Newly Signed California Health Insurance Law To Cost Businesses $11.4 Billion

Senator Kennedy, AFL-CIO See Job-Killing Mandate As National Model
  • Publication Date: October 2003

  • Topics: Health Care

Washington – A new health insurance mandate signed this past weekend by California Governor Gray Davis will cost Golden State businesses $11.4 billion a year resulting in massive job loss, particularly to less-skilled workers. The AFL-CIO, who heavily backed the job-killing California bill, now seeks to make the Health Insurance Act (HIA) a national model, pursuing similar legislation in 25 other states. Senator Ted Kennedy (D-MA) also called HIA “a model for the nation.”

The enormous cost and consequences of the Health Insurance Act of 2003 (HIA) are analyzed in a report conducted by Dr. Aaron Yelowitz, a nationally respected labor and health economist at the University of Kentucky and a research fellow at the National Bureau of Economic Research. Prior to the University of Kentucky, Yelowitz spent seven years as an economist at UCLA.

Yelowitz’s report, commissioned by The Employment Policies Institute (EPI), found that California employees will suffer from the $11.4 billion cost as employers adjust for the mandate by lowering wages, cutting benefits, or by laying off workers. Over a half-million employees who currently earn the state minimum wage or just above it will be hit the hardest. A rich body of evidence suggests these employees are at risk of losing their jobs either through labor force reductions or displacement by more experienced employees.

“While proponents of this employer-mandate are downplaying its high price tag, businesses are once again turning away from California because of the costs,” said Craig Garthwaite, an EPI economist. “To make HIA national policy would result in large scale job loss and stifled economic growth. Despite the massive cost to business, only a fraction of the uninsured end up with coverage. The damaging effects and minimal return of this new law cannot be ignored.”