McGeorge School of Law

Proposition 72

Proposition 72:
The Health Care Coverage Requirements Referendum.

By David Bainbridge

Copyright © 2004 by University of the McGeorge School of Law

JD, McGeorge School of Law, University of the Pacific
to be conferred May 2005
B.A., Political Science, University of California, Davis, 2002


Table of Contents

I. Executive Summary
II. The Law
III. Drafting Issues
IV. Constitutional Issues
V. Public Policy Considerations
VI. Conclusion

I. Executive Summary

Proposition 72 is a referendum that will appear on the ballot for the California General Election on November 2, 2004. The measure gives California voters the opportunity to decide whether medium and large employers should be required to pay the majority of their employees’ healthcare coverage costs.

Proposition 72 started out in the California Senate as Senate Bill 2 (SB2), and is known as the Health Insurance Act of 2003. SB2 passed the Senate and Assembly. On October 6, 2003, Governor Davis signed the bill into law just days before the recall election. The law would have gone into effect on January 1, 2004, however, it did not because of the successful referendum effort that placed SB2 on the November ballot. A “yes” vote on Proposition 72 is a vote to put SB2 into effect.

Proposition 72 requires medium and large employers to pay for healthcare coverage for all employees who qualify as enrollees. To qualify as an enrollee, an employee must work at least 100 hours per month, and be employed by the employer for at least three months. Those employers subject to Proposition 72 will have to pay a minimum of 80% of their employees’ healthcare insurance premiums. Employers can provide healthcare coverage for their employees in one of two ways. One, the employer can contract directly with private health care providers. Alternatively, the employer can pay the state, and the state will obtain healthcare coverage for the employee. Proposition 72 will create a State Health Purchasing Program to be managed by the Managed Risk Medical Insurance Board (the Board). The Board will purchase healthcare coverage for employees of private employers, and the employer will pay the cost of the healthcare coverage, including administrative costs, to the state. In fact, all employers subject to Proposition 72 will be accountable to the Board, but employers that provide adequate healthcare insurance for their employees will receive a credit, thereby excusing the employer from payment.

Not all employers are treated the same under Proposition 72. Employers are divided into four groups depending on the number of employees. Employers with 200 or more employees must provide health insurance for employees, and the dependents of the employees beginning January 1, 2006. Employers with 50 to 199 employees must provide health insurance for their employees beginning January 1, 2007. Employers with 20 to 49 employees will be required to provide those employees with health insurance if a specified tax credit is enacted. Proposition 72 does not directly affect employers with less than 20 employees.

II. The Law

A. Existing Law

Currently in California, employers are not required to provide healthcare insurance for their employees. In fact, Hawaii is the only state with a law that requires private employers to provide employees with healthcare, and only in a limited number of situations. Los Angeles Economic Development Corporation, (accessed Sept. 2, 2004). Presently, 56% of Californians receive healthcare insurance from their employers or have private coverage. Employment Policies Institute, The Cost of California’s Health Insurance Act of 2003, (accessed Sept. 2, 2004). Seventeen percent of Californians receive healthcare insurance from government programs, be them county, state, or federal. Id.

B. The Effects of Proposition 72

The obvious effects of Proposition 72 on the law will be the creation of an obligation on employers to provide their employees (and dependents in some situations) with healthcare insurance, where such an obligation did not previously exist. Employers that fail to pay will be subject to significant fines. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). Additionally, Proposition 72 will create a state entity in charge of administering the program. Id. This will likely result in new administrative rules and regulations, as is common when new government bodies are created.

In addition to the new requirements placed on employers that are added to the Labor Code, Proposition 72 amends a number of other codes to facilitate the creation and operation of the new system. Extensive sections are added to the Insurance Code to reform the insurance market to conform with the new provisions of the Labor Code. Specifically, section 4 regulates the type of policies insurance companies can sell to employers so that the insurance policies comport with the new minimum standards for acceptable healthcare insurance under Proposition 72. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). Parts of the Insurance Code and the Welfare and Institutions Code are also amended to ensure state and county programs, such as Medi-Cal and Healthy Families, are not denigrated or otherwise adversely affected by the new law. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). The alterations to state and county programs are not so much a change in the law, as an attempt to prevent a change. There are also additions to the Unemployment Insurance Code, and the Government Code to facilitate the new healthcare system. Such a comprehensive and sweeping change in the law clearly requires additions and amendments to a number of different California statutes with far reaching effects on the law in many areas.

