Massachusetts took our breath away with the elegant political balance of its reform solution — whether the state’s universal coverage plan turns out to be implementable or not. California, on the other hand, leaves us scratching our heads: What is going on out there? 

Ultimately, it is a state that governs by referendum, and the fate of the California plan probably won’t be known until the voters have spoken sometime next year. In the meantime, the state’s policymakers face the same fundamental challenge as their counterparts in Massachusetts in finding adequate sources of funds to subsidize coverage for those who can’t otherwise afford it. 

As negotiations progress between the Republican executive and Democratic legislature, party affiliation matters perhaps less than policymakers’ ability to steer a course between the twin constraints of the Employee Retirement Income Security Act (ERISA) on one side and the Jarvis amendment on the other. The former precludes funding subsidies with levies on self-insured employers. The latter requires a two-thirds legislative supermajority to enact new taxes — or a referendum.

The 1978 tax revolt spearheaded by Howard Jarvis proved to be the harbinger of a powerful national movement. This year, most policy pundits tend to regard state reform efforts as the best available predictor of the prospects for national reform after the 2008 election. One piece of the action in California that seems to bear watching is the participation of business. 

At a September 14 Century Foundation forum in Washington on the role of business in reform, California Blue Shield’s Bruce Bodaken claimed emphatically that “business can play a key, positive, central role” and that the California proposals wouldn’t have happened without it. Cost shifting from business that don’t offer coverage to those that do — as well as underpayments to providers by California Medicaid — have been a major factor in driving up employer premiums. Bodaken said that Safeway executive Steve Burd was motivated to lead a state reform coalition by a desire to level the playing field between his company and competitors like Wal-Mart with lower benefit costs. Bodaken’s company is part of the same coalition, along with the Service Employees International Union (SEIU), AARP, and the California Medical Association. Wal-Mart belongs to another strange-bedfellows coalition, along with Intel, SEIU, the Center for American Progress, and the Communications Workers of America. Go figure. 

The last time around, during the short-lived drive for the Clinton reform plan 14 years ago, corporate heavyweights were among the first to jump on the reform bandwagon and were then among the first to jump off again. Some employers may still turn against the Massachusetts plan if implementation details don’t turn out to their liking, forum speaker Dallas Salisbury of Employee Benefits Research Institute (EBRI) cautioned. 

But another speaker at the event raised the genuinely novel possibility that small business could play a different role than they did in fighting the Clinton plan. Small businesses need health insurance reform as much as or more than large ones do and could play a constructive role if given a seat at the table, said John Arensmeyer, founder and CEO of Small Business Majority, a national coalition. “Small business is huge,” Arensmeyer said, citing familiar statistics on the share of new jobs and overall employment that companies with fewer than 100 workers represent. Arensmeyer’s organization has surveyed its constituency and found attitudes that suggest that their adamant opposition to reform in the early 1990s could be turned around. “We can’t let that happen again. It doesn’t have to be that way,” he said. “There’s no reason why small business can’t be part of the solution.” 

Are you listening, Hillary?