As lawmakers in Sacramento go into overtime reforming the state's health care system, business groups again are gearing up to prevent a big hit on their members' cash registers.

At stake for Los Angeles and statewide employers is a proposed law that would expand coverage to most or all of California's residents with a good share of funding coming from a new payroll tax on employers that don't offer health care coverage.

Some business groups are starting to accept the notion that companies will have to pay some sort of tax, but the big question remains just how much the smaller percentage sought by Gov. Arnold Schwarzenegger, a larger amount being pushed by Democrats, or a compromise.

"Everyone has to have some skin in this game, which the governor's plan calls for," said Laura Yamanaka, owner of Los Angeles financial services personnel firm TeamCFO and president of the local chapter of the National Association of Women Business Owners, one of a handful of business groups that has endorsed Schwarzenegger's approach.

Earlier this month, the Legislature went into special session at the request of the governor to try to hash out a compromise on reforming the state's troubled health care system. The chief focus is reducing the number of uninsured residents, now standing at an estimated 6.7 million.

Earlier in the year, the governor got the ball rolling with a proposal that spread the pain all around, requiring individuals to have coverage and for employers who don't offer it to pay a 4.5 percent payroll tax into a state pool. Also being hit with special fees to bolster the pool were doctors and hospitals.

But the administration never released a draft bill, leaving that to the Democratic-dominated Legislature. The result was Assembly Bill 8, which eliminated the individual mandate and fees on doctors and hospitals while upping the employer mandate to 7.5 percent. That's a no-go for the governor, who promised a veto, and his few business allies.

"The 7.5 percent (in AB 8) was a deal breaker for sure, and even the 4.5 percent in the governor's plan was high and unreasonable for some of our members," Yamanaka said.

Businesses split

The large Los Angeles chapter of Nawbo is not the only business group that has accepted the idea of a payroll tax on employers that don't offer health care.

The Los Angeles Area Chamber of Commerce publicly broke with the California Chamber of Commerce this month in supporting Schwarzenegger. The chamber invited the governor to its Sept. 17 announcement in downtown L.A.

"We had held off, waiting for the governor to submit some legislation we could react to," said L.A. chamber President Gary Toebben. "We decided to take a position now because the governor needed some business groups to stand up and say 'Congratulations for vetoing AB 8,' and second, 'We support the proposal you have laid on the table.'"

AB 8 has been panned by business groups as only a slightly less noxious version of Senate Bill 2, the landmark 2003 health care reform legislation later overturned by voters. "AB 8 was a rehash of what's been tried in the past: if you've got a problem, get business to pay for it," Toebben said.

Schwarzenegger also has received support from large regional chambers in Orange County and Northern San Diego County, as well as some smaller industry trade troops.

But other groups, such as the California Restaurant Association and the California branch of the National Federation of Independent Businesses, the state's largest small business association, are firmly set against any employer mandate.

The restaurant association has even put out its own proposal that a general sales tax would be a better approach to expand coverage to the uninsured. Meanwhile, the state small business federation has complained that market-based approaches such as employer tax credits and state versions of the federal health savings accounts put forward by the Senate Republican Caucus are being virtually ignored by the Legislature's Democratic leadership and ought to be on the table.

"All the focus was on how much businesses, including the providers, should pay and not on how you could make providing coverage more affordable," said Michael Shaw, the group's legislative director.

Meanwhile, the state's 800-pound gorilla of business groups, the state Chamber of Commerce, remains suspicious of any employer mandate though President Alan Zaremberg said the group might rethink its opposition if a reform plan penciled out and strict limits were set so any agreed-upon payroll tax could not be raised.

"You have to do it in a way that doesn't create another underfunded government program where they can cost-shift to the private sector," said Zaremberg. "Voters are going to demand to know whether the mechanism is going to raise enough money and how that money is going to be spent."

It's considered likely that any compromise legislation will include a provision that the funding process get voter approval, which Zaremberg considers a major step forward.

Anthony Wright, executive director of the advocacy group Health Access, which broadly supports reform but is concerned about premium costs for individuals, said he has been pleasantly surprised by business groups in the state.

"We haven't heard from only the 'Hell no, we won't go for any mandate' crowd," Wright said. "We have major employers like Safeway calling for single-payer, and groups like the (California) Restaurant Association supporting a sales tax increase to expand coverage. And even more important, we've seen polls of small businesses that show strong support for the mandates that are in both the Legislature's and governor's plans."

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