III. Drafting Issues

A. Employer Opt Outs

Proposition 72, as it is comprehensive healthcare legislation, is long and contains many provisions. For this reason, it is impossible to foresee all of the possible drafting and future interpretation issues, however, one important ambiguity readily presents itself. In instances where employers are required to provide healthcare insurance, it is not clear whether employees may refuse the insurance, thereby exempting the employer from providing coverage. The legislation does not explicitly state that an employee can refuse coverage, thereby relieving the employer of having to provide it. However, it seems rational that an employee should be able to opt out because that individual may receive healthcare insurance from another source (i.e. a spouse’s employer). It is also possible that the employee may not wish to pay his/her share of the cost (up to 20%) of the healthcare insurance premium. If the employee does not want, and will not use the healthcare insurance mandating that the employer pay for it, it is simply will be a waste. It stands to reason that the resulting waste is a windfall for the insurance company that is collecting payments for the unutilized healthcare insurance.

The language of Proposition 72 does not provide for an opt out provision, but instead states that employers must provide healthcare insurance for every enrollee. The only requirements to qualify as an enrollee, are to work at least 100 hours per month, and be employed for at least three months. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). On the face of this proposition, it does not seem like an employee could opt out. However, courts interpreting this question may find the argument for allowing employees to opt out compelling, and conclude that such an implied exception exists. The legislative history does not readily provide an answer to this question. A court interpretation of this issue is unclear; therefore it is uncertain whether an employee would be allowed to opt out, and save his/her employer the cost of providing healthcare insurance. In any event, this is a question that cannot be answered definitively by reading the legislation.

B. Severability

Since Proposition 72 was originally written as legislation in the Senate, and not intended as a ballot proposition, it does not contain a severability clause. This means that if part of Proposition 72 were declared unconstitutional, it would be less likely a court would find it appropriate to sever out the offensive part of the proposition, and enact the remaining provisions. However, the existence of a severability clause is not determinative of whether a proposition can be severed or not. Calfarm Ins. Co v. Deukmejian, 48 Cal. 3D 805, 821 (1989). In determining whether a proposition can be severed, a court will consider three factors. Gerken v. Fair Political Practices Commission, 6 Cal. 4th 707, 715 (1993). To be severable, the provision to be retained must be grammatically, functionally, and volitionally separable. Id. Grammatically severable requires that a part of the legislation be “removed as a whole without affecting the wording of any other provision.” Calfarm Ins. Co. v. Deukmejian, 48 Cal.3d 805, 821 (1989). Functionally severable means that the proposition must still mechanically operate normally, even without the severed clause. Id. Lastly, for a section of a proposition to be volitionally severable, the court must find that “the electorate’s attention was sufficiently focused upon the parts to be severed so that it would have separately considered and adopted them in the absence of the invalid portions.” People’s Advocate, Inc. v. Superior Court, 181 Cal.App.3d 316, 332-333 (1986). The court determines the electorate’s intent by looking at the materials produced for the public concerning the proposition including, the proposition itself, ballot materials, and Legislative Analyst materials. Gerken, 6 Cal. 4th at 718.

There is a possibility that the credits that employers would receive for providing private healthcare insurance for employees will be struck down as unconstitutional. This is discussed further in section IV. If that is the case, the court may have to decide whether the rest of Proposition 72 is severable. What would be left if the “credit clause” is severed out would be a law that required all employers to pay into the fund regardless of whether the employer provides private healthcare for its employees. Grammatically, Proposition 72 would still make sense as the section concerning credits is included as an exception and removing it would merely remove the exception. Similarly, removing the exception would not change the way Proposition 72 mechanically functions.

Lastly, the volitional requirement requires the court to consider whether the voters would have voted for the proposition without the unlawful portion. This prong of the test is often controversial because it requires the court to ascertain the intent of the entire voting public. Gerken, 6 Cal. 4th at 715. One could make a strong argument that the credit clause, by allowing employers to choose between finding their own healthcare and using the healthcare selected by the state, is such a vital part of Proposition 72 that a court could not find that the voters would have passed the measure without it. Proposition 72 gives an employer two options in providing healthcare for its employees, and removing the credit clause would eliminate one of those options. Conversely, one could argue that the purpose of Proposition 72 is to make medium and large employers pay for healthcare insurance, and that is what the voters focused on in approving the measure. Therefore, even if the credit option is removed, employers would still be paying for the healthcare of their employees. However, since its inception, proponents of the bill have touted Proposition 72 as a “pay or play” provision, and in fact it is presented as such in voter materials. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). If the credit provision is taken out, Proposition 72 becomes merely a “pay” provision, a seemingly significant change from the measure to be presented to voters on November 2, 2004.

