Under the Umbrella of Health Care

On Election Day, California voters narrowly rejected a ballot initiative -- Proposition 72 -- that would have required businesses with 50 or more employees to provide health insurance to their workers or contribute financially to a state health insurance pool.

That defeat was not terribly surprising, given that preelection polls revealed a steady erosion of support for the measure as some sectors of the business community invested millions of dollars in a drive against it. After years of searching for a solution to the state's uninsured problem, California legislators and the governor must now go back to the drawing board to search for another idea that will cover the 6 million uninsured Californians and save the state and hospitals money, all without breaking the backs of employers.

The vote on Proposition 72 gave us some intriguing insight into what kind of system Californians want, and the state's legislators should be mindful of the signal that voters sent. Despite a well-financed campaign opposing it, Proposition 72 failed by the slimmest of margins -- 49 to 51 percent. It's an indication that California voters are serious about solving the problem of the uninsured, but also recognize that placing the burden solely on business may not be the best way to achieve their goal.

The close vote on Proposition 72 suggests that many insured Californians are feeling some insecurity about the stability and affordability of their own health coverage, and with good reason. The cost of health insurance has soared in recent years, and employers have imposed cost containment measures, such as increasing worker contributions and ending dependent coverage or making it more expensive. This growing insecurity, coupled with the fact that 6 million people in California lack health insurance, entirely makes it easy to understand why voters are tempted to support a mandate on employers to provide health insurance. Yet the outcome also suggests that Californians fear losing their jobs even more. After all, the main argument many employer groups used against Proposition 72 was that it would be too costly for businesses, forcing them to downsize, move out of the state or fold entirely.

But the business community is not monolithic in its opposition to requiring employers to provide health benefits. In fact, many employers who voluntarily provide generous employee and dependent coverage welcome an employer mandate. They recognize that they are subsidizing companies, such as WalMart and McDonald's, by providing health insurance to the spouses of workers who may be employed without coverage at one of these companies. Listen to John Catsimatidis, CEO of Gristedes supermarkets, who argued in a recent Christian Science Monitor article that if his "competitors are allowed to be irresponsible employers, not providing health and other benefits -- they're not only hurting their employees, they're hurting mine."

While an employer mandate such as the one proposed through Proposition 72 would have made strides toward leveling the playing field among medium-sized and larger employers, it would have covered only about a fifth of California's uninsured population. Because the mandate would only apply to employees in firms with more than 50 employees, only 18 to 26 percent of uninsured Californians would have gained coverage. This is because it targeted the wrong segment of the population: according to the California HealthCare Foundation, 95 percent of the targeted employers with 50 or more employees already offer insurance to some of their workers -- whereas only 65 percent of smaller employers (who would have been exempt from the mandate) offer coverage. The initiative would have left the millions of employees in small businesses without coverage, perpetuating the outdated notion that health insurance is best delivered through employees in large firms. And it would have continued the trend of some businesses subsidizing the health insurance of dependents whose employers don't offer coverage.

Proposition 72, however, did recognize that health insurance is and should be a shared responsibility, a fact that didn't receive much attention. The legislation would have required employers to contribute 80 percent of the cost of health care premiums. Individuals would have been required to accept coverage from their employers and contribute the remaining 20 percent. While this distribution may be skewed, the concept is correct and should be expanded. Yes, employers should be required to contribute to the cost of their employees' health insurance. But individuals have a role as well. Health insurance should be not only a right, but a duty. All Americans should be required to maintain a basic level of health insurance and to contribute a reasonable share of their income toward the cost of their own coverage. Where necessary, government should provide financial help to bridge the gap.

This solution -- universal coverage for universal responsibility -- is achievable. To be sure, many Californians are uninsured because they are too poor to afford health insurance. But nearly a third are living in households where their income is three times the federal poverty level -- nearly $50,000 for a family of three. Many of these individuals could afford to contribute toward the cost of their health insurance if they chose.

In addition, almost half of the uninsured in California are relatively young and healthy -- between the ages of 18 and 34 -- and they are the fastest growing demographic of the uninsured. Many of these younger people are playing Russian roulette with their health -- gambling that they'll stay healthy. But when they do get sick or suffer a traumatic injury, their ensuing health costs often force them into personal bankruptcy or are passed onto taxpayers or the insured in the form of higher premiums. Bringing all these younger and relatively healthy individuals into the insurance pool would spread risk more evenly among the population, bringing down the cost of insurance for everyone. It would also protect the rest of California taxpayers from having to absorb their uncompensated health care costs.

Another important advantage to a mandatory health insurance system is that health insurance would be tied to the individual rather than the employer. The current voluntary employer-based system evolved during the Depression when wage caps forced employers to find another way to compensate their employees. They began to offer their employees and dependents health and pension benefits as a substitute for higher wages. This system made sense 45 years ago when most employees worked full time supporting an at-home wife and children.

Today's work force, however, looks very different; millions of people are so-called "nonstandard" employees: part time, temporary and low-wage. These individuals either aren't eligible for employer-sponsored insurance or earn too little to afford their share of the premiums. Indeed, two-thirds of the 45 million Americans who are uninsured are working. Under a universal, mandatory system, all individuals would have insurance regardless of the number of hours they worked or their place on the corporate ladder. And people would no longer have to worry that losing a job means losing their health insurance, a phenomenon that causes labor market distortions such as job lock. It would also do away with one of the most vexing problems for people with employer-sponsored coverage -- the inability to take their doctors and health plans with them from job to job.

And unlike Proposition 72, a system of mandatory health insurance would be universal because it would apply to everyone, regardless of the size of the employer or the number of hours worked. This would level the playing field among businesses, since all employers would be required to contribute toward the cost of coverage. It would also end the cost-shifting of dependent coverage that occurs under today's voluntary system.

Since employers would have the option to contribute a fixed amount toward the cost of their employees' coverage, it would stabilize their costs, insulating them from unpredictable yearly premium increases. Small businesses that can't afford to offer their employees health insurance today would also receive tax credits to help them cover the cost.

The good news for Californians is that they don't have to start from scratch -- the building blocks are already there. Almost half of California voters support an employer mandate and Governor Arnold Schwarzenegger recently suggested an individual mandate as a route to coverage. Marrying an employer mandate that includes all employees to an individual mandate would result in all Californians gaining coverage and could serve as a model for other states and the nation.