Businesses warm to 'pay or play' healthcare

California and New York City ponder making some employers pay for insurance - or help government do it.

In a new sign of the business community's increasing frustration with the nation's healthcare system, "Pay or Play" is gaining popularity with the wingtipped set.

That's the nickname of a controversial proposal that requires businesses to provide workers health insurance, or pay into a government fund that will do it for them.

The business community once saw it as an ideologically offensive unfunded mandate. But as initiatives in New York, California, and Washington State show, an increasing number of traditional employers have come to view it as a protection of their own interests, or even as the foundation for reform of the healthcare system.

Faced with skyrocketing insurance premiums and tough competition from other businesses that don't provide health insurance, many medium and large employers have signed onto to pay-or-play proposals - like the one introduced at the New York City Council Tuesday.

Called the New York City Health Care Security Act, it would require all employers in the hotel, large grocery, building services, industrial laundry, and construction industries either to provide family health insurance or to contribute to a fund that would do it for them.

More than 70 percent of the affected businesses already provide employees with affordable insurance. That's been key to winning support for the proposal from more than 90 local businesses, including one of the city's major supermarket chains.

"The business support for this New York campaign really shows reaction by responsible employers to the spreading Wal-Mart model of low wages and few benefits," says Paul Sonn, associate counsel at the Brennan Center for Justice at New York University School of Law.

This fall, the people of California will be asked to vote on a referendum for a similar proposal that was passed with some business support by the Legislature and signed into law last year by then-Gov. Gray Davis. That bill would not only require businesses with more than 50 employees to provide health insurance or pay into a state fund, but it would also create a subsidy to help low-income employees pay their share of insurance premiums.

But opponents, largely funded by restaurant chains like McDonald's, gathered enough signatures to put the referendum on the ballot, which asks voters to rescind the law before it takes effect in January 2006. [Editor's note: The original version mistakenly included a reference to Wal-Mart.] Supporters believe the proposal will pass intact, in part because polls show a majority of voters support it. But opponents have been heartened by Gov. Arnold Schwarzenegger's announcement that he recommends voting against it.

If the proposal passes, more than a million of California's uninsured workers will get coverage. Opponents contend it will cost the state more than $7 billion. Supporters counter that the overall savings garnered from covering the uninsured will end up saving the state $620 million to $900 million per year.

The New York proposal would protect the coverage of 152,000 workers and extend it to 60,000 currently uninsured employees. Supporters, like John Catsimatidis, CEO of Gristedes supermarkets, argue that mandating coverage is an important way to protect quality jobs and employers. "In New York supermarkets, being a butcher or a store manager is way of life - a family-sustaining job," he said in a statement. "But if my competitors are allowed to be irresponsible employers, not providing health and other benefits - they're not only hurting their employees, they're hurting mine."

Opponents say the increased costs could drive some businesses under and raise prices for consumers. They also believe government does not have a right to tell them how to run their businesses.

New York City Councilwoman Christine Quinn, who introduced the legislation, says she hopes to convince opponents that pay-or-play is actually pro-business. "We have introduced this bill at the request of businesses, the 70 percent of folks who are out there and doing the right thing by providing insurance," she says. "We have an obligation to protect that majority, not the minority that don't offer the appropriate benefits that we believe they should."