NCPA - National Center for Policy Analysis

California to Add Health Care Folly to List of Woes

September 19, 2003

Although the California state government is nearly bankrupt and the state trails the nation in both economic growth and job-creation, the state legislature recently passed a health-care bill that would impose a hefty new employment-related tax, says the Wall Street Journal. It would make California the first state in the nation to require employers to pay for health insurance.

The new "play or pay" measure compels any business with more than 50 employers to buy health insurance for workers or pay a fee (read: a new tax) to the state. However, it exempts employees covered by union contracts.

California already imposes a number of expensive mandates on employers and high tax rates on businesses. The insurance bill will add to that burden:

  • California is only state that mandates paid family leave, the only state where family leave applies to small businesses, the only state with ergonomics regulations and the only state with daily overtime rules instead of weekly overtime rules.
  • California's corporate tax rate is 8.8 percent; the corporate tax rate in the adjacent states of Washington and Nevada -- where businesses might relocate -- are zero.
  • A study by the Los Angeles Area Economic Development Corporation prices the mandates at $7.2 billion annually, with employers paying $5.7 billion, or 80 percent, and employees paying $1.5 billion.

A debate is already raging about whether this is legal, given that the federal Employment Retirement Income and Security Act says states don't have the power to regulate employer health plans.

Source: Editorial, "Progressive Paradise," Wall Street Journal, September 19, 2003.

For text,,SB10639362025927300,00.html


Browse more articles on Tax and Spending Issues