damage from a health care reform law could begin picking up speed early next year. The officials and nearly 200 of the state's smallest banks are fighting to exempt the association's group health insurance plan from a law enacted in 1992. The tiny community banks have been stung by rising health care costs. In some cases, premiums have jumped 40% and deductibles and copayments have skyrocketed 200%. They are counting on a bill that would create a special class of business under which several small-group employers sponsored by a qualified association would be considered a single employer. "I sure hope this gets passed," said Tom A. Michelli, president and chief executive of Pacific Commerce Bank in Chula Vista. "As it is now, we've got higher costs with less coverage and less options. It really isn't doing small banks like ours any good." The bill is currently in the state Senate insurance committee, where it lost a 5-4 vote earlier this year. Trade group officials believe the measure will succeed in a second committee vote, set for January. After that, the bill would need to win floor votes in the Senate and Assembly before finally moving on to Gov. Pete Wilson. Another "no" vote in committee, however, would kill it. The 1992 reform law brought an end to collective bargaining practices in which small banks joined with the California Bankers Association to form one giant employer and negotiate lower rates. The small banks, now classified as small-group employers, are legally subject to the same underwriting criteria as all small businesses. Economies of scale dictate that small businesses typically pay much more for health insurance than large corporations. The reform bill has run into strong opposition from the Wilson administration, which is worried about setting a precedent. "All I can say is we're continuing to work for the bill's passage," said James A. Clark, vice president of state government relations for the bankers association. "I really do have faith that the governor's office will recognize the difference between a bill rectifying a wrong and a bill gutting a marketplace."

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