California Apparel News

Insurance for all, but at a steep cost to small businesses

Sewing contractors in Los Angeles are worried that state politicians will force them to pay for their employees’ health insurance, an additional cost that could spell the end of their businesses.

Legislators are considering a host of new bills that would make employer coverage of health-care costs mandatory.

One of the most recent is state Senate Bill 2 (SB 2), introduced in December by co-authors state Sen. John Burton, D-San Francisco, and state Sen. Jackie Speier, D-San Mateo. The bill would impose a new “play-or-pay” system that would demand California employers to either provide health insurance for all employees and their dependents or pay a fee to provide a staterun health-care program.

Proponents said the bill would relieve the burden put on the state to treat the uninsured, who often end up at county-run hospital emergency rooms seeking care at the expense of taxpayers.

But contractors, who run a lean business while competing with offshore factories, say they cannot cover their employees’ health-care costs and make a profit.

“There is no way I could afford to do it,” said Jimmy Macias, owner of Ja-Mar Apparel Manufacturing Co., a decades-old sewing contractor in Irwindale, Calif. “As much as many business owners would like to do it, we’re getting squeezed. We haven’t gotten any raises from our manufacturers. And the manufacturers are getting squeezed by the retailers.”

Macias runs a tight ship. He and his wife, Carole, work in the front office while about 45 employees work in the rest of the factory, which primarily sews pull-on pants for women.

SB 2, which is backed by organized labor and the California Medical Association, is scheduled to be heard before the nine-member state Senate Insurance Committee chaired by Speier on April 30.

It probably will not be debated on the Senate floor before this summer, but local apparel-industry executives are already worried.

“Frankly, it would be the last straw for some of our contractors,” said Susan Crank, president and chief executive of Lunada Bay, a swimwear manufacturer in Anaheim, Calif., that covers the health-care costs of its 72 employees but also relies heavily on outside contractors who do not pay for the health-care coverage of their employees.

“The contractors have been very hard hit with the worker’s compensation issue,” Crank said. “A lot of our contractors are discouraged from doing business in this state.”

California not only has one of the highest minimum wages in the country—at $6.75 an hour compared with $5.15 an hour at the federal level—but also higher business taxes and energy costs.

On top of that, insurance costs for workers’ compensation have skyrocketed in the last two years.

Macias said his insurance rates for workers’ compensation have doubled in the last two years.

“Our policy is to be renewed in July, and it looks as if it will go up another 30 to 50 percent,” he said.

In addition, sewing contractors said they now have to devote more personnel to the filling out of paperwork required by state Assembly Bill 633, which holds garment manufacturers, including widely recognized labels, liable for wage-and-hour violations of sewing contractors.

And now the state is looking at mandatory health coverage, which could cost anywhere from $130 to $270 a month per employee, depending on the number of employees covered under the plan.

“It might be well-intentioned, but it will never work,” said Joe Rodriguez, executive director of the Garment Contractors Association of Southern California, a nonprofit association of local sewing contractors. “The reason contractors don’t provide health insurance is that there isn’t any money there to pay that benefit. It is not that they are ogres and don’t want to.”

But Victor Narro, co-executive director of Sweatshop Watch, a nonprofit organization dedicated to eliminating sweatshop conditions in the garment industry, said it is about time apparel workers got health coverage.

“We shouldn’t allow this situation where millions of workers in California are working full time and don’t have health care,” Narro said. “Government and businesses both have a responsibility to provide health care for workers.”

If the Insurance Committee approves SB 2 at the end of this month, the bill would then be sent to the state Senate Appropriations Committee, where its cost and fiscal impact on the state budget would be determined before it goes to the Senate floor for debate.

Richard Steffen, the staff director for Speier’s office, said the senator introduced the bill because the state’s current health-care infrastructure is not working well.

Over the years, bills advocating mandatory health-care coverage have come and gone in the state Legislature. But sewing contractors are worried SB 2 may pass with the clout of Burton, who as Senate president protempore is one of the most powerful people in the state Capitol.

Health-care coverage for everyone is an ongoing problem, state officials said.

In California, nearly one in five, or about 6.3 million of the state’s 34 million residents, has no health insurance. The state has the third-highest uninsured rate in the country.

Los Angeles County has been particularly hard-hit. With 2.5 million uninsured, many of whom are poor immigrants, Los Angeles County has more uninsured patients than any other county in the nation.

During the past decade, the federal and state governments have had to bail out the county health system to the tune of $2 billion.

To cut costs last year, the county closed 16 health clinics. The closures have created a drain on the clinics that remain open.

Despite assurances that health-care coverage costs per individual would decline as more people would be covered, the bill still would cost contractors thousands of dollars a month.

Several insurance bills pending

SB 2 is just one of several health-insurance bills in the state Legislature.

Other bills include Senate Bill 921, introduced this year by state Sen. Sheila Kuehl, DSanta Monica, who wants a system for universal health-care coverage. The bill advocates a “single-payer” system where the state would replace insurance companies in collecting funds, contracting for medical services and paying doctors and hospitals for services.

Assemblywoman Rebecca Cohn, D-Saratoga, introduced Assembly Bill 1528, which would create a minimum level of coverage that all large and mid-sized employers would have to make available to workers. Individuals not covered by employers would then be required to purchase plans on their own. Government subsidies would be available to those who could not afford plans.