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September 10, 2007

Small Calfornia Firms Struggle to Pay Health Costs

To understand why it is so hard to cover the uninsured in California, consider the case of Brookfields, a small chain of family style restaurants near the state capital.

Profits are low, and the owner, Sam Manolakas, says he cannot afford his workers' rising health care premiums. But since his waitresses, cooks and busboys earn so little, neither can they.

So, like low-wage workers across California and the nation, many of Manolakas' employees are dropping their coverage.

Now, reformers in Sacramento want to reverse this trend, which is a major reason why 6.8 million Californians had no insurance at some point last year.

Gov. Arnold Schwarzenegger says Brookfields' workers should be forced to buy health insurance on their modest wages. Democrats in the state Legislature say Manolakas should bear the burden. They are in intense negotiations to find a compromise in the waning days of the Legislative session.

But, experts say, neither approach has enough subsidies to help Manolakas and his workers afford these proposed mandates, given that medical costs are rising so much faster than inflation.

"Health care is still really expensive," said Marian Mulkey, an analyst with the California Health Care Foundation. "This is shifting the cost but not reducing the cost."

Shifting the cost, of course, is what Manolakas has been doing for years.

He says the insurance premiums for his 250 employees have been rising 10 percent to 20 percent a year, while his profit margin is 3 percent and falling. This year, it is about 1 percent.

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Posted by healthinsurance at September 10, 2007 11:01 PM