California business groups dealt setback on health insurance mandate referendum

HR Magazine, Feb, 2004 by Karyn-Siobhan Robinson

The clock ran out for some HR professionals and business groups in California. They will not be able to place a referendum on a March 2 ballot to block a health insurance mandate that would require large employers to provide health insurance for employees and their dependents.

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Groups opposing the measure had gathered petitions to place the measure on the ballot, but a Sacramento Superior Court judge ruled the petitions invalid. The case then was taken to the 1st District Court of Appeal in San Francisco where the opponents were awaiting the outcome of the case argued Jan. 15.

Former governor Gray Davis signed the health care mandate, SB 2, prior to his Oct. 7, 2003, recall. The law, which is scheduled to take effect Jan. 1, 2006, would require employers with 200 or more workers to provide health insurance for employees and their dependents and to pay 80 percent of the cost.

The state Chamber of Commerce and Restaurant Association spearheaded an effort that brought together a coalition of business groups in the effort to block the law, gathering more than 624,000 signatures to force a referendum.

There has been a groundswell of business opposition to the legislation and support for a referendum, said Richard Danehy, SPHR, a lawyer and vice president with Fraser Richards in Goleta, Calif. Small business owners in particular are concerned about the economic impact of the law, said Danehy, who is a former government affairs co-director for the Society for Human Resource Management (SHRM) California State Council.

The referendum effort slowed when justices of the 3rd District Court of Appeal in Sacramento recused themselves from the case because a former member of the bench represented the business groups opposing the law.

The case was heard too late to get the proposal on the March 2 ballot. However, business groups are committed to forcing a voter referendum, said Sara Lee, spokeswoman for the California Chamber of Commerce. "Polling has shown once voters understand the huge impact of the legislation on California jobs and the economy, they will resoundingly reject it at the ballot box," said Lee.

HR professionals are watching the developments closely.

"This law essentially requires HR professionals to reconfigure their entire health insurance benefits programs for rank-and-file employees to provide a minimum package of coverage that meets the mandatory minimum health care requirements of SB 2," said Sam McAdam, an attorney with Seyfarth Shaw in Sacramento and legislative director for the SHRM California State Council.

McAdam predicts that employees ultimately would be harmed by the law, despite the good intentions of those who back it. "Currently, most employers provide a higher level of coverage for their rank-and-file employees than the law mandates," stated McAdam. "Those employees may face reduced benefits as companies look to recoup the added expense of mandated dependent coverage.

"The irony is that--because of the law's far-reaching scope--it could actually result in fewer insured individuals," said McAdam. "Instead of increasing the number of insured people, increased costs could lead to layoffs resulting in fewer people having health insurance."