ON OCTOBER 5th, the soon-to-be-ex-governor of California signed a new law on health-care coverage. According to the Kaiser Family Foundation (KFF), California has 6.7m people without health insurance, roughly a fifth of the population. About 80% of these are people, or their dependants, whose employers—faced by rising insurance premiums—may not offer health-care coverage, or who choose not to take it up.
This will change under the new law. By 2006, firms with more than 200 employees will have to stump up 80% of the health-insurance costs of their employees and their dependants, or pay into a public fund which will administer these benefits. Their workers will be required to contribute the remaining 20%. By 2007, firms with 50-199 employees will be obliged to provide the same for employees only. Tiny companies—those with 20-49 workers—will remain exempt unless the state can come up with some form of subsidy to help them pay.
The new law will extend health-care insurance to more than 1m Californians, according to the UCLA Centre for Health Policy Research. Estimates of cost vary greatly: $1.4 billion a year, say supporters; closer to $11 billion, say some opponents. But, as Alina Salganicoff of KFF points out, the price of not having health insurance is substantial too, as neglected conditions become chronic and costly.
Although many employers are persuaded by this, they resent being forced by the state to foot the bill. According to Richard Costigan, chief lobbyist with the California Chamber of Commerce, the new law is a “job killer”, coming on top of hefty increases in workers' compensation, unemployment insurance and energy costs which already make the state a less attractive place to do business. A few firms have said they will leave California, and some have changed their plans; Wal-Mart, for example, still plans to expand there, but may hire more part-time employees, who are exempt from coverage under the new law, rather than full-time workers.
The governor-elect, Arnold Schwarzenegger, opposes the new law as too costly and cumbersome for business. California's Chamber of Commerce is considering taking the state to court, and has already filed a referendum to repeal the legislation. In the meantime, however, the new law moves California to the forefront of states, such as Hawaii and Maine, trying to come to grips with America's 43.6m uninsured people. The next step may be a federal solution, with bills before Congress to provide tax credits for health insurance and Democratic presidential hopefuls putting forward schemes to cover the uninsured. California, as usual, may be setting a trend.
