Businesses Say Enough to State’s Health Insurance Law

Businesses Say ‘Enough’ to State’s health insurance Law

By VITA REED

Reaction to California’s new law mandating employer-funded healthcare has been swift: It stinks, businesses say.






“It unfairly penalizes employers who have done well,” said Vic Tanon, president of StaffPay Inc. in Irvine. StaffPay provides payroll and other human resources services to businesses with about 4,000 workers, including 2,500 who don’t have healthcare benefits.






“I’d have to raise rates and take on some of the hit myself (to profits),” said Tanon, who estimates his costs will rise by $600,000 when Senate Bill 2 goes into effect. That’s a sizeable cost for StaffPay, which has revenue of $4 million to $5 million a year.






Many details of the law,known as SB2 before it was signed by outgoing Gov. Gray Davis days before the recall election,still need to be fleshed out. That’s raised caution flags among employers, healthcare providers and health insurers.






“To some extent, there’s a lot still up in the air,” said Charlie Rosson, a senior vice president at insurance brokerage Marsh Inc.’s Newport Beach office. Rosson sells insurance policies primarily to medium and large employers.






Governor-elect Arnold Schwarzenegger has noted his distaste for the law but has not outlined a remedy.






Rosson said his clients are concerned about higher costs, along with “a lot of regulation and burden placed on California employers that they don’t face elsewhere,” Rosson said. “This is an additional responsibility that falls on top of high workers’ compensation and other costs.”






The law’s implementation dates are some time away, with a phase-in period for large employers in 2006, medium-sized employers in 2007 and small employers in 2008.






SB2 requires companies with more than 50 workers either to pay 80% of employees’ health coverage or to pay an equivalent fee into a state pool that provides coverage.






Companies with more than 200 workers additionally must provide health coverage for spouses and children, according to the law. It exempts unionized companies, which stands to give a big boost to the state’s labor unions.






Particularly hard hit could be midsized companies with more than 200 workers.






“This is absolutely impossible for us to comply with this law as it’s written and remain in business,” said John Ginger, owner of Riverside-based John Ginger Masonry Inc. Ginger is an OC resident.






Ginger, who provides healthcare coverage for his 350 workers but not dependents who can buy coverage under his plan, said SB2 puts his company at a disadvantage when bidding for homebuilding work.






“Many of our competitors are much smaller companies and fall into the under-200 category and even the under-50 category,” Ginger said. Ginger estimates his costs would be 5% to 6% higher than a smaller competitor under SB2.






One potential solution: Ginger said he likely would have to cut his staff below the 200-worker threshold to stay competitive.






Studies say the law, which makes California just the third state behind Maine and Hawaii to mandate employer-sponsored healthcare, could cost employers anywhere from $6 billion to $11.4 billion.






A University of California, Berkeley study says 1.6 million more state residents will be covered under the law, while Washington, D.C.-based Employment Policies Institute says 2.3 million more will get insurance. The state has an estimated 6.5 million uninsured residents.






Companies near the cutoff levels will be forced to make key decisions: cut a few workers to get under or take a deep breath and pay up.






Kim Jorgenson, owner of Plum’s Caf