The Health Insurance Act of 2003, a law signed by former governor Gray Davis last October, is a potentially devastating law for California employers, including those in the state's agricultural industry.

Also known as Senate Bill 2 (SB2), the law requires California employers with 200 or more employees to help pay for their employees' (and their families) health insurance, or pay a tax for the state health care fund, by 2006. Companies with 50 to 199 employees must comply by 2007. A wide range of businesses in California, including agribusiness employers, oppose these additional mandates on providing healthcare coverage, expressing the already high cost of providing health insurance, and the impact on their profits, payroll, and benefits offered to workers.

Agriculture is California's No. 1 industry, contributing nearly $59 billion to the state's economy each year, and supports 1.1 million jobs. As the nation's leader in agricultural production for more than 50 years, these workers currently produce more than 250 commodities. These same businesses lead the nation in agriculture exports. More than 2 million acres in the state produce for the export market, led by almonds, cotton, wine, grapes, dairy products, and oranges. The state's agricultural industry sells an average of $18.2 million in farm exports daily to the world. Imagine the impact to the state's existing economic situation if agriculture employers could no longer afford to stay in business or produce as they do today.

Clearly, the multi-billion healthcare tax created by SB2 is leading California business in the wrong direction. Forcing new expenses on employers will pull them out of a highly competitive environment, force layoffs, and may even force some businesses to close down or move out of state.

According to research done by United Agribusiness League, a staunch opponent of SB2 on behalf of its agricultural membership, the costs of this program could be potentially devastating: SB2 is a very costly program for California businesses and employees. Under its provisions, the state's medium- and large-size firms would have to pay at least $5.7 billion to cover uninsured workers and their dependents.

Costs estimated

The cost to employees could approach $1.5 billion. Should single coverage be extended to small businesses (19 employees or fewer), the cost to California employers and employees could be another $4 billion. Overall, the potential cost of SB2 could exceed next year's California state budget deficit.

According to another strong opponent of the new law, the California Chamber of Commerce, SB2 could end up costing California employers over $11.5 billion.

Opponents suggest that mandating employer-based health benefits is not necessarily the most effective or efficient vehicle for helping the uninsured population. Additionally, they cite that government-run programs do not always help the most disadvantaged and vulnerable workers. Instead, opponents of the new law would like the state to consider several less costly and risky alternatives, such as:

  • Simplify and streamline the administration of the state's existing health insurance programs.

  • Furnish tax credits or other subsidies as incentives for small businesses to voluntarily offer health insurance coverage to their workers.

A wide range of business groups strongly oppose this new law, including the, United Agribusiness League, California Chamber of Commerce, and National Federation of Independent Businesses. These groups, and others, believe that there will be even more negative affects for employers as the regulations are drafted as to how SB2 will be implemented, and will be actively involved in the legal challenges to come.