Considering the strength of the argument against severability under the Gerken factors, it seems unlikely the court would sever Proposition 72 in regards to the credit provision. If the credit clause is struck down as unconstitutional, then most likely the whole thing would be struck down because the credit clause is probably not severable from the rest of the proposition.

IV. Constitutional Issues

A. Referendums

The power of citizens to directly affect the lawmaking process in California by voting for or against ballot propositions is provided for in the California Constitution. Cal. Const. art. II, §§ 8, 9 (West 2004). Propositions can take the form of an initiative or a referendum. California voters place initiatives on the ballot through a petition process without any participation by the legislature. The initiative process is “ the power of the electors to propose statutes and amendments to the Constitution and to adopt or reject them.” Cal. Const. art. II, § 8. Referendums are also placed on the ballot by California voters by a petition process, however, instead of asking voters to enact a new law, it allows voters to approve or disapprove a law that has already passed the California Legislature and been signed by the Governor. Cal. Const. art. II, § 9. The referendum allows for popular review of a law enacted through the political process. Proposition 72 is a referendum on the Health Insurance Act of 2003.

B. State Constitutional Issues

Proposition 72 contains no serious state constitutional issues. When SB2 originally passed through the Legislature, there were concerns that it was an unconstitutional means of taxation. The California State Constitution provides that increases in taxes must be approved by two-thirds of both houses of the State Legislature. Cal. Const. art. 13A, § 3 (West 2004). SB2 did not receive two-thirds approval in both houses. However, the question of whether Proposition 72 is a tax is moot because the California Supreme Court has ruled that art. 13A § 3 does not affect the initiative process, and voters can enact new taxes by initiative with a simple majority. Kennedy Wholesale, Inc. v. State Board of Equalization, 53 Cal. 3d 245 (1991). Although that case involved an initiative, there is no reason to believe the holding would not apply to a referendum.

C. Federal Constitutional Issues

Legitimate questions exist whether federal statutes 29 U.S.C. §1001 et seq., commonly known as the Employee Retirement Income Security Act of 1974 (ERISA), will preempt part or all of Prop 72. 29 U.S.C. §1001 et seq. (2004). The preemption clause of the Constitution provides that federal law will preempt all state law concerning the same subject. Gibbons v. Ogden, 22 U.S. 1 (1824). Preemption can be expressed in the federal legislation itself or implied from the circumstances. The ERISA legislation contains a broad preemption clause stating that ERISA supercedes all state laws that “relate to” employee benefit plans sponsored by private sector employers or unions. 29 U.S.C. §1144. An exception included in the ERISA preemption clause, provides that States retain the authority to regulate insurance. Id. Therefore, in analyzing whether ERISA will preempt Proposition 72, this paper will consider whether the legislation relates to employee benefit plans covered by ERISA. If it does, ERISA will preempt Proposition 72, unless the insurance exception to the preemption clause applies.

The provision most likely to be preempted by ERISA is section 2160 of Proposition 72, which lays out the credit that employers will receive if their private healthcare plans provide certain benefits, and the employer pays at least 80% of the cost of premiums for healthcare insurance. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). Arguably, this “credit clause” will directly regulate an employee benefits plan sponsored by a private sector employer because it places a condition on how the plans can be structured, namely employers must pay at least 80% of the premiums. California Healthcare Foundation, ERISA Implications for SB2: Full Report, (accessed Sept. 2, 2004).

The Supreme Court has held that a state law that mandated certain benefits on private employee healthcare plans “related to” ERISA plans were subject to the ERISA preemption clause. Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724 (1985). In that case, a state law required insurers to cover mental health benefits. The court found that such a provision “related to” an ERISA plan, but that the insurance exception applied. Id. at 758. Certainly an analogy can be drawn here, as Proposition 72 mandates that employers pay at least 80% of the premium. Like the state legislation in Metropolitan Life, Proposition 72 places a requirement on an employee benefit plan covered by ERISA. This seemingly would satisfy the relation to requirement, thereby triggering the preemption clause.

