Governor Schwarzenegger has released a health care reform plan for California that requires all Californians to have health insurance. Businesses with more than 10 employees will be required to provide health benefits to their employees. To pay for this government subsidized health coverage, doctors and hospitals will have their income taxed, and employers who don’t provide health coverage will have to pay 4% of their payroll to the state.

Most programs that state or federal government mandates for businesses apply only to larger employers. This one, however, will touch smaller employers as well, making it an important bill for startups to watch.

Although I understand the idea behind mandatory health insurance — that health care is already guaranteed and every citizen is paying for those without coverage — I’m not thrilled about the government telling me how to live my life.

Of further concern to me is how this will affect business in California. Schwarzenegger had previously instituted a number of business-friendly reforms with the goal of reducing the exodus of business from the state. Instituting mandatory benefits will drive many businesses away and could keep businesses from growing so they don’t surpass that magic 10 employee number.