A costly idea: individual and employer mandates for health care

By CMTA Staff

Capitol Update, May 11, 2006 Share this on FacebookTweet thisEmail this to a friend

Last February Assemblyman Joseph Nation (D-San Rafael) introduced the Healthy California Act (AB 1952) framed as a system of shared responsibility for achieving universal health care coverage in California.  The bill mimics Massachusetts legislation mandating individuals and employers to retain and pay for health care.  

All individuals 18 years of age or older would be required to maintain health coverage for themselves and their dependents or be fined. Subsidies would be available for low-income individuals and families.  Additionally, employers that do not cover at least 75 percent of the cost of a policy for their employees and 50 percent of the cost of a policy for the dependents of employees would be required to pay 7 percent of payroll so that their employees can secure coverage for themselves and their dependents.  

The California plan would be developed accordingly:
  • All California residents must have access to health care.
  • A state authorized pool would be established, contracting with private health plans to cover individuals that do not have employer-based plans.
  • Subsidies will be created through the state pool.
  • There will be predetermined benefit levels that all plans must cover.
  • All California companies would have to pay for health insurance premiums with pre-tax dollars.
The idea of individual and employer mandates could work for Massachusetts, but California’s circumstance makes this type of legislation infeasible.  The California Health Care Foundation found that "a Massachusetts style coverage model in California would cost the state an amount estimated between $6.8 billion and $9.4 billion."  Much of California’s population is uninsured and low income.  A larger share of California’s population would need financial assistance in order to afford coverage.  A Massachusetts style individual mandate with subsidies in California would require billions of dollars in additional state spending as well as higher spending by employers and individuals. 

Moreover, another pertinent distinction is the relative amounts of existing state spending on care for the uninsured.  In Massachusetts $1 billion is already available for subsidies equaling about $1,300 to $1,800 per uninsured person per year.  On the other hand, in California $2 billion in funds would equate to $300 per uninsured Californian per year.  To spend the same as Massachusetts per capita, California would have to spend about $8.5 to $11.5 billion. 

AB 1952 is also not right for California’s employers.  The legislation, if passed, would require a "pay or play" employer mandate.  The cost of healthcare premiums may exceed the 7 percent payroll tax.  This will be an incentive for employers to pay the tax and not provide coverage.  As a  result, California’s health care delivery system would become government run via the 7 percent tax on payroll. 

In addition, AB 1952 does nothing to control skyrocketing health care costs, which is the major barrier to coverage.

Voters have twice rejected a government run health care system.  There is universal agreement that California faces a significant health care crisis, although, the mandates as provided in AB 1952 will not fix the problem.  CMTA has allied with others in opposition to AB 1952. 
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