NCPA - National Center for Policy Analysis


March 6, 2008

A California Senate committee has rejected Gov. Arnold Schwarzenegger's plan to provide government-controlled health insurance to millions more of California's citizens, says Jeff Emanuel, research fellow at the Heartland Institute and managing editor of Health Care News.

Much of the opposition was based on the projected impact on the cash-strapped state's economy:

  • The act was to receive funding from four sources: a $2.3 billion increase in the state hospital tax, a new payroll tax on businesses of 1 to 6.5 percent, an additional $1.50 to $2 per pack tax on cigarettes, and another $2.3 billion in funding from the federal government.
  • The measure also would have prohibited insurers from denying coverage to people because of existing medical ailments and would have required them to spend at least 85 percent of insurance premiums exclusively on medical care.
  • The estimated price tag had climbed from $14 billion at the time the plan was announced to $14.9 billion by the time of the committee vote; state budget officials are projecting a $14.5 billion overall budget deficit.

"The biggest problem for the state was the proposal to force employers to spend between 1 percent and 6.5 percent of payroll on health coverage," said Devon Herrick, a senior fellow at the National Center for Policy Analysis."  This tax on labor would have stalled job growth and increased costs on employers whose workers aren't willing to forgo sufficient cash wages to cover health benefits."

Source: Jeff Emanuel, "California Senate Kills $15 Billion Health Insurance Plan," Heartland Institute, April 1, 2008.


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