Pay or Play in California?

On October 5, 2003, embattled Governor Gray Davis signed a sweeping health care reform bill, S.B. 2 (Burton) that imposes new obligations on medium and large employers to provide health insurance benefits for their workers. Under the socalled "pay or play" legislation, covered employers are required to provide health insurance benefits to employees (the "play" alternative) or to pay a fee to be used for the purchase of state-provided health insurance coverage (the "pay" alternative). Specifically, medium-sized employers (20 to 199 employees) must provide health insurance coverage to employees and pay at least 80% of the premium for that coverage. Large employers (over 200 employees) must provide coverage for both employees and dependents and pay at least 80% of the premium for both employee and dependent coverage. Alternatively, employers covered by the legislation could pay an as yet undetermined fee into a state pool that would be used to provide healthcare coverage to eligible employees under a state-administered system.