New California Law Requires Employers to Provide Employee Health Coverage

By Melanie R. Margolis

On October 5, 2003, two days before California Governor Gray Davis was recalled by voters, he signed into law Senate Bill 2, a bill requiring employers to provide health insurance coverage for employees. In its findings relating to S.B. 2, the California legislature noted that:

S.B. 2 Legislative Findings, accessible at
http://www.leginfo.ca.gov/pub/bill/sen/sb_0001-0050/sb_2_bill_20031006_chaptered.html.

Specifically, S.B. 2 creates the State Health Purchasing Program and calls for specified health benefits to be provided by employers directly or through the purchasing program. Employers must pay a fee for employee health coverage, but employers who provide health care coverage directly would receive a credit against the fee. The bill requires large employees to begin providing employee health care coverage beginning January 1, 2006. The deadline for medium employers is January 1, 2007. Small employers are exempt from the requirement to provide coverage and from the fee.  The text of S.B. 2 is available at
http://www.leginfo.ca.gov/pub/bill/sen/sb_0001-0050/sb_2_bill_20031006_chaptered.html.

The California Medical Association (CMA) and the California Labor Federation supported the legislation. See http://www.cmanet.org/publicdoc.cfm/702/207/PRESS/276;    http://www.calaborfed.org/Health_Care/health_care_SB2.htm. The CMA estimates that approximately one million uninsured Californians will gain health insurance coverage because of S.B. 2. See http://www.cmanet.org/publicdoc.cfm/702/207/PRESS/276.

On the other hand, the California Chamber of Commerce (CCC) opposed S.B. 2, arguing that many employees would lose their jobs if it passed because it would be expensive for employers to provide the required coverage. See http://www.calchamber.com/pdf/sb2_analysis.pdf. A 40-page report by the Los Angeles Economic Development Corporation (LAEDC) detailing the costs of the S.B. 2, estimated to exceed $7 billion, is accessible on the CCC Web site. Id. The CCC noted that the new law raises some legal questions, and it may challenge the new law in court. See id.; BNA Health Law Reporter, October 9, 2003,
http://pubs.bna.com/ip/BNA/hlr.nsf/is/a0a7m2x5e2.

10/15/03