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How Prop 72 Affects Employers Who Already Provide Health Coverage
Proposition 72 imposes significant new costs, including the cost of expanded health coverage for many employers as well as reporting and compliance requirements on employers who already provide health coverage to their workers. For example:
- Prop 72 requires employers to provide coverage for all workers who work 100 or more hours per month. Many employers now require employees to work full-time or at least 120 hours a month to be eligible for health insurance.
- Prop 72 requires employers to pay for healthcare benefits after just three months on the job. Many employers require a six-month waiting period. There are no exceptions for seasonal or temporary employees.
- Prop 72 requires employers to pay at least 80 percent of the cost of coverage for workers, more than many employers currently pay.
- Prop 72 requires employers with 200 or more employees to pay 80 percent of the cost of dependent and domestic partner coverage. Many large employers with existing coverage do not pay 80 percent of coverage costs for dependents, while others do not cover domestic partners.
- Prop 72 caps the contribution of low-wage workers to 5 percent of wages. Employers may be forced to pick up the balance.
- Prop 72 prevents employers from taking actions to minimize the economic cost of the mandate, including reducing employee hours. Even if layoffs occur due to reducing profits or other legitimate reasons, employers still could be subject to lawsuits accusing them of circumventing the law. Alleged violations will result in expensive civil litigation (17200 cases, etc.) and costly fines.
- Employers are responsible for transmitting the 20 percent payment from employees, even if they do not pay it. Fines of 200 percent of the cost of healthcare are authorized in the bill.
- Prop 72 empowers an un-elected state board to set healthcare taxes and determine the benefits employers must provide. That board will be under tremendous pressure to expand benefits and saddle employers with the bills.
- According to the Los Angeles County Economic Development Corporation, Prop 72 imposes an annual healthcare tax of $6,803 per employee for those employers with 200 or more employees and $2,482 per employee for smaller employers. Those costs could increase if the state board administering the program decides to expand benefits or pass on cost overruns.
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