Arguably, because the credit is voluntary, there is no mandate that employers pay at least 80% of private costs. If employers pay less than 80%, they are not entitled to the credit; thus, the credit clause here is distinguishable from the mandate in Metropolitan Life, where mental health benefits had to be provided. 471 U.S. 724. If Metropolitan Life was distinguished, one could argue the “relates to” requirement is not met for Proposition 72. However, considering Proposition 72 is being touted as a “pay or play” provision, saying the 80% requirement in the credit clause is not a mandate because employers could elect not to take the credit ignores the fact that the credit is not an extra reward, but instead the means for the second option, or “play” portion of the legislation. If an employer prefers to directly provide healthcare for its employees, as the legislation provides for, it does not have the option of whether to pay at least 80% of the premium. Realistically, an employer who chooses to provide its own healthcare insurance does not have the option to pay less than 80% of the premium, even if technically that is an option, as no rational employer would pay twice for healthcare. Therefore, if Proposition 72 is to retain its “pay or play” structure, and allow employers to provide healthcare for its employees, it seems that the 80% requirement is more like a mandate than an option.

Assuming the court found that ERISA did preempt the credit clause, that portion of Proposition 72 would be unconstitutional, unless the state insurance law exception to the ERISA preemption clause applied. Federal courts have generally interpreted the ERISA preemption clause broadly since the bill became law in 1974. California Healthcare Foundation, ERISA Implications for SB2, (accessed Sept. 2, 2004). However, in recent years, the courts have construed the clause narrowly, and found for the states in a few areas. Id. One of those areas is state health insurance law. In a recent case, the Supreme Court established a two-part test for determining when a state law qualifies as an insurance regulation exempt from ERISA preemption. Kentucky Association of Health Plans v. Miller, 538 U.S. 329 (2003). To qualify as an insurance regulation the state law must (1) be specifically directed toward entities engaged in insurance, and (2) it must substantially affect the risk pooling arrangement between the insurer and the insured. Id. at 342.

In Kentucky Association, the Court upheld a Kentucky law that made it illegal for insurers to deny healthcare providers an opportunity to participate in the insurance plan, if the provider was licensed and met state standards. The Court ruled that the law was directed toward entities engaged in insurance because it regulated the relationship between insurers and providers. The Court did not require that the law control the actual terms of the insurance policies. Id. at 335. The Court also found that the second element of the test was met because the statute enlarged the number of providers that the insured could choose, which increased competition, thereby altering the type of programs offered by insurers; thus, consequently altering the risk pooling arrangement. Id. at 342.

It seems fairly certain that Proposition 72 will satisfy the first prong of the Kentucky Association rule. Although the credit clause regulates employers, not insurance companies, it is not essential that the legislation control the terms of insurance policies. Id. at 335. In regulating the relationship between insurance companies and providers, the Court in Kentucky Foundation found the “directed toward” requirement was met. Id. The credit clause regulates the relationship between employers and employees by requiring employers to pay 80% of the premiums to qualify for the credits. This relationship is further removed from insurance regulation than the insurance provider/care provider relationship that is regulated in the Kentucky law. However, it can also be argued that the 80% requirement in Proposition 72 also regulates insurance company relationships with employers because it, in effect, establishes minimum parameters that the insurance companies and employers must abide by in negotiating healthcare insurance agreements. Additionally, many of the provisions of Proposition 72 would be added to the Knox-Keene Act and the Insurance Code, which are both statute sections directed at regulating entities engaged in insurance. California Healthcare Foundation, ERISA Implications for SB2: Full Report, (accessed Sept. 2, 2004).

The second prong of the test from Kentucky Association is more open to interpretation than the first prong. The Kentucky law was found to alter the risk pooling agreement because it “altered the scope of permissible bargains” by increasing the number of providers that insurance companies must include in their plans. Id. at 338-339. The credit clause in Proposition 72 limits the amount employers can require employees to pay. This is one step removed from directly altering the scope of permissible bargains between the employer and the healthcare insurance provider. Certainly one could argue that the 80% requirement would not affect the insurance company as it would still receive 100% of the premium, regardless of how much the employer paid and how much the employee paid. Following that line of reasoning, the insurance company would be isolated from the effects of the credit clause; thus, the risk pooling agreement between the insurer and the insured would not be affected. On the other hand, proponents of Proposition 72 can argue that the 80% requirement will have a ripple affect on the risk pooling arrangement between the insurer and the employer. Employers who have to pay a larger percentage of the premium will seek to reduce the total amount of the premium and vice versa. Both of these arguments are viable, and it is not clear whether a court would find a substantial affect on the risk pooling arrangement in this case.

