Gov, labor close on health care; wary heavy hitters stay outside ‘broad coalition’

Republican Governor Arnold Schwarzenegger, at odds with his own party and Democrats on his health-care plan to cover 6 million uninsured Californians, is finding support in an unexpected quarter: organized labor. Joining them are huge HMOs, including Kaiser Permanente and Blue Cross of California, in what the governor and other supporters believe is a powerful, unprecedented coalition to push through sweeping health care reforms.

But all is not what it seems.

Major players who defeated universal health care in the 2004 referendum on SB 2 are conspicuously absent from the coalition, such as the California Restaurant Association, the California Chamber of Commerce and other opponents who spent $26.2 million to defeat the plan that earlier had been approved in the Legislature and signed by former Governor Gray Davis. Lurking in the background is the possibility, in the event legislation is approved, of another ballot referendum in 2008, a presidential-election year.

And even those who support pieces of the new Schwarzenegger proposal, such as the California Medical Association, are careful to say they back the concepts of his plan, not the specifics–a critical distinction, since the governor’s plan is not written down and has no legislative author, yet, willing to carry a bill. And they know that a new referendum battle is a distinct possibility.

“SB 2 changed the calculation. Now, you’re not just legislating for the Legislature, you have to legislate for the ballot. When we did SB 2, none of us ever thought it would be on the ballot,” said CMA lobbyist Dustin Corcoran.
Business groups–especially small businesses–dislike the governor’s proposal requiring employers to pay a 4-percent payroll surcharge to help finance their workers’ health care; labor groups, and some larger businesses, believe that amount is too low.

“The governor came out with a relatively comprehensive health-care-reform proposal. It includes elements that we like and elements that we are concerned about, but nothing is really insurmountable,” said Angie Wei, a lobbyist for the California Labor Federation, which represents over 1,200 union locals with 2 million members. “Without significant health-care reform, our members pay more and get less. For a Republican governor to come out and say employers should provide coverage or pay a percentage to provide coverage really advances the ball here.”

Jim Lewis of the Building and Construction Trades Council agrees. His group has 350,000 members in affiliated locals.

“It’s good that the governor is out there pushing health care in a way that we can support, in concept. Of course, the devil will be in the details. But this is a starting place for negotiations. This may not even come together this year, it may go into next year. But this is huge. This is workers’ comp times 100,” Lewis said, referring to earlier, omnibus legislation that saved employers billions of dollars in the state’s workers’ compensation insurance system by reducing injured workers’ settlements.

The Democrats in both houses and the Republicans in the Senate have offered their competing plans, and the Assembly Republican version is anticipated before the end of the month following a caucus retreat. Legislative negotiators say a deal remains elusive, that the skirmishing has just begun and that any final agreement is all but certain to emerge later in the year–or even next year, an election year.

But key elements in Schwarzenegger’s plan have drawn support, in concept, from major elements in labor: the 2 percent fee on doctors’ billings, the 4 percent fee on hospital charges and language that bars excluding patients with pre-existing medical conditions. The most widely reported piece of Schwarzenegger’s proposal, a 4-percent levy on employers’ payrolls, is proving the most divisive–with businesses opposed and labor contending that it is not enough. “The average now on businesses that provide health care is about 10 percent,” Wei noted.

On Tuesday, the Service Employees International Union, the CMA, Kaiser, Health Net, Blue Cross and Catholic Healthcare West–the nonprofit hospital chain–announced their support for a plan to create access to universal health care. The decision, apparently, means that the group is willing to bankroll a costly effort to win approval for the proposal, whether through a campaign to pressure lawmakers into approving a plan or by convincing voters to approve the plan at the ballot box. Barring a special election, the next regularly scheduled statewide election is next June, although legislation already is under way to push California’s presidential primary up to February 2008.

But even the supporters said their backing was tentative. “One issue we need to consider carefully is shifting the risks and costs of health care to individuals,” Sal Roselli, president of the SEIU state council, said in a written statement. “We must ensure that Employers shoulder their share of the cost of insurance and not place too great a burden on workers.”

For employers, Roselli’s comments signaled a clear position that businesses would be required to foot a big piece of the health-care bill.

“We applaud the governor for reaching out, for tackling such a mind-bendingly complex and white-hot issue, but we have concerns about how we see the sorts of players who are staking out their positions. These are the same players, I suspect, who were in support of SB 2,” said Jot Condie, president and CEO of the California Restaurant Association.

“That 4-percent payroll tax is something that small businesses can’t afford, just as most consumers can’t afford health insurance. We believe there should be a strong emphasis on cost controls, and that it should be at the forefront of the debate,” he added.

“We are really awaiting more details,” added Chamber spokesman Vince Sollitto. “We are participating in the process, and Cal Chamber certainly shares the goals of the governor to increase access and improve affordability. But we have not taken a formal position [on the governor’s plan] until we review the details and determine just what the true impacts are of the governor’s plan.”

The governor’s proposal has received the most attention, but four other major proposals with important differences are being circulated in the Legislature.
The Senate Republican, the Senate Democratic and the governor’s plans require individuals to assume some of the costs of coverage; the Assembly Democratic proposal has no individual mandate. The Senate GOP plan does not require employers to foot a piece of the bill; the Democratic and the governor’s plans do, with exemptions for smaller companies. All except the Senate Democratic plan provides tax breaks for employers. The Senate GOP plan gives tax credits to doctors and hospitals, plus a low-interest loan program for nonprofit hospitals and clinics. Detailed comparisons of the plans are available online at and

“Everybody is trying to decide the best way to proceed,” said Senate Republican Leader Dick Ackerman, R-Irvine. “This is a very large topic, with a whole bunch of issues and a whole bunch of stakeholders. We are trying to get as much input as we can.”

Supporters and critics alike are uncertain whether any health-care plan ultimately goes to a two-house conference committee to be hammered out–a common Capitol practice.

“We want to make sure it goes through both houses and that you have hearings,” Condie said. “The last time we saw a huge, complex issue rushed through in a one-year legislative process to a conference committee two nights before the end of session was with AB 1890,” he said, referring the bill that paved the way for the state’s disastrous experiment with electricity deregulation.
“And we all know what happened with that.”

Contact John Howard at

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