Cities, Counties, School Districts: No Immunity from Proposition 72
Prop 72 makes no distinction between public and private employers. As a result, significant new costs will be imposed on local governments, school districts and special districts, including costs associated with extending health coverage to some employees who are part-time workers or recent hires and expanding benefits for those who are already covered. Public entities will also be subject to the same reporting and compliance requirements as private employers. Consider the following:
- Prop 72 requires employers to provide coverage for all workers who work 100 or more hours per month. Many public 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. Seasonal and temporary workers hired by local governments that now are not covered by any collective bargaining agreements would likely now have to be provided healthcare under Prop 72.
- Prop 72 requires employers to pay at least 80 percent of the cost of coverage for workers, more than many employers currently pay. Some collective bargaining agreements provide for lower employer health contributions in exchange for wage concessions. Under Prop 72, public entities will be stuck with higher contributions and the wage concessions.
- Furthermore, Prop 72 sets a floor for employer contribution of 80 percent of the cost, not a ceiling. By removing from discussion the employer/employee share of health from collective bargaining negotiations, the only matter left for negotiation is wages. The flexibility to control payroll costs is severely hampered.
- The conflicting, ambiguous language of Prop 72 makes it very difficult for local governments to budget for its impact. Will they be required to pay the health care "fee" up front and then submit a claim for a refund? Will the benefits package and associated costs change with no notice? No one can say for sure. We can only look at our experience with state mandates in recent years and understand that we always come out on the short end of the stick when dealing with the state.
- Prop 72 requires employers with 200 or more employees to pay 80 percent of the cost of dependent coverage. Many large employers with health coverage do not pay 80 percent of coverage costs for dependents.
- 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. 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.
- Prop72 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.
The same study estimates that Prop 72 will cost employers at least $5.3 billion and employees another $1.7 billion. Public entities will feel the impact of this tax increase twice: once as employers and again as tax revenues decline because businesses have closed their doors or cut jobs.
California's struggling economy cannot afford this flawed attempt to reform our healthcare system. California's local governments cannot afford another costly new mandate from Sacramento politicians.
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