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California's Prop. 72, employer medical insurance mandate, narrowly defeated

Proposition 72, a state law that would have required business owners to pay for employee health insurance, went down to defeat Tuesday. But all sides agree the problem of rising health costs won't go away any time soon.
San Francisco Chronicle
November 4, 2004

The vote on the measure was close, with 51 percent of voters opposing it and 49 percent giving it their support.

"The public saw through a lot of the rhetoric and ultimately realized this is the wrong solution to the right problem," said Jot Condie, president of the California Restaurant Association, which along with retailers and other business interests helped back the campaign against the measure.

Supporters were disappointed, but vowed to continue fighting for health care reform.

"Virtually half of California voters support the concept that employers have a responsibility to their workers to provide health insurance, and that's something we can build on," said Anthony Wright, executive director of Health Access, a coalition of community and labor groups that backed the measure.

The whole country watched

Prop. 72 was closely watched nationwide. It would have made California the second state in the country to force employers to provide health insurance. Hawaii passed a similar law in 1974.

Health care costs have been rising at double-digit rates in recent years. A growing number of employers are responding by offering fewer benefits and forcing employees to pay a larger share of the costs.

Prop. 72 was put on the ballot by business owners who wanted to overturn a law passed by the Legislature and signed by then-Gov. Gray Davis last year. Supporters said the law would have extended coverage to about 1 million Californians.

Business owners with 200 or more employees would have been required to pay 80 percent of insurance premiums for their employees and dependents or pay into a state insurance fund by 2006. Businesses with 50 to 199 workers would have had to provide employee-only coverage by 2007.

A yes on the proposition was a vote to uphold the state law. A no was a vote to overturn the law and free employers from the insurance mandate.

Aggressive advertising by both sides highlighted the campaign. Wal-Mart Stores Inc. contributed $600,000 to defeat the measure after becoming a target of the proposition's supporters, especially unions. Wal-Mart's detractors accused the retail giant of offering inadequate health insurance that its workers can't afford. The company said it provides an appropriate level of health insurance.

Many business owners, like Laurie Mark, owner of a lumber and building materials company in Eureka, said they sympathize with the growing number of uninsured Californians. But Mark said business owners shouldn't have to take on the additional cost burden of mandated insurance.

No effect on Mill Yard

Mark's company, the Mill Yard, offers insurance to its 27 employees but requires them to pay 30 percent of the premium. Under Prop. 72, a business of that size would not been affected unless a tax credit was established to defray costs.

"There has to be an answer," said Mark, referring to the problem of rising health care costs. "Do I have the answer? No, because I'm a small- business owner and we just work to keep the doors open and keep the business running."

Condie, of the California Restaurant Association, said opposition by Gov. Arnold Schwarzenegger helped turn the tide after initial polls showed voters supported the measure.

Condie said the proposition would have eliminated jobs, hurt a fragile economy and lead to a government-controlled health care system. But he, like many others trying to address the issue of spiraling health costs, lacked specific solutions.

"The problem is that escalating health care costs are running amok and there's nothing in sight and nothing in Prop. 72 that could have contained those costs," he said.

In spite of the measure's defeat, the current system cannot continue, said Dr. Jack Lewin, chief executive of the California Medical Association, one of the initiative's main supporters.

"The status quo will take all of us on a more expensive and frustrating course than Prop. 72," Lewin said, referring to rising costs and the increased use of emergency departments to care for the uninsured.

He did not rule out the possibility of another attempt to pass an employer health insurance mandate in California.

"It's inescapable that there's a role for government, there's a role for business and an increasing role for individuals in covering health care," he said.

E-mail Victoria Colliver at  vcolliver@sfchronicle.com.

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