California Play or Pay Repeal Gains Ballot Status

Published March 1, 2004

A three-judge panel of the First Circuit Court of Appeals in San Francisco has ruled Californians should be allowed to vote on a referendum aimed at repealing SB 2, a law requiring some companies either to provide health insurance to their workers or pay into a state fund that would provide such coverage. The measure is expected to appear on the November ballot. (See “Cal. Insurance Mandate Faces Repeal,” Health Care News, January 2004.)

The appeals court ruled in early February that a Sacramento County Superior Court judge wrongly decided in December that the title and summary statements on petitions circulated to place the referendum on the ballot contained “misleading and prejudicial” information and that the petitions themselves were technically flawed.

The appeals court said the title and summary can be “reasonably read to accurately describe the ‘chief purposes and points'” of the new law and that the organizers’ failure to print the title of the measure on each page of the petition was “not confusing or misleading.”

Last December, Californians Against Government Run Healthcare, a coalition of business groups led by the California Chamber of Commerce, announced it had collected more than 620,000 signatures to place the referendum on the ballot. Governor Arnold Schwarzenegger (R) is on record as supporting the referendum.

Several groups, including the California Labor Federation/AFL-CIO, challenged the repeal effort, complaining the petitions misrepresented a provision of SB 2 that exempts businesses with 20 to 49 employees from the program until the state provides them with a tax credit to offset some of the costs of providing health coverage.

Education Effort Underway

Former Governor Gray Davis (D) signed the play or pay mandate in October just two days before he was recalled from office.

The mandate, scheduled to take effect January 1, 2006, forces employers with 200 or more employees to provide health insurance to employees and their dependents or pay into a state-run health insurance plan. Businesses with 50 to 199 workers will be forced to offer health insurance only to employees by 2007; and employers with fewer than 20 workers will be exempt from the law. Those with 20 to 49 employees will be exempt from the law unless the state provides tax credits to subsidize the cost of health benefits.

Employers who already offer health benefits that comply with the mandate can continue offering their existing benefit plans. If those plans do not comply with the mandate, employers can be fined.

Sara Lee, vice president of media relations for the Chamber of Commerce, predicted, “When voters are truly aware of what [SB 2] means, they will reject it.” Lee said business groups plan to launch a campaign to educate voters about the law and help them “understand the severe impacts that this multibillion-dollar mandate will have on California jobs.”

John Dunlap, CEO of the California Restaurant Association, told the San Jose Mercury News the $10 million campaign will include television ads and direct mail pieces. According to the Mercury News, a coalition of physicians, consumer groups, and labor unions is expected to launch a “vigorous” campaign against the referendum.

Public Opinion Unclear

A telephone poll of 929 California registered voters, conducted by Field Research, found 65 percent of voters support the play or pay mandate, while 27 percent oppose it and 8 percent are undecided. After those surveyed were briefed on the mandate’s provisions and expected impact, support fell to 53 percent; 39 percent opposed the mandate and 8 percent remained undecided.

“The California Labor Federation maintains labor union polling shows 71 percent of California voters support the law,” said Mark DiCamillo of Field Research. “What this says to me is that this is going to be a very contested initiative.”

Conrad F. Meier is managing editor of Health Care News. His email address is [email protected].