Slowly but surely, California's economy is rebounding, thanks in large part to bipartisan workers' compensation reform in 2004 and the passage of Proposition 64, which has reduced the high number of frivolous lawsuits filed against our state's employers. Nonetheless, business investments and jobs keep packing up and leaving California for greener pastures; pastures where providing health insurance to employees doesn't break the bank.
If California is serious about retaining existing businesses and attracting new ones, and reducing the number of uninsured, we must further reform our out-of-control legal system. Class-action lawsuits threaten businesses by forcing them to cut health care insurance coverage, driving up the cost of health care and prescription drugs and passing those increased costs along to employees and taxpayers.
Employees and employers alike should be concerned that California leads the nation in the percentage of citizens without health care coverage (23 percent), and that figure is rising by 23,000 each month. The high and ever-increasing cost of health care forces many employers to discontinue insurance for their employees. These are frequently lower-wage employees who cannot afford to purchase coverage on their own.
According to a study published in the Journal of Health Economics, every 10 percent increase in the cost of health insurance creates a 3 to 4 percent decrease in the number of people who choose to purchase coverage.
While some efforts have been made to bring down costs, among the greatest looming threats to health care are massive class action lawsuits that personal injury lawyers have filed against health plans. Whatever gripes we have with our HMOs, one thing is clear more lawsuits will not result in more people being insured.
In fact, these lawsuits will likely hurt the very people the personal injury lawyers say they are trying to protect. In their quest for notoriety and huge contingency fees, these lawyers seem to have forgotten that their actions pose a serious threat to health care access, and ultimately put everyone at risk of poorer health.
Litigation and settlement costs for these lawsuits will ultimately increase the price employers and consumers pay for health care and prescription drugs. Many employers often consider cutting health benefits for fear they could be named as defendants in lawsuits against HMOs. The result would be even more people without coverage and we all know that emergency services are the most expensive method of health care.
At the Valley Industry and Commerce Association, we regularly hear about the everyday struggles of small business owners. One of their greatest concerns is maintaining their ability to provide health insurance for employees and their families.
Currently, California's rate of employer-provided health coverage is the lowest in the nation, about 58 percent, in spite of our state's rebounding economy. As these lawsuits impose higher costs on the state's employers, we can expect this number to dip even lower.
Every increase in the cost of providing health care forces small businesses to tighten budgets in other ways. Already, many Californians have to stretch their paychecks each month to pay for their family's health coverage and prescription drugs, and they simply cannot afford an increase in that cost. In addition, employers may have to start charging their employees more for health care, offering less coverage, or simply stop providing coverage altogether just to stay afloat.
In order for California's business community to remain financially viable, we must contain the cost of providing health care for employees. We can start by cleaning up the legal system, where out-of-control litigation continues to make us sick in more ways than one. Otherwise, businesses will simply continue to graze for greener pastures.
Bob Scott is chairman of the Valley Industry and Commerce Association, a regional business advocacy organization based in the San Fernando Valley. He is also a member of Citizens Against Lawsuit Abuse.
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