Health Bill Wins Davis’ OK

Forty-eight hours before voters decide his fate in an unprecedented recall election, Gov. Gray Davis on Sunday signed historic legislation that will expand health care to about 1 million uninsured Californians and move the state to the forefront of a national debate over how to provide coverage to all Americans.

In making his decision to sign Senate Bill 2 by Senate President Pro Tem John L. Burton (D-San Francisco), Davis weighed strong backing from labor against intense business opposition. With Tuesday’s special election looming, and with labor unions a key pillar of his support, Davis would have risked severe political consequences if he had vetoed the measure.

Davis acknowledged that the bill had its critics, but he defended it as a law that would ease the burden that uninsured workers place on California’s health system and economy.

“We need to insure working Californians, for their health, for the health of our economy and for the health of this great state,” said Davis before signing the legislation at a ceremony at the Kaiser Medical Center in West Los Angeles.

Under the new law, businesses with 200 or more employees must provide health coverage for workers and their families beginning in 2006 or pay into a state fund to insure the employees. In 2007, the program will be expanded to companies with 50 to 199 employees, but coverage will apply only to the workers. In each case, the employer will pay at least 80% of the cost and the employee will pay the remaining 20%.

Businesses with payrolls of 20 to 49 people will be exempt from participation until the state can afford to give them a tax credit to relieve at least some of their higher costs. Employers with fewer than 20 workers are exempt, the result of a compromise aimed at sparing the smallest businesses an additional financial burden at a time when the general economy is struggling.

To be eligible, an employee must work at least 100 hours a month and have been employed by the same company for at least three months.

Health-care advocates and representatives of the California Medical Assn. said the law is a crucial first step toward attacking the problems posed by an estimated 6 million Californians who lack health insurance.

“This is a historic day,” said Dr. Jack Lewin, chief executive of the California Medical Assn., a professional organization that represents 35,000 doctors. “It’s going to save money, it’s going to save lives and it’s going to help us in the crisis we have in our emergency rooms because of the rising numbers of uninsured people. This is a bill that’s good for patients, for the state and for businesses.”

However, Allan Zaremberg, president of the California Chamber of Commerce, immediately condemned the governor’s action, calling the new law a “job killer” that will heap more costs on disaffected corporations, force some companies out of business and cause others to squelch hiring to stay within the small-business exemption in the bill.

Zaremberg said the chamber “is reviewing all options to stop SB 2 from becoming law, including court challenges and a potential referendum campaign.” The health insurance act could be preempted by federal law, chamber officials said, and could be subject to a state challenge if the move was viewed as a new tax that was not approved by the mandated two-thirds vote in the Legislature.

“This is really a nail in the coffin for many folks,” said Martyn Hopper, California state director of the National Federation of Independent Business, a trade group representing 37,000 small- and medium-size companies. “Our members that don’t offer insurance don’t offer it for one reason, and that is that they cannot afford it. It’s not because they don’t want to do it.”

Hopper predicted that businesses from light manufacturers to landscaping companies would resist growing large enough to trigger the bill’s insurance mandate, and that they could undermine California’s economic recovery by turning to temporary workers to fill work-force gaps instead of hiring more full-time employees.

Siding with the business groups, the Washington, D.C.-based Employment Policies Institute released a study Friday that concludes that SB 2 will indirectly cost residents $11.4 billion in lost jobs, lower wages and reduced benefits as the state’s employers adjust to the mandate. “California cannot afford this type of irresponsible policy,” said Craig Garthwaite, an economist at the nonprofit research organization that has supported employers of low-wage workers in opposing living-wage laws.

Health-care advocates and California Medical Assn. representatives, however, said businesses are already indirectly paying the costs of uninsured workers through higher insurance premiums and taxes. They described the legislation as a compromise between representatives of doctors and labor in an effort to curb health-care costs and reduce the number of people without health coverage.

Anthony Wright of Health Access, an advocacy group, said the measure would level the competitive playing field between businesses that already provide health insurance to their workers and those that don’t.

The California Medical Assn. disputed contentions by the California chamber and business leaders that the measure would be devastating to businesses. Most businesses -- 95%, according to the medical association -- won’t be affected by the law. Most working families in California are covered by employer-financed health insurance. A Kaiser Family Foundation study recently found that eight out of 10 California businesses with 10 employees or more now provide coverage.

The Center for Health Policy Research at UCLA has estimated that when the program is fully implemented, 1.07 million workers and their dependents will be covered. Based on the most recent figures available, the center estimated that there were 6.27 million Californians in 2001 who had no health insurance or who had lost their coverage.

Supporters say the bill will provide much needed health coverage to working poor Californians who either can’t afford employer-sponsored plans or who don’t work for a business that provides health coverage.

Businesses will be able to claim the expense on federal tax returns, health advocates said.

Supporters of SB 2 dispute that it conflicts with a federal law prohibiting states from regulating employee pensions and benefits. They say that the state’s authority to enforce the law would come from its existing power to regulate the insurance industry and that it doesn’t infringe on the federal government’s exclusive power to regulate employee benefits and retirement programs.

The signing ceremonies took on the tenor of a political rally during many of the speeches, with Democratic lawmakers and others praising Davis and urging a rejection of the recall.

Burton, a frequent and often-fierce Davis critic, was generous in his praise. He called Davis “a great governor” and predicted that the beleaguered Democrat would defy the pundits and defeat the recall Tuesday.

Echoing a stream of scornful assessments of GOP gubernatorial candidate Arnold Schwarzenegger by other lawmakers on the stage, Burton said: “We want a real governor in the governor’s office, not a plaything governor. You can’t be a governor on vitamin supplements.”

“Signing this bill alone -- and it’s not the only thing -- signing this bill alone would be enough [reason] to see [that] Gray Davis has another three years,” Burton said. “He is going to be the governor another three years. I don’t know whether he’s going to look forward to working with me those three years or not. We do have a lot of fun. But when it’s all over we get together and do what’s best for the people of this great state.”

In his remarks, Davis repaid the tributes to Burton. He wryly noted that “John and I do make an interesting pair,” but added, “I’ve always known he has a great heart. In many ways he’s the conscience of Sacramento. At the end of the day, we’ve done some great things together, along with the other legislators.”

A huge cheer went up from the crowd when Davis put his signature on the bill and some companion legislation, with Burton vigorously leading the applause. Davis wrote a long message on the copy of the bill he signed for Burton, then handed it to Burton and with a smile and a handshake whispered a few words to him. Burton whispered something in response, patted Davis on the shoulder and gave the governor a thumbs-up.

“This is historic,” said Wright of Health Access. “When we finally get quality health care for all, we’ll look back on this bill as an important building block.”

Times staff writers Elizabeth Douglass and Carl Ingram contributed to this report.