Too Costly for the State Budget? Employers Have Budgets Too!

On May 17, 2019 the Senate and Assembly appropriations committee will weigh the fiscal impact of all bills in the suspense file and determine which bills will move out of suspense to the floor. The appropriations committees’ focus is the cost impact of any bill to the state. The higher the cost to the state, the less likely the bill will move off the suspense file.  While state costs are considered during this process, costs on the private sector are not. A great example of this dynamic is with regard to bills related to health care.

One of this year’s most costly health benefit mandate bills on private employers is AB 767 (Wicks). This bill mandates coverage of infertility treatments. The first cost analysis of the bill revealed an annual increase of health care premium by a whopping $537,777,000, with every penny of that cost to be borne by employers and employees. Recent amendments will reduce the cost but the bill still remains significantly costly. Interestingly, when the bill’s cost impact was analyzed, it was noted that the bill didn’t subject Medi-Cal to the bill’s coverage mandate. But to ensure and emphasize that there will be absolutely no cost to the state, the bill was recently amended again to expressly exclude any Medi-Cal managed care plan or any entity that enters into a contract with the State Department of Health Care Services.​ The amendment assures that there will be no cost to the state budget, but it doesn’t eliminate the increased health care costs and premiums for private sector employers and employees. Notably, in the last 5 years premiums for small employers and Covered California have cumulatively increased by 42%. Large group premium premiums have also increased, though at a slower pace.​

​​In 2002, the University of California was authorized by statute to analyze health insurance benefit mandate bills. The California Health Benefit Review Program (CHBRP) reviews and reports to the Legislature relevant data regarding the proposed legislation including the cost impact of these bills on employers, employees, individuals and the state. Of the 2019 health benefit mandate bills that CHBRP was able to estimate an increased health care cost, the total would exceed a staggering $800 million annually.  Of that amount, small and large businesses would have the burden of paying over $640 million every year in the form of health care premiums over what they currently pay. The State on the other hand, would have to pay less than $55 million of that amount. ​​

​If the health benefit mandate bills that are introduced every year are so critical and necessary, they should be applicable to all Californians including Medi-Cal beneficiaries. One third of the state’s population should not be excluded. If the state is excluded from the significant costs of these mandates, the rest of California, including employers and employees, should not be saddled with the burden of paying for such mandates either.

Karen Sarkissian, Policy Advocate