Employees’ Health Plan Proposed : Insurance: Business owners would have three years to supply coverage. Those unable to meet the goal would be taxed to fund a private program.

Seeking to jump-start stalled negotiations over how to provide health coverage for the uninsured, a key lawmaker Wednesday suggested a plan that would give the business community three years to reduce by 90% the number of working Californians who lack medical coverage.

If that goal is not reached, a so-called “play or pay” system would be triggered under which businesses would be required to provide insurance for their employees or pay a payroll tax to the state. Proceeds from the tax would go into a fund to purchase private insurance for all Californians who could not obtain it on their own.

The plan also includes a provision that would establish state regulation of hospital rates and doctors’ fees if increases in those costs exceeded a targeted level. No specific target was mentioned in Wednesday’s proposal.

Assemblyman Burt Margolin, a Los Angeles Democrat who has led six months of talks on the issue, said he hoped the proposal would be the starting point for three weeks of negotiations aimed at reaching a compromise before the Legislature’s scheduled Aug. 31 adjournment.

Margolin acknowledged that his maneuver means there is almost no chance that the Legislature and Gov. George Deukmejian will enact a bill this year that would require all businesses to provide insurance for their workers.

“If we were to have any chance at all of completing a deal, we needed a document to set us on a fast track toward negotiating out the differences among the various parties on this issue,” Margolin said. “The notion of a voluntary effort is probably going to be required to produce a bill that the governor can sign.”

Deukmejian administration officials working on the health insurance issue could not be reached for comment.

The proposal will be considered by an Assembly-Senate conference committee headed by Margolin that has an unusually high-powered membership, including the Democratic and Republican leaders in the Senate, the Assembly Republican leader, and the Democratic chairman of the Assembly Health Committee.

The Margolin plan is expected to encounter stiff opposition from Assembly Republicans. One conference committee member, Assembly Republican Leader Ross Johnson of La Habra, has said he will not agree to any program that requires businesses to provide insurance for their workers. A Johnson aide said Wednesday that the lawmaker has not changed his position.

Otis Turner, Johnson’s press secretary, said Margolin’s plan would almost certainly trigger an 8% payroll tax at the end of three years because it is unlikely that businesses could insure the required number of workers--about 2.5 million--in that short a time. Turner said Johnson also opposes state regulation of medical care rates.

“The whole thing just ignores market forces completely,” Turner said. “We don’t think that this is a rational approach to the issue of health care.”

The concept, however, has received the tentative support of the Los Angeles Area Chamber of Commerce, a key business group. The chairman of the chamber’s health issues committee said in a letter to Margolin that the chamber is “supportive of the direction” taken in the proposal.

The plan includes provisions designed to make health coverage more affordable by, among other things, curbing the current insurance industry practice of basing premiums on the health history of each company’s workers. This method, known as “experience rating,” has prompted huge price increases for small businesses that have a single worker afflicted by a serious disease.

The proposal also envisions containing medical costs by making the industry more competitive. This would be done by making more information available about doctor and hospital treatment practices and providing incentives for companies to buy the cheapest possible coverage.

Businesses also would be eligible for tax credits to offset the cost of providing insurance.