Employer Mandate Rejected by California Voters

Published January 1, 2005

On Election Day 2004, California voters rejected a law, previously passed by the state legislature, that would have required all businesses in California with more than 50 employees to provide full medical insurance for those employees.

Proposition 72 was narrowly rejected with about 51 percent voting to repeal the law, known as Senate Bill 2. The measure would otherwise have gone into effect January 1, 2006.

SB2 “was originally passed in 2003 by the California legislature and signed into law by outgoing governor Gray Davis to impose a mandate on employers in the state to provide health insurance for all of their workers,” explained Grace-Marie Turner, president of the Galen Institute.

“The measure was put to the voters as a ballot initiative,” Turner said, “and they wisely rejected the mandate. Gov. Arnold Schwarzenegger recognized that [the law] would have been a jobs killer for the state of California, and he actively campaigned to repeal it.”

Supporters of the law, such as the Consumer Federation of California, saw it as “an important step to closing the gap in health coverage in [the] state.” The group claimed the mandate would “provide health care to one million hard-working Californians and their dependents who are currently uninsured.”

Strong Opposition Arose

But many businesses and the California Chamber of Commerce opposed the law.

“Just as California’s economy begins to rebound, we cannot afford this multibillion-dollar tax on employers and workers,” said Allan Zaremberg, president and CEO of the California Chamber of Commerce and co-chair of Californians Against Government Run Healthcare (CAGRH), the broad coalition that worked to defeat Prop 72.

“Prop 72 does absolutely nothing to solve the real problem with health care, which is skyrocketing health care costs,” Zaremberg said. “In fact, Prop 72 will only make the problem worse.”

According to a study by University of Kentucky labor and health economist Dr. Aaron Yelowitz for the Employment Policies Institute, the law would have cost California employers more than $12.4 billion a year and could have eliminated up to 150,000 jobs. The study described SB2 as “one of the most costly and inefficient pieces of labor law legislation ever created.”

During the campaign, supporters of Prop 72 cited Wal-Mart stores as an example of an employer costing Californians tens of millions of dollars in state health care services for store employees who did not receive company health insurance.

Wal-Mart gave $500,000 to fight the proposition, according to the Associated Press. “We had no choice but to get involved,” said company spokeswoman Cynthia Lin. She said television ads promoting Proposition 72 “attempt[ed] to make Wal-Mart a scapegoat, claiming we do not provide affordable health care. These are outright lies, and voters deserve far better than that.”

Victory for Consumer-Driven Care

“Defeat of this mandate is a major victory for free-market advocates,” said Turner. “An employer mandate is seriously out of step with our mobile workforce. Tying health insurance to the job doesn’t work for millions of people. Rather than trying to turn back the clock 50 years to a time when people had one or two jobs over their lifetime, we need to start changing our policies to keep pace with our twenty-first century economy so people can have health insurance that they take with them from job to job.

“People should be able to own their own health insurance,” Turner said, “and those who qualify for subsidies should get them directly, so they can decide what health insurance policy is best for themselves and their families.”

Susan Konig ([email protected]) is managing editor of Health Care News.