Speier), introduced in 2002, would have
created Healthy California to provide universal
coverage by expanding and consolidating public health
programs and requiring employers to provide health
insurance using a "pay or play" approach, but failed in
Senate Appropriations.
SB 941(Kuehl) would create an approach to universal
health coverage by creating a single-payer system. (in
Senate Insurance).
AB 30 (Richman) would expand Healthy Families to
include working adults without children (in Assembly
Health).
AB 923 (Wesson) would enact legislation that makes
provision for rural health care for farmworkers
(Assembly Rules).
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AB 1527 (Frommer) would mandate employers with more
than 50 employees to provide health insurance using a
"pay or play" approach (Assembly Health).
AB 1528 (Cohn) would mandate all employers to provide
health insurance using a "pay or play" approach,
require individuals without employer provided health
insurance to obtain health insurance, and would create
the California Essential Health Benefits Program
(Assembly Health).
POSITIONS
Support
California Labor Federation, AFL-CIO (sponsor)
AFGE Local 1881
Alliance of Catholic Health Care
American Federation of State, County, and Municipal
Employees
Amalgamated Transit Union Local 1555
Art Directors Guild
Association of Flight Attendants Local 11
ATU Local 1555
Being Alive Los Angeles
Brewery Soda and Mineral Water Bottlers of California Local
896
Butchers' Union Local 120
California Association of Public Hospitals & Health Systems
California Catholic Conference
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Federation of Teachers
California Medical Association
California National Organization for Women
California School Employees Association
California State Council of Hotel Employees & Restaurant
Employees
California State Employees Association
California Teachers Association
California Women Lawyers
Central Labor Council of Contra Costa County
Central Labor Council of Fresno, Madera, Tulare & Kings
Counties
City and County of San Francisco
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Commission on the Status of Women
Consumers Union
Communications Workers of America Local 9000
Communications Workers of America Local 9415
Communications Workers of America Local 9503
Communications Workers of America Local 9586
Communications Workers of America Local 9588
Communications Workers of America Local 14909
Engineers and Scientists of California, Local 20
Faculty Association of California Community Colleges, Inc.
General Teamsters Union Local 890
General Teamsters, Warehousemen, Cannery Workers & Helpers
Union #94
Glaziers, Architectural Metal & Glass Workers #718
Graphic Communications Union Local No. 583
Gray Panthers California
Health Access California
Hotel Employees & Restaurant Employees Local 49
IAMAW Local 1528
International Brotherhood of Electrical Workers (IBEW)
Local Union 11
IBEW Local Union 18
IBEW Local Union 45
IBEW Local Union 302
IBEW Local Union 551
IBEW Local Union 569
IBEW Local Union 595
IBEW Local Union 684
Insured the Uninsured Project
IUPAT Local Union No. 2345
JERICHO
Kern County Firefighters Union Inc.
Latino Issues Forum
League of Women Voters of California
Lieutenant Governor Cruz Bustamante
Machinists Automotive Trades District Lodge #190
Mexican American Legal Defense & Educational Fund
Marine Firemen's Union
National Association of Letter Carriers
Northern California District Council - ILWU
Office & Professional Employees International Union Local
#3
Older Women's League of California
Pacific Institute for Community Organization
Painters & Allied Trades D.C. 36
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Planned Parenthood
Plumbers, Steamfitters & Refrigeration Fitters Local Union
#467
Professional and Technical Engineers, Local 21
Sacramento Building Trades Council
San Diego-Imperial Counties Labor Council
San Francisco Labor Council
Sanitary Truck Drivers & Helpers Local 350
Seafarers International Union
Service Employees International Union
Sheet Metal Workers' International Association
St. Athanasius Church
St. Athanasius Food Pantry
Teamsters Joint Council #42
Teamsters
United Farm Workers of America
United Food & Commercial Workers Region 8 States Council
United Nurses Associations of California/ Union of Health
Care Professionals
United Teachers of LA
Numerous individuals
Oppose
Automotive Aftermarket Services
Blue Cross of California
California Assisted Living Association
California Business Properties
California Chamber of Commerce
California Manufacturers and Technology Association
California Restaurant Association
California Right to Life Committee
California State Floral Association
California Women for Agriculture
Californians for Affordable Health Reform
Chamber of Commerce, Alhambra
Chamber of Commerce, Azusa
Chamber of Commerce, Cerritos
Chamber of Commerce, Chico
Chamber of Commerce, Clovis
Chamber of Commerce, Encinitas
Chamber of Commerce, Greater Riverside
Chamber of Commerce, Greater Fresno
Chamber of Commerce, Irvine
Chamber of Commerce, Merced
Chamber of Commerce, Modesto
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Chamber of Commerce, Napa
Chamber of Commerce, Redondo Beach
Chamber of Commerce, Salinas Valley
Chamber of Commerce, Santa Fe Springs
Chamber of Commerce, San Rafael
Chamber of Commerce, Temecula Valley
Chamber of Commerce, Thousand Oaks-Westlake Village
Chamber of Commerce, Upland
Chamber of Commerce, Vacaville
Chamber of Commerce, Victorville
Coalition of California Insurance Professionals
Employers Health Care Coalition of Los Angeles
Epler Company
International Mass Retail Association
Metal Finishing Association of southern California
National Federation of Independent Business
West Orange County Legislative Committee
West Valley Staffing Group
Several individuals
Consultant: Michael Ashcraft, MD 916-445-0825