The Kentucky Association test is subjective and malleable. The case is also fairly recent, and has not been applied by the lower courts in any significant degree. For these reasons, it is hard to predict whether Proposition 72, specifically the credit clause, will qualify as an insurance regulation, and therefore be exempt from ERISA preemption. Certainly, finding that Proposition 72 is an insurance regulation for purposes of ERISA would extend the law, specifically the second prong of the Kentucky Association test, but not so much that it would be an irrational or unlikely decision by a court.

The drafters of SB2, and those in the legislature were keenly aware of the ERISA preemption issue. Tom Abate & Victoria Colliver, Health Insurance Bill Revives National Debate, San Francisco Chronicle, (October 5, 2003). The drafters of the bill argue that because SB2 does not actually order employers to provide health insurance, but instead requires them to contribute to a new state fund that will buy coverage for the uninsured that the ERISA preemption clause is not triggered. Id. However, they concede this argument may not hold up in court, and have publicly stated that if a court finds that the state law is preempted, they will lobby Congress for an exception to the ERISA legislation. Id. The drafters of the bill and members of the California Legislature believe they might have found a way around ERISA, but clearly they are not convinced that the law will not be preempted.

V. Public Policy Considerations

A. Proponents

Proponents of Proposition 72 begin with the almost irrefutable presumption that it is good public policy to provide as many people as possible with healthcare insurance. Proponents of Proposition 72 include: consumer advocate groups, labor unions, and numerous medical organizations. David Lazarus, Health Law Faces Big Guns, San Francisco Chronicle Business C1, (June 4, 2004). These proponents emphasize that in 2002, there were 6.4 million Californians without healthcare insurance. IGS, (accessed Aug. 26, 2004). They argue that Proposition 72 will provide health insurance to 1.1 million working people and children who are currently uninsured, without requiring a government funded program. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004).

Proposition 72 will also protect employees who currently receive healthcare from their employers. According to the proponents, as healthcare rates have soared over recent years, employers have increasingly transferred more of the burden of healthcare insurance costs to employees. Yes On Prop 72, About Prop 72, (accessed Sept. 12, 2004). Proposition 72 would cap the amount that employees can be required to pay at 20% of the premiums. Additionally, 30% of employers say they plan to cut healthcare benefits. Id. Proposition 72 sets minimum standards for healthcare coverage that employers must provide.

Fiscally, Proposition 72 should save taxpayers’ money. Proponents state that taxpayers pay $4.6 billion per year to cover emergency room services for the uninsured. Id. By providing 1.1 million more people with healthcare, the amount spent by state and local government on emergency room visits by uninsured people would decrease. Proposition 72, by increasing the number of people with private healthcare insurance, would reduce the amount of state resources going to fund Medi-Cal, resulting in a net savings of tens of millions of dollars for the State. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). Proposition 72 will not only help the healthcare problem in California, but it will also save the over-extended State budget millions of dollars.

Lastly, proponents argue that Proposition 72 is not as devastating to businesses as opponents would have you believe. Proposition 72 will eliminate the competitive advantage that employers, who do not provide adequate healthcare coverage, enjoy over those employers that do provide adequate healthcare. Yes On Prop 72, About Prop 72, (accessed Sept. 12, 2004). Proponents also reiterate that Proposition 72 applies only to medium and large employers, and therefore will not force small employers, such as restaurants and retailers, to go out of business. Id.

In sum, proponents of Proposition 72 argue that hard working people should not go without healthcare because they cannot afford it. Medium and large companies benefit from a healthy workforce, and can afford to pay their employees healthcare costs. For these reasons, medium and large employers should be legally obligated to provide their employees with healthcare coverage. Proposition 72 will not ruin California’s businesses, and it will lower taxes.

B. Opponents

Opponents of Proposition 72 agree that healthcare is a good thing for the health and welfare of the people of California. However, they do not agree that requiring employers to pay for healthcare is the most advantageous solution to the healthcare crisis. The major opponents of Proposition 72 are the California Chamber of Commerce, business and agricultural organizations, and large corporations, such as McDonalds and Macy’s. David Lazarus, Health Law Faces Big Guns, San Francisco Chronicle Business C1, (June 4, 2004).

