What Would An Employer's Response be to California's Employer Mandate?
Employers’ Responses To A Play-Or-Pay Mandate: An Analysis Of California’s Health Insurance Act Of 2003
By Anna D. Sinaiko
Health Affairs - October 13, 2004
California, with 20 percent of its population uninsured and an unemployment rate of 6.2 percent, recently enacted the Health Insurance Act (known as SB 2), a play-or-pay employer mandate to expand health insurance coverage to a portion of the state’s working uninsured population. This law requires employers to either “play,” by providing employee health benefits that meet a minimum standard, or “pay” a fee to the state to cover workers under a state-sponsored program. Specific provisions of this program are still being determined. Although the law is scheduled to be phased in starting in 2006, a coalition of business groups is working to overturn it by referendum in November 2004.
With the passage of SB 2, California has brought the employer mandate back to the forefront of the health policy reform debate. Although state governments can mandate that employers provide coverage without committing public funds, someone must pay for the newly provided health insurance. In the best-case scenario, workers will value health insurance at more than its cost, and the combination of health insurance and lower wages will make workers better off without any adverse effects on employment or product prices. A more likely scenario is that some of the cost of health insurance will be passed to consumers, some felt by workers as unwelcome wage reductions, and some avoided by firms as they restructure their workforces. In California, workers at firms not offering benefits are more likely to be young males earning less than workers at firms that offer insurance; SB 2 will affect this group most adversely.
As employers restructure their workforces, fewer would-be-eligible workers will be offered health insurance. Although SB 2 will bring eligibility for health coverage to a portion of the uninsured in California, it will be lower than the estimated 1.07-1.56 million that researchers have projected. Moreover, because SB 2 does not include an individual mandate requiring workers to take up the coverage offered by their employers, some employees will decline employer-sponsored coverage, and fewer workers will be insured. This finding is not unique to California; similar results would be expected in other states.
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.469
Comment: Proposition 72, on California’s ballot next month, will allow voters to accept or reject SB 2, the play-or-pay employer mandate.
An employer mandate is the wrong solution to the problem of the uninsured. It reduces wages of those who were previously uninsured, with the greatest negative impact on lower income individuals. It perpetuates regressive tax policies in which higher income individuals receive a greater tax benefit than do lower income individuals. It threatens loss of employment as employers adjust hiring and work requirements to minimize the financial impact of the mandate. It results in higher prices which impairs competitiveness in national or international markets. In can result in adverse selection as decisions are made to avoid pools that concentrate higher cost individuals. Workers may decline coverage because of the consequential reduction in their take-home pay.
The problem that the voters face is that Proposition 72 is the only current, politically feasible proposal that will increase health care coverage. It would provide health insurance for close to one million of California’s six million uninsured. The single payer proposals, Kuehl’s SB 921 and Conyers’ HR 676, are locked in political limbo. And any promise of the presidential candidates for bona fide reform cannot become reality until the Congressional partisan rift is mended, a highly unlikely event in the next decade or two. The most realistically feasible approach would be to expand Medicaid and SCHIP, but that is highly unlikely until the deficit is reduced by tax increases, at a time when no politician would dare utter those words.
Although Proposition 72 is the wrong solution, it is the ONLY solution, at the right time and the right place. Californians need to approve it and then move on with our grassroots efforts to create the political feasibility for the adoption of a single payer system. If we work hard enough, maybe we won’t have to wait a decade or two for genuine reform.