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September 13, 2003

CA Health Mandate- Good for Business

Late into the night, the California Assembly passed the health care employer mandate for larger businesses in the state-- promising to extend health care coverage to millions of Californians. All larger businesses in the state will now have to either provide health coverage or pay a fee into a state fund which will then cover those employees.

And it's good for business in California, since it will help the majority of employers already providing health care by creating a level playing field for competition. Rival firms will have to compete based on innovation, not by dumping the health care costs of their employees on the public hospitals. And the state government will save the $1 billion per year in health spending they had previously been paying to subsidize unfair competition against the firms providing health care for their employees.

That firms paying health care will benefit from this reform should be obvious. It's obvious to them. In a recent survey of employers out of UC-Berkeley, 64 percent of business respondents stated they supported an employer mandate for health insurance.

Somewhat surprisingly, even most firms (59%) not offering health care were supportive of such a reform. This suggests, said the study's authors:

the businesses most affected by the proposed reform would find that their competitors would face similar effects, and that most businesses would not likely face cost increases that would erode their competitiveness.

Yes, they would feel some pressure from out-of-state competition, but that kind of competition is less direct and it's worth putting the increased costs in perspective. The typical cost increase from the new health care law would be on average just 0.2 percent increase in overall operating costs for these businesses.

Here is the full study. (pdf)

The real solution is to pass far more comprehensive reforms nationally, since states are limited in what they can do because of the federal ERISA law, in order to cut out all the wasteful administrative costs that make the US health care system the most expensive and bloated system in the world.

But until then, the California law is a great step forward.

Posted by Nathan at September 13, 2003 08:47 AM