The crux of the opposition’s argument is that Proposition 72 will have an adverse effect on an already weak business climate in California ,and weaken the California economy. Opponents claim that Proposition 72 will cost California employers between $9.9 and $11.4 billion. Aaron Yelowitz, The Cost of California’s Health Insurance Act of 2003, (accessed on Sept. 2, 2004). They argue that many businesses will not be able to pay the costs invoked by Proposition 72, and they will relocate to another state or be forced to close. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). In that case, opponents argue the number of uninsured would actually increase because those that lost their jobs obviously would not receive healthcare under Proposition 72. Additionally, Proposition 72 would apply to government agencies, as well as nonprofit organizations. Opponents of Proposition 72 claim this will cost schools and charities millions. Id. From the perspective of Proposition 72 opponents, the measure will hurt businesses, nonprofit organizations, government entities, and the economy in general.

Opponents do not agree that Proposition 72 will benefit taxpayers. Proposition 72 will cost some employers more money, which in turn may result in decreased profits, which would mean less tax revenue for the State, potentially in the low hundreds of millions of dollars. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). Additionally, administrative costs in connection with the implementation of Proposition 72 will likely result in costs in the low tens of millions of dollars, and will probably be paid by the General Fund and federal funds. Id. Therefore, according to the opponents of Proposition 72, any savings due to decreased government services would be more than offset by the decrease in tax revenue, and the increase in administrative costs.

In addition to hurting California’s economy, Proposition 72 is ineffective at remedying the healthcare crisis. Opponents of Proposition 72 estimate that 65% of those currently uninsured will still be uninsured even if it is implemented. Aaron Yelowitz, The Cost of California’s Health Insurance Act of 2003, (accessed on Sept. 2, 2004). Opponents of Proposition 72 also point out that 1.6 million or 24% of the uninsured people in California are children, and almost all of these children are eligible for free or low-cost health insurance through various federal and state government programs. Id. For opponents of Proposition 72, the measure will be inefficient and ineffective.

Lastly, opponents believe that Proposition 72 will even harm some of those who receive healthcare insurance as a result of the measure, specifically the poor people. Opponents argue that Proposition 72 will result in government-controlled healthcare run by a state bureaucracy. According to opponents, the result of such a system would be higher deductibles, unlimited administrative fees, and a loss of control by patients over which doctor they see and what hospital they attend. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 72 (2004). Opponents point to the provision that allows employers to take up to 20% of the cost of the health insurance premium from the employee, arguably without allowing the employee to opt out, as unfair to poor employees. Id. Opponents imagine a scenario where an employee may not be able to afford his/her 20% share of the premium, but will be forced to pay it. Id. Poor people will also be disproportionately harmed by the increased costs of goods and services due to the increased operating costs for employers. Aaron Yelowitz, The Cost of California’s Health Insurance Act of 2003, (accessed on Sept. 2, 2004).

In the minds of the opponents of Proposition 72, the costs of the program far outweigh the benefits. The legislation would hurt businesses, organizations, individuals, and the economy without adequately remedying the problem of insufficient healthcare in California.

VI. Conclusion

If the majority of California voters choose “yes” on Proposition 72, it will be a landmark event in healthcare legislation. Such a comprehensive plan requiring medium and large, private and public employers to provide healthcare for employees does not exist in any other state. The legislation would result in healthcare coverage for 1.1 million people who are currently uninsured, and it would affect the operations of a significant number of California employers.

Even if Proposition 72 passes, there will likely be court challenges. The issue of whether federal ERISA law is in conflict with Proposition 72’s credit clause does not have a clear answer. This issue will likely be litigated, especially considering the amount of resources that both proponents and opponents possess. If Proposition 72 goes before the courts and the courts find that ERISA preempts the credit provision, it is unlikely that the measure will be saved. Removing the credit clause would have such a profound affect on the meaning and function of Proposition 72, that it seems unlikely the court would sever it.

Whether Proposition 72 is good public policy comes down to a decision whether the benefits are worth the costs. In all likelihood, the measure would result in more Californians having adequate healthcare. The question is at what cost to California’s economy. Certainly it would cost businesses substantial amounts of money, but many medium and large companies are already providing healthcare for their employees. Additionally, such a measure may save state and local governments money, which in turn benefits taxpayers, both individuals and companies. If Proposition 72 passes, the effect it will have on the economy, and the health and safety of Californians as a whole will not be known for many years. Neither side would disagree that the healthcare system in California needs change, but the two sides differ on whether Proposition 72, by requiring employers to foot the majority of the healthcare insurance burden, is an efficient and effective way of insuring a healthier California in the future.