The Sacramento Bee reported that California lawmakers hope SB 2 will survive an ERISA challenge on the back of a loophole permitting the states to regulate the health insurance industry. Under ERISA, federal authorities regulate employee pension and benefit programs, which can include the health coverage workers get on the job.

If it stands up to a challenge, the law would make California the first state in the three decades since Congress passed a law preventing states from regulating employee health benefits – ERISA – to compel employers to pay for medical insurance and to spell out the type of coverage offered.

“California has always been a trendsetter in health care,” Paul Fronstin, a health analyst with the Employee Benefits Research Institute (EBRI) in Washington, DC, told the Bee. “If this legislation becomes law it will be an eye opener for the rest of the country and other states will look at it as a test case.”

Several state lawmakers admit there might be court challenges to SB 2, but said they still hoped to get the bill through floor votes next week and on to the governor’s desk. A spokesman for Governor Gray Davis said the governor has yet to take a position on the proposal.

“California is in the midst of a fiscal crisis,” said California Assemblyman Dario Frommer, (D-Los Angeles), according to the Bee. “We need to have a system of expanding employer health coverage. We need to stand up to any legal challenges.”

The Details

The bill would require all companies with 200 or more workers to offer insurance for employees and their families starting in 2005 or pay fees to support a statewide insurance program. Firms with between 20 and 199 employees would have to give workers, but not their families, insurance by 2006 or pay similar fees to the state. In most cases, companies would pay at least 80% of the monthly insurance premium, leaving workers to pay no more than 20% of the tab.

Employees would qualify for coverage under the law if they worked at least 100 hours per month and had been with their current job at least three months. Workers who qualify would either get insurance on the job or through a state-run insurance pool. Four out of five of California’s approximately 6 million uninsured residents are workers and their families, studies show.

Variations on employee health insurance mandates have been tried in other states, but only Hawaii has a law on the books – and that took a special act of Congress to circumvent ERISA.

By far the most ambitious state effort, and the closest in scope to the California proposal, was a 1988 Massachusetts law that would have taxed firms with five or more workers to subsidize a public health program but offered tax credits to companies that bought coverage. The Massachusetts state restaurant association challenged the law but dropped the case when it was repealed.