CAN ARNOLD SNEAK PAST INSURERS?

Byline: JILL STEWART Capitol Punishment

THE governor is getting into a tricky new campaign, and - if he wants Californians to keep siding with him - he needs to watch out for his propensity for cheerily dismissing behavior on his part that doesn't sit so well with others.

You're a sly one if you guessed I want to talk about the insurance and health care industries.

These fat cats gave scads of money to Gov. Gray Davis, and now some are pouring fortunes into the coffers of Arnold Schwarzenegger's various campaign committees.

Unless you've been stuck in solitary confinement, you know that Schwarzenegger refuses to take money from public employee unions with whom he must negotiate and American Indian tribes because these are California's most powerful, high-pressure lobbying groups. Schwarzenegger must deal with each of them in hopes of saving California billions of dollars.

Yet Schwarzenegger has opened up the floodgates to virtually any other group, apparently not taking too seriously the chance that they could taint his efforts to pass the March 2 bond measure and a possible November initiative to reform workers' compensation.

Come November, if the Legislature fails to rid workers' compensation of the troubles that have driven premiums crazily upward, Californians could see the most expensive mudfest ever involving a ballot measure. A wad of cash will also be spent on the March 2 campaign.

There's potential for great good in what the governor is doing, but also for great mischief.

Big insurers have been heaping the governor with money just as he fights for massive reform of workers' comp. One Schwarzenegger committee received $100,000 from AIG (Motto: ``We know money''). Travelers gave $49,000 and Chubb gave $29,000.

This smells. And I'm not a hysterical type who buys the silly claim that the insurers caused the skyrocketing costs. Many insurers still avoid California because workers' comp is so jammed with people gaming the system, even our huge premiums aren't a lure.

Costs are out of control because the Legislature buckled to unions - who see workers comp as a vacation perk - by banning use of objective medical criteria, such as that of the American Medical Association, to assess worker injuries.

And California's ``no fault'' system ensures that serious claims are fought over in court for months. This was done to reward the gluttonous workers' comp. lawyer lobby. In Utah, 4 percent of serious cases go to court. In California, it's 50 percent.

We simply must cut out these awful middlemen. But it won't help sell reform if Schwarzenegger gets heaped with bucks by insurers. James Carville and other political strategists helping the opponents of reform will claim the governor is tainted - a perfect way to shift public focus away from leeches in the system. After Carville spoke to them recently, workers' comp attorneys coughed up $2.1 million to fight reform.

Big health care entities are also giving to the governor. They could be affected by his proposed cost-saving efforts in the Medi-Cal and Healthy Families programs, or by Schwarzenegger's position on Senate Bill 2, signed by Davis last fall.

SB 2 requires companies with more than 50 employees to provide state- controlled health care to employees by 2007. A Field poll shows voters back this misguided law. The fine print forces many Californians off of their private insurance and onto state-run, HMO-like insurance. I predict a mess.

If Schwarzenegger campaigns for a measure to repeal SB 2 in November, critics will instantly point to money he received, such as $21,200 from Health Net, $31,200 from Pacificare and $21,200 from Dennis Weinberg, an executive at Wellpoint.

This is the knotty problem presented by massive contributions, which voters tried to end with passage of campaign finance reform. Unfortunately, it was scam reform written by the Legislature, containing more holes than a bullet-riddled body.

Darry Sragow, a respected Democratic consultant, says voters won't judge the governor - for now. ``I think voters understand that the governor is now involved in politics, and in politics you have the unsavory problem of fund-raising, and that he is going to have to do it to get things done.''

So maybe it won't hurt the governor personally. But it will give special interests and those who oppose change just the opening they need. I hope the governor is ready to pay that price.