Two healthcare-related bills that passed this month in the final hours of California's 2003 legislative session could face legal challenges by employers and providers who fear the financial fallout could be too great.
One of the bills, authored by state Senate President Pro Tem John Burton, a Democrat, would create a "pay or play" system in California that requires companies with 50 or more employees to provide healthcare benefits directly to workers or pay fees into a state-run insurance pool to cover them. The other bill aims to overhaul California's workers' compensation system, partly by cutting payment rates and limiting treatments.
Gov. Gray Davis has indicated that he would sign the workers' compensation bill but has remained largely silent about the employer insurance mandate. Davis has until Oct. 12 to address the bills.
Supporters of the Burton bill-which include the California Medical Association (CMA)-say the landmark measure would extend coverage to 1.2 million additional residents, or half of the state's working uninsured, at an annual cost of $1.3 billion for businesses, which would pay 80% of coverage costs. But opponents say the plan would prove a far greater blow to both employers and workers and ultimately lead to rising unemployment.
According to an independent study released by the California Chamber of Commerce, Burton's plan would cost companies $5.7 billion a year. Add to that the 20% paid by workers, and the annual tab would top $7 billion.
"Given the state's current economic situation, what amounts to a multibillion-dollar tax increase on business will devastate California's economy," said Richard Costigan, the chamber's vice president of government relations. "We anticipate waging a challenge to it," through a referendum or the courts, he said.
Under the bill, companies with 20 to 49 workers would be required to provide coverage only if a state subsidy is created to help offset their costs. Companies with fewer than 20 employees-which account for 80% of California businesses-would be fully exempt.
But the financial burden could prove too great even for larger companies, many of which now cover less than 80% of their workers' healthcare tab, Costigan said. To dodge the added costs, many large companies could flee the state, while midsize businesses may try to drop below the 50-employee threshold by laying off workers or subcontracting. And because the bill applies only to employees who work 100 or more hours per month, "some companies will just get two workers to work 50 hours each instead," Costigan said.
Opponents say they have federal law on their side. The Employee Retirement Income Security Act of 1974 gives states the right to regulate the health insurance industry but not employee benefits, including health coverage. That could prove an obstacle for the Burton bill, which mandates certain benefits, including prescription drugs.
Even supporters admit the bill could land in court if signed into law. "We expect a challenge based on ERISA," CMA spokesman Peter Warren said. "But recent (federal) rulings seem to be going against stricter interpretations of the law, which the chamber seems to be using."
Meanwhile, some providers are gearing up to challenge the newly passed package of workers' compensation bills, which they argue would cut into their bottom lines and deprive injured employees of necessary care.
The legislation calls for limiting visits to chiropractors and physical therapists, setting treatment guidelines for work-related injuries and establishing a new fee schedule for outpatient surgery center procedures. Supporters say the reforms would cut the cost of treating injured workers by 20% to 30% and ease by $5 billion to $6 billion the annual cost to state businesses that fund the now-$29 billion system.
Tom Wilson, president of the Sacramento-based California Ambulatory Surgery Association, said that the proposed fee schedule is 15% below the minimum amount needed to cover the cost of common surgical procedures, such as knee arthroscopy, carpal tunnel release and hernia repair. As a result, many providers will be forced to stop accepting workers' compensation patients, he said.
"Facilities will stop performing workers' compensation surgeries if the fees do not cover the cost, and injured workers will be denied care," Wilson said. "The new fee schedule is so low that the cost of surgical implants alone for some knee repair surgeries is greater than the proposed reimbursement rate."
Bill Howe, executive director of the California Chiropractic Association, Sacramento, added that the legislation would deprive injured workers-particularly those who cannot take medications because of the nature of their professions-of an effective means to control their pain and stay on the job.
"Without (continued chiropractic care), people who are working and making a living might well have to leave their jobs ... and presumably rely on disability payments," Howe said. "Now, how is that saving our system money?"
Both Wilson and Howe said it was far too early for their respective associations to consider filing a motion to block the legislation, though each added that litigation remains an option.
"There are some (provider) groups that are already considering litigation" if the bills are signed into law, Wilson said. "At this point, we don't have any plan to join them. But that's an option that's open to us in the future."