The California legislature's greatest hits of last minute legislating include the 1996 botched restructuring of the electricity industry that helped, in part, to put the state in its current fiscal condition. This year's crew is seeking to surpass that boondoggle with the recently passed Health Insurance Act of 2003, a state intrusion into the health insurance marketplace financed by a tax on California's businesses.

The legislation has been billed by its supporters as a reasonable extension of our current, employer-based health insurance system. Ninety percent of privately-insured California families rely on employer-provided group coverage. Nearly 70 percent of uninsured Californians work for employers that don't offer insurance.

Therefore, requiring employers to offer health insurance solves the problem.  If employers would rather not offer health insurance, they can simply remit a "fee" to the state, which will provide the employees coverage.

Putting such elegant theory into practice, however, requires a bit of coercion. Employers, after all, are free to provide employees with health insurance today, should they and their employees deem it a useful form of compensation. In fact, they are encouraged to strike just such a bargain by the tax code, not to mention insurance agents and brokers who earn their living by convincing employers to purchase their services.

So let's take a look at how California's wise legislature proposes to provide health insurance to all working Californians. The first order of business is to create a new government bureaucracy, the State Health Purchasing Program. New programs require new money. No one knows exactly how much, so it's authorized to take start up loans from that great venture capital fund known as the state general fund, the very fund that's $8 billion overextended.

Once it's up and running, the State Health Purchasing Fund will be financed by "fees" and "contributions" from California's productive sector, a.k.a. its employers and employees. Like the holdup artist that offers a choice ("your money or your life"), California's employers will be able to either offer health insurance to employees on state dictated terms -- or pay the state the sums it demands.

The actual "fees" aren't specified in the bill. Instead, the legislators felt comfortable giving the program's administrators the power to set the fees or tax rates. "The board shall establish the level of the fee by determining the total amount necessary to pay for health care for all enrollees," states the legislation. In other words, the program has a blank check.

Then there are definitional problems -- as in what defines insurance for the purposes of qualifying for not having to pay the new tax. Those running the program will determine a government-mandated health insurance policy for the state, including "deductibles, coinsurance, or co-payment levels for specific benefits, including total annual out-of-pocket costs."

It is to avoid such micromanagement that many large companies self-insure under a 1974 federal law known as ERISA. This bill seeks to erode that exemption and force large, multi-state companies such as WalMart to conform to the California way. Their "fees" will be waived if they offer a conforming policy.

But it's not the large employers who will suffer most under the yoke of this bill, but rather the state's small and medium size employers -- those who have the gall to employ fewer than 200 Californians. These businesses are less likely to already offer health insurance and will, therefore, face the choice-buy our plan or pay our taxes.

The legislature, which pays little mind to increasing government regulations, has anticipated some of the obvious ways for business to mitigate the impact, such as switching employees to independent contractors. That will henceforth be illegal. (Enforcing this prohibition will also require additional money from the taxpayers.) Unfortunately for Californians who prefer employment to unemployment, the legislature can't prevent the most effective way for businesses to avoid these new regulations and mandates -- leave the state.

Governor Gray Davis must now decide whether this bit of last-minute legislative handiwork will become law. It would be ironic if one of the last acts of this governor, currently stuck in a budget deficit quagmire and an economy shedding jobs, were the signing of this bill.