Businesses mixed on healthcare proposal
Leaders of large and small businesses reacted cautiously Monday to Gov. Arnold Schwarzenegger’s proposed $12-billion plan to provide health coverage to 6.5 million uninsured Californians.
They praised the plan for universal health insurance coverage and the promise to “share responsibility” and costs among government, employers and individuals. But they worried that the plan would be too costly, especially for smaller businesses.
Many business executives said they saw the need for prompt action by the state.
“If we don’t solve this, it will put a stranglehold on business and an even more difficult stranglehold on employees,” said Steve Burd, president and chief executive of Safeway Inc., the Pleasanton, Calif.-based supermarket chain that owns Vons in Southern California.
The governor’s ambitious plan would give at least basic health insurance coverage to every Californian by mandating that they buy individual policies if their employers do not provide the benefit. Employees would be required to pay as much as 6% of their wages for healthcare.
The estimated $12-billion tab for the state’s uninsured would come from a variety of sources.
Employers that have more than 10 workers and don’t offer health insurance would be required to pay a fee of 4% of their payroll into a state pool. Hospitals would pay 4% of their revenues into the same fund and doctors would pay a 2% fee on revenues. Other money from the program would come from new and existing state and federal government sources.
Schwarzenegger called his plan realistic and stressed that in the end it would “leave everyone with a better deal.”
For their part, small businesses with fewer than 10 employees, representing 80% of California employers, said they were relieved to be exempted from a requirement to either provide coverage or pay 4% of payroll into a state health fund. Their employees would be required to buy individual policies, possibly at subsidized rates.
However, spokesmen for slightly larger employers with more than 10 workers said they feared they wouldn’t be able to afford the additional 4% cost.
“For a business to increase its payroll taxes by 4%, then that 4% is not going to go toward other things such as growing the business,” said Michael Shaw, assistant state director of the National Federation of Independent Businesses. The group lobbies in Sacramento for 35,000 small companies in California.
Shaw also said he was somewhat concerned that the governor’s plan would impose a new cost on small businesses by forcing them to set up pretax healthcare accounts to pay insurance premiums.
Large businesses, which mostly already provide health insurance to their workers, worried that Schwarzenegger’s proposal could drive up already steep premiums by slapping new fees on hospitals and doctors.
“We support the governor’s goal of increasing access and improving affordability,” said Allan Zaremberg, president of the California Chamber of Commerce. “But our biggest fear is that people who are satisfied with the system and can afford the system can be burdened with increased costs.”
Manufacturing companies, which face high operating costs in California, are particularly concerned about whether the governor’s plan would eat into their bottom line.
“Any solution should also ensure that the cost of doing business in California does not increase for manufacturers, whose operating costs are already 24% more than their competitors in other states,” said Jack Stewart, president of the California Manufacturers & Technology Assn.
Stewart said the governor’s proposal could have unintended consequences. The 74% of manufacturers that now provide health insurance, he said, might be forced to stop offering coverage if double-digit inflation continues in the healthcare sector. They could opt to cut expenses by paying a fixed 4% of their payroll into the state fund.
“Guys close to the edge are going to be pushed off the edge,” he said.
