With a huge stake in the battle over health care, business groups pushed hard and successfully to defeat state legislation that they feared would increase the cost of health-insurance premiums.

“California employers and their employees spend over $35 billion annually for health care more than one-third of all health care dollars in this state,” said Fred Main, vice president of the California Chamber of Commerce. “We oppose all measures which would increase this burden and jeopardize the ability of employers to provide comprehensive medical insurance.”

The state chamber is a member of Californians for Affordable Health Reform, which lobbied against measures to allow patients to sue their HMOs, to go outside their HMO for treatment, and to require HMOs to pay for certain treatments and drugs.

A pair of bills (AB 2436 and SB 977) pushed by consumer activist groups would have allowed patients to sue HMOs. Currently, HMOs are exempted from lawsuits under federal law, but states can enact their own liability laws that pertain only to companies doing business in a particular state. Last year, Texas enacted the first law in the nation allowing patients to sue HMOs.

Consumer groups dismissed claims that passage of the bill would increase health care costs.

“HMO liability does not raise premium costs,” said Jamie Court, director of L.A.-based Consumers for Quality Care. “With liability for HMOs in place for one year in Texas, not a single lawsuit has been filed and premiums have not gone up more than the cost of inflation. Instead, health plans there are practicing better medicine.”

But the coalition, which also includes the California Manufacturers Association, California Retailers Association and other groups, says that allowing patients to file lawsuits when denied treatment would only serve to drive up premium costs.

“HMOs have allowed companies to provide health care at an affordable level,” Main said. “Without HMOs, prices would have continued to spiral out of control throughout the 1990s, meaning you would have less coverage paid for by employers today.”

For every 1 percent rise in premiums, Main said, up to 40,000 people lose their employer-paid health coverage.

But the cost-containing techniques of HMOs have come under fire from consumer groups and trial attorneys. In Congress, these groups have tried to overturn the 1974 Employee Retirement Income Security Act, or ERISA, which exempts employer-sponsored health plans from lawsuits.

This provision is included in the Patient Bill of Rights put forward by President Clinton and Sen. Edward Kennedy, D-Mass. But the House of Representatives rejected the package in July and it has been put on hold in the Senate.

In Sacramento, the business coalition supported a pair of HMO-industry sponsored bills that would have established an independent third-party arbitration system for HMO complaints, AB 1667 and SB 1504. But these measures were defeated in the final hours of the session, after lobbying from the Consumer Attorneys of California.

CAHR has also opposed bills that would have mandated specific treatment regimens, such as two requiring coverage for mastectomies and reconstructive surgery, both of which are now on Gov. Pete Wilson’s desk.

“We oppose mandates on employers that require them to pay for certain medical procedures and we oppose reforms that will increase premiums for business owners,” said Shirley Knight, a lobbyist with the state branch of the National Federation of Independent Business, a coalition member. “Cost is always the number-one reason business owners give for not providing health care.”

The most far-reaching bill on Wilson’s desk that CAHR opposes is AB 1100, which would require health plans to cover severe mental illnesses. In a letter to Wilson, CAHR said that expanding health coverage to mental illness would increase overall health premiums between 0.75 percent and 1 percent.

There are a few bills that CAHR is lobbying for Wilson to sign, including: AB 984, which requires health plans to cover ambulance transportation arising out of a “911” call, and a pair of bills SB 593 and AB 399 that would allow self-employed workers to buy insurance under the state’s small-business health pool.

Wilson has until Sept. 30 to sign the legislation that reached his desk. While aides will not disclose his positions, business groups expect him to veto most of the bills that they oppose.