Blazing a Trail for Health Care

The passage of a landmark California bill that would require all but the smallest businesses to provide health insurance to their workers may give new traction to sputtering efforts in other states to expand health coverage, experts said Sunday.

The California measure, along with a new Maine law, offers hope for those seeking to reduce the number of uninsured Americans, now estimated at more than 40 million.

Federal lawmakers have largely shied away from expanding health-care coverage since the colossal failure of the Clinton administration’s health-care reform plan of 1993-94. That has left state and local governments bearing many of the growing costs of caring for the uninsured and devising solutions of their own.

“We see little evidence from Washington that the current administration and current Congress are going to do anything about the huge number of uninsured people in the country,” said E. Richard Brown, director of the UCLA Center for Health Policy Research, who consulted with drafters of the California bill. “I think there’s growing sentiment that states need to do something.”

In June, Maine Gov. John E. Baldacci, a Democrat, signed a law that aims to provide health insurance to all state residents by 2009. It also seeks to rein in medical costs by establishing voluntary price caps for providers, hospitals and insurers. Lawmakers in several states, including Maryland, Illinois, New Mexico and Wisconsin, are conducting studies or drafting legislation to expand health coverage that could be considered as early as next year.

Hawaii is so far the only state requiring businesses to provide health insurance for most employees working more than 20 hours a week. Massachusetts and Oregon lawmakers enacted similar laws but repealed them before they took effect because of strong opposition from businesses.

The California legislation -- supported by doctors and labor unions and opposed by business groups -- still awaits Gov. Gray Davis’ signature and could face court challenges. Even if it passes muster, it would not begin to take effect until 2006.

Still, the leader of the Universal Health Care Action Network called the California bill “very, very positive.”

“What we’re seeing now is state leadership and creativity,” said Dr. Ken Frisof, the group’s national director. “California and Maine and some other states are beginning to show that it’s, in fact, possible to get political momentum in this area.”

The California legislation, approved early Saturday, would require employers to either purchase private health-care policies for workers or pay into a statewide pool that would purchase insurance on their behalf. The requirement would apply to employers with 200 or more workers on Jan. 1, 2006. Businesses with 50 to 199 workers would have until 2007 to comply, and employers with fewer than 20 workers would be exempt.

Employers with 20 to 49 workers would be exempt until the state provided them with a tax credit subsidy to help offset the insurance cost. Supporters believe the legislation would provide health coverage to 1 million of the 6.3 million uninsured Californians.

*

One of Several Bills

The bill was one of several in the Legislature to expand health coverage. The plans differed based on who would administer and pay for care -- government or private business. The legislation that passed relies on businesses to fund the additional coverage.

By contrast, Sen. Sheila Kuehl (D-Santa Monica) sponsored a bill that would have created a state-run system to provide coverage for all residents. Kuehl had proposed paying for it with existing health-care dollars, along with a payroll tax. Her measure passed the Senate but was not considered by the Assembly.

Expanding health coverage is to Democrats what tax cuts are to Republicans -- a core party concern. Universal health coverage generally refers to providing all people enough insurance for doctor visits and hospital stays. Some support a government health system, similar to Canada’s and Britain’s, while others favor a mix of public and private programs. Still others argue that the government’s role should be limited to providing tax credits for people to spend on private health insurance.

Frisof said California may prove to be a unique case because Democratic lawmakers rushed to pass bills before the Oct. 7 gubernatorial recall election, which could eject the Democratic governor from office.

Universal health care has been a hard sell. In November, voters in Oregon trounced a universal health-care initiative on the ballot, and Massachusetts voters defeated a similar measure in 2000. Years earlier, lawmakers in both states had killed laws that would have required employers to provide insurance.

The latest roadblock is money. Most states are now struggling with budget deficits and rising Medicaid enrollment. And many states are considering dropping low-income people from the public health insurance program to help balance their budgets.

“The Medicaid rate of growth is not sustainable and will destroy states,” said Nelson J. Sabatini, secretary of the Maryland Department of Health and Mental Hygiene.

Even so, Sabatini said, he is working on a plan to give all Maryland residents basic health coverage. That can be done, he said, by limiting benefits but providing them to more people. Sabatini said he and his colleagues in other states are going to “watch very closely” what happens in California.

Davis said Sunday that he had not reviewed the health insurance bill but expects to act on it before the recall election. Although the governor estimated that 600 bills await his signature or veto, he called the health measure “one of the most important.

“In principle, I would like to extend health care to people,” he said. “I’m proud that we’ve been able to enroll a million children in various health insurance programs that didn’t have that opportunity before I was governor.”

Business groups want Davis to veto the bill, arguing that it would saddle small companies with another financial burden when they are already struggling with soaring workers’ compensation costs in an uncertain economy.

Michael Shaw, the assistant state director for the National Federation of Independent Business, said Sunday that if the governor signs the bill, a coalition of business groups may challenge it in court. Shaw said the measure appears to violate the federal Employee Retirement Income Security Act, which prohibits state regulation of employee benefit and pension plans.

“We are going to be having meetings early this week to discuss a legal challenge,” Shaw said. “We need to be prepared, if the governor signs it, to move quickly.”

Proponents of the bill, however, said it was written to withstand judicial scrutiny. They contend the state will save money when the bill becomes law because businesses will help bear the cost of caring for the uninsured, which now falls to state and local governments.

“It’s sending a signal to large employers that they do have an obligation to their workers,” said Anthony E. Wright, executive director of Health Access, which lobbied strongly for the measure.

*

Candidates Weigh In

At the federal level, health-care reform has attracted considerable attention from Democrats running for the White House.

Rep. Richard A. Gephardt of Missouri would require all employers to provide health insurance for workers, with tax incentives offsetting part of the cost. The plan, which would cost more than $200 billion per year to fully implement, is pricier than other proposals mainly because tax credits would also go to employers who already provide insurance.

The California measure “is obviously a step in the right direction,” said Kim Molstre, a spokeswoman for the Gephardt campaign.

Former Vermont Gov. Howard Dean would expand Medicaid to cover more poor people and give government subsidies to help others pay insurance premiums.

Massachusetts Sen. John F. Kerry would have the federal government pay to insure the poorest children if states agree to partially fund coverage for millions of working-poor families. Kerry also would give tax credits to small businesses to subsidize half the cost of insuring their workers.

Sen. Joe Lieberman of Connecticut has suggested a new universal health program for children, dubbed “Medikids,” that would guarantee coverage for all Americans through age 25.

Sen. John Edwards of North Carolina has offered a less-costly plan to cover all children that would require many parents of uninsured children to pay part of the expense.

Some national politicians have yet to hear about the California bill. But once word spreads, experts anticipate other states will follow California’s lead.

“There is this tendency among the states not to want to be the first and to also look to other states for models that they could adapt or use,” said UCLA’s Brown. “I think this becomes a model for action.”

*

Times staff writers Michael Finnegan in Los Angeles and Vicki Kemper in Washington contributed to this report.