McDonald's fights try for paid health insurance

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A battle is gearing up in California to determine if companies will be forced to pay for workers' health insurance.

A law requiring many employers to pay at least 80 percent of workers' premiums will go into effect unless voters strike it down in November, and Oak Brook-based McDonald's Corp. and many franchisees are among the companies leading the campaign against it.

While business leaders argue the legislation will weaken California's already shaky economy, the dramatic rise in insurance premiums and the increasing number of uninsured in California and across the U.S. has generated broad support for the measure.

"If they can do this successfully, I think you are going to see this in other states," said Alina Salganicoff, vice president of the Kaiser Family Foundation, a health-care think tank in Menlo Park, Calif.

Such a change would heap significant new costs on companies like McDonald's, Sears, Roebuck and Co. and smaller firms that don't currently offer health insurance.

As one of his last acts in office, former California Gov. Gray Davis signed legislation requiring most companies to pay at least 80 percent of workers' health insurance premiums or contribute to a health-care fund run by the state. The law requires companies to also cover part-time employees who work at least 100 hours a month.

Businesses aggressively fought the bill and have since put forward the referendum to determine if the legislation will be enacted.

A recent Field Poll found 48 percent of likely California voters support the mandatory insurance legislation, while 31 percent oppose it and 21 percent are undecided.

But businesses opposing the legislation have already raised $6.5 million and have not yet launched their television, radio and direct mail advertisements.

After the $1.2 million in contributions from the California Restaurant Association, McDonald's has been the campaign's largest contributor with $788,000 coming from the company and franchisees, according to filings in California that were compiled by the group in favor of the legislation.

McDonald's and its franchisees have made more than 500 contributions, more than half of the total number of contributions made so far, according to the compiled information.

A McDonald's statement said it is actively opposing the legislation because it "could limit our ability to re-invest in the California economy."

Others in opposition to the legislation said people who currently have private insurance could end up in government-run health plans.

"You shouldn't have to turn everybody's health care upside down to address the need of improved access," said Allan Zaremberg, president of the California Chamber of Commerce, who said his group hopes to raise between $12 million and $15 million.

Zaremberg expects more people will oppose the legislation once his group starts making its case that the legislation would hurt the state's economy.

"When you're the only state in the continental U.S. that has an employer mandate, you know that puts you at a competitive disadvantage for jobs," Zaremberg said.

The coalition supporting the legislation includes many labor unions and consumer-rights groups. It has raised $954,000 and hopes to raise $12 million.

Earl Lui, senior attorney with Consumers Union, a non-profit group that publishes Consumer Reports, said business leaders are resorting to "scare tactics" to try to get voters to knock down the legislation.

"I don't think the economy is going to crumble if McDonald's has to offer health-care coverage," Lui said.

Under the legislation, companies with 200 or more employees would have to pay at least 80 percent of premiums for workers and their families by January 2006. Firms with 50 to 199 employees would have to pay at least 80 percent of workers' premiums by January 2007, while firms with 20 to 49 employees would have to provide coverage to workers in 2007 if the state legislature approves subsidies to help offset the cost.

Small and medium-size business owners that don't currently offer health insurance say they have the most to lose if the measure is approved.

Clay Paschen, who along with his two sons owns 11 McDonald's franchises near Los Angeles, estimates offering insurance to 30 employees at each restaurant will cost him $150,000 per location, wiping out much of his profits. "For the average business in California, it's just really devastating," Paschen said.

Some owners have talked about shrinking their businesses so they don't have to offer insurance. Others said the legislation could keep them from expanding and hiring new workers. Still, some businesses that already offer health insurance are unconcerned about the referendum's outcome.

Discount chain Costco Wholesale Corp., which has one-third of its stores in California, currently covers about 92 percent of employees' premiums.

"It's not going to have any impact on us should it be passed," said Bob Nelson, Costco's vice president for finance and investor relations. Still, Costco recently increased the amount workers must contribute for their health coverage.

Copyright © 2014, Los Angeles Times
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