Happy New Year..

Friday, January 4th, 2008


  • Governor, Speaker file initiative language to accompany reform package
  • Lower court rules against employer contribution for Healthy San Francisco, although Appeals court sends promising signals
  • Senate Health Committee to hear AB x1 1 (Nunez) on January 16th

In a typical year, Sacramento stands still the week between Christmas and New Year. Not so, in 2007, especially regarding health care.

The last Health Access Update reported from the Capitol (December 17th to be exact), when Gov. Arnold Schwarzenegger, Assembly Speaker Fabian Nunez, and a broad and diverse number of supporters were at a celebratory press conference right after the passage of ABx1 1 (Nunez/Perata) out of the Assembly. (Senate Leader Don Perata chose not to immediately hear ABx1 1, waiting until after the break as analysts looked at fiscal forecasts for the measure.)

If ABx1 1 (Nunez) is passed along with its accompanying ballot measure – which was filed last week – it would represent the largest public program increase in more than 40 years and would require all California businesses to contribute toward their workers’ health care. (Read a more detailed analysis of ABx1 1 here, and about its passage here. Ongoing updates will be posted on the Health Access blog.)


Last Friday, the Governor and Speaker filed with the Attorney General the initiative that accompanies ABx1 1. As previously agreed upon, the initiative contains some of the financing of ABx1 1. The initiative includes four financing components:

  • $1.75 per pack tobacco tax;
  • Minimum employer contribution of 6.5% of payroll (if payroll exceeds $15 million); 6% (if payroll is between $1 million and $15 million); 4% (for payrolls between $250,000 and $1 million); and 1% (for payrolls below $250,000);
  • $1 billion from counties in return for the state assuming care of medically indigent patients;
  • Hospital provider fee of 4%, which would be used to bring down federal funds to help increase Medi-Cal rates and partially fund coverage expansion.

The money that the initiative raises largely goes to expand public programs for lower income Californians — both children and adults — to provide subsidies for moderate income families, and to raise Medi-Cal rates and to fund some public health and prevention efforts. It also sets a standard for employer contributions to health care for their workers.

The measure also includes a $25 million loan to finance children’s coverage from January 2009 through June 2009, allowing children to continue to be enrolled in county programs until statewide coverage takes effect. Without this provision, the counties would run out of money and would likely disenroll children from coverage.

The initiative also contains various door-stop/triggers to prevent the program from creating a fiscal threat to the general fund. First, the Director of Finance, twice a year, would look into the state’s special health account to determine if there is enough money to run the program. If not, then he tells the Governor and Legislature, giving lawmakers a chance to do something about it. If the Governor and Legislature fail to act, then the law is inoperative and the reforms revert to the current status quo, in an attempt to calm the fears of those who have questioned whether the program might create too much of a strain on an already strapped state budget.

The initiative will likely emerge from the Attorney General’s office with a Title and Summary and fiscal analysis in the next month. The measure then heads to the Secretary of State’s office, who will certify the initiative and start the (less than) 150-day clock for signature gathering efforts to place the initiative on the November ballot.


Other news broke over the holidays with potential but uncertain impact on health reform. A Bush-appointed San Francisco Superior Court judge, Judge Jeffrey White, struck down a key provision in San Francisco ’s near universal health care plan, which required employers to either provide coverage to workers or pay a fee that would enable the city to provide medical services to employees.

The decision says the San Francisco law would violate the federal ERISA (Employee Retirement Income Security Act). The federal law, passed in 1974, was meant to assure that mulit-state businesses did not have to contend with a hodgepodge of rules about benefits for each city, county, state they operated in. The city of San Francisco has appealed the decision to the Ninth Circuit Court of Appeals, which heard initial arguments yesterday.

The ruling creates a problem for the implementation of the Healthy San Francisco program, which moved ahead with the rest of the proposal with a rollout on Tuesday, January 1. The court decision, if left to stand, would force San Francisco to limit enrollment, which means that 26,000 middle-income San Franciscans (out of the 82,000 uninsured residents) will not be able to benefit from health care. While a financial hit, the employer assessment was not the dominant part of the funding: Employers contributions were expected to pay for approximately 19% of the city’s program.

PROMISING HEARING YESTERDAY: A three-judge panel yesterday heard arguments about whether the employer contribution piece of the Healthy San Francisco Plan should continue while the lower court decision is appealed. As reported in the SF Chronicle today, the comments by all three judges suggest that the lower court ruling may be overturned, and that the federal ERISA law does allow room for states and localities to construct health reform for their citizens.

Meeting the requirements of both health reform and ERISA has been an issue for health reformers around the country. Since the beginning of this year’s health debate, advocates and the authors have consulted with experts – including lawyers who helped write ERISA –to help prepare for such a court case against the proposal.


There are some similarlies between the statewide reform proposal, and city’s effort. But the San Francisco health plan and ABx1 1 are not mirror images, therefore, any ruling on the San Francisco proposal won’t necessarily have an impact on ABx1 1.

But perhaps most importantly, is a suggestion which the lower court judge gave into how an ERISA-compliant reform could be structured.

From Judge White’s conclusion:

The Court is not convinced that other alternatives for creating a program for
providing public health private employers into account in the form of tax
credits. are are not viable. Defendants propose an increased general tax
requirement, but state the unfairness of not taking existing health care
expenditures into account. Without wading into the legislative dominion, the
Court can envision such a tax program that takes existing health care
expenditures by private employers into account in the form of tax credits.

White’s suggestion parallels language in the initiative that was filed by Gov.
Schwarzenegger and Speaker Nunez:

19003 (a): On and after January 1, 2010, each employer shall pay a health care contribution equal to a percentage of wages paid to its employees during the calendar year. Each employer shall be eligible for a credit to offset the contribution by the amount that the employer expends for health expenditures for employees and their dependents during that same period.

It remains to be seen whether the SF health plan will advance or be impacted by the courts, but in absence of a definitive court ruling, many health advocates continue to seek to advance reform at the state and local level.


As attorneys toil away in separate corners, the state Senate Health Committee is scheduled to hear AB x1 1 (Nunez) on January 16.

Senate Leader Don Perata, who has been supportive of health reform in the last year, has asked the Legislative Analysts’ Office to perform an independent review of ABx1 1’s impact on the state’s general fund in light of the $14 billion budget deficit in the fiscal year.

The state Department of Finance has testified in hearings that the plan would have no impact on the state budget because it uses its own sources of revenue — from employers, workers, the federal government, savings, providers and the tobacco tax — to pay for itself and would shut itself off if it were found to have insufficient funds.

The Legislative Analyst is expected to have an analysis in the coming weeks.

CALL TO ACTION: Submit letters about ABx1 1 (Nunez) to the Senate Health Committee by January 10th to be reflected in the committee analysis. Health Access will post our Support (if Amended) letter shortly.

Sen. Sheila Kuehl, Chair
Senate Health Committee
State Capitol
Sacramento, CA 95814
FAX: 916.324.0384

Health Access will continue to provide updates on ABx1 1, the initiative and other health reform efforts, including late-breaking developments that will be posted on our blog, at:

To view other resources from the Year of Health Reform, visit our website, at:

You may also contact the author of this report, Hanh Kim Quach, at hquach@health-access.org.

Health Access California promotes quality, affordable health care for all Californians.
VIEW THE FILE Legislation

Leave a Comment

%d bloggers like this: