California Proposition 216, Taxes on Healthcare Businesses (1996)

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California Proposition 216 was on the November 5, 1996 general election ballot in California as an initiated state statute, where it was defeated.

If Proposition 216 had been approved, it would have imposed new taxes on some health care businesses and individuals. The revenue from the new taxes would have paid for a variety of health care services. Proposition 216 also would have added additional regulations to the operation of health care businesses in California.

Specifically, Proposition 216 would have:

  • Imposed new taxes on health care businesses for bed reductions, mergers, acquisitions, and restructurings.
  • Imposed new taxes on certain individuals who receive stock distributions from health care businesses.
  • Provided that revenues from these taxes be spent to administer the measure and to fund specified health care services.
  • Prohibited health care businesses from denying recommended care without a physical examination.
  • Required the state to set more comprehensive staffing standards for all health care facilities within six months.
  • Prohibited health care businesses "from using financial incentives to withhold safe, adequate, and appropriate care."
  • Increased protections for certain health care employees and contractors.
  • Required health care businesses to make various types of information available to the public.
  • Created a new public corporation, to have been known as the Healthcare Consumer Association. The association would have "advocate[d] for the interests of health care consumers."

Election results

Proposition 216
Defeatedd No5,593,58961.24%
Yes 3,540,845 38.76%

Text of measure



The official ballot summary that appeared on the ballot said:

  • Prohibits health care businesses from: discouraging health care professionals from informing patients/advocating for treatment; offering incentives for withholding care; refusing services recommended by licensed caregiver without examination by business's own professional; increasing charges without filing required statement; conditioning coverage on arbitration agreement.
  • Requires health care businesses to: make tax returns public; establish criteria written by licensed health professionals for denying payment for care; establish staffing standards for health care facilities.
  • Authorizes public/private enforcement actions.
  • Establishes nonprofit public corporation for consumer advocacy.
  • Assesses taxes for certain corporate structure changes.

Fiscal impact

The California Legislative Analyst's Office provided an estimate of net state and local government fiscal impact for Proposition 216. That estimate was:

  • Increased revenues from new taxes on health care businesses--potentially in the hundreds of millions of dollars annually--to fund a corresponding amount of expenditures for specified health care services.
  • Additional state and local costs for existing health care programs and benefits, probably in the range of tens of millions to hundreds of millions of dollars annually, depending on several factors.
  • Reduced state General Fund revenue of up to tens of millions of dollars annually because the new taxes would reduce businesses' taxable income.

See also

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