New Health Insurance Law Faces Showdown

The November ballot battle over California’s controversial new law on employer-provided health insurance is shaping up to be both noisy and expensive.

The law, known as SB 2 and signed in the waning days of Gov. Gray Davis’ abbreviated term, is facing a recall of its own. A business-backed referendum on the Nov. 2 ballot could wipe the law off the books.

The contest officially kicks off today when a coalition that includes labor unions, doctors, nurses, church groups and retirees launches its defense of the 2003 law. Among other provisions, SB 2 will eventually require businesses with 50 or more employees to provide health insurance for their workers.

The pro-SB 2 campaign plans to play on the insecurity of California voters who worry about paying an ever larger share of their employer-provided health insurance or losing their coverage altogether.

For example, proponents of the law plan to focus on its less publicized provisions, which ban employers from dropping current health insurance plans and limit workers’ share of health insurance premiums to 20%.

At the same time, the “Yes on SB 2” campaign will soft-pedal the law’s mandatory-insurance provision, which has been a lightning rod for opponents.

And that’s exactly where business groups, which won’t officially launch their anti-SB 2 campaign until summer, see a soft spot. Employers argue that the law is a job killer that will raise their costs, lead to higher taxes and insert government meddling and bureaucracy into the healthcare market.

The battle, expected to cost at least $30 million, is being closely watched nationwide. Analysts see it as the first major clash over healthcare policy since President Clinton and First Lady Hillary Rodham Clinton gave up their drive for universal health insurance in 1994.

“This is a cutting-edge issue,” said Darry Sragow, a Democratic campaign consultant. “It’s going to be receiving a lot of national attention.”

If SB 2 survives the referendum -- in which voters who favor upholding the law will vote yes while those who oppose it will vote no -- California would be the only state other than Hawaii to require employers to pay for their workers’ health insurance.

Under the law, beginning in January 2006 companies with 200 or more workers will be required to provide state- approved health insurance for all employees and their dependents or pay a fee to the state that is equivalent to the cost of coverage.

A year later, the mandate will be extended to businesses with 50 or more workers.

Businesses with 20 to 49 workers will be exempt, unless lawmakers give them a tax credit in return for providing coverage.

Proponents of the law are distributing a pamphlet depicting a middle-class couple glumly perusing what appear to be medical bills. The headline “Save Your Healthcare” is followed by the pro-SB 2 pitch that “everyone who works hard and plays by the rules should get health insurance on the job.”

The “yes” message -- which also will be conveyed through TV and radio ads, as well as grass-roots campaigning -- is aimed at the 18 million Californians who have employer-provided insurance, “because they are concerned about the scaling back of health coverage,” said Anthony Wright of Health Access California, a Sacramento advocacy group that is leading the campaign to uphold SB 2.

Meanwhile, the law’s opponents, led by a group of national fast-food restaurants and big-box retailers, are gearing up for a statewide media blitz. The referendum signature drive consumed about $2 million, and the anti-SB 2 forces are prepared for an expensive fight.

“If they spend $12 million to $15 million, I’m sure we’ll have to match that,” said Allan Zaremberg, president of the California Chamber of Commerce.

It’s unclear which side has the bigger hill to climb. Proponents say their polls indicate voters favor SB 2 by 65% to 31%. Opponents say their polling shows that 35% of voters support the law and 50% oppose it.

Estimates of the cost of enacting SB 2 also are contradictory. The California Medical Assn., a proponent, puts the price at $1.3 billion a year, while the Employment Policies Institute, a Washington think tank, sets it at $11.3 billion.