NORTH COUNTY - Although many praised Gov. Arnold Schwarzenegger's efforts to take the lead on health care reform, business groups, health advocates and some Republican lawmakers criticized aspects of a sweeping plan announced Monday that would require all Californians to have health insurance and would extend coverage to more low-income children, including those who are in the country illegally.

The state has about 6.5 million uninsured residents.

The plan asks government, businesses, individuals, insurance companies, hospitals and doctors to share in the cost of coverage for the uninsured. But it also provides incentives, such as exemptions for smaller businesses, subsidies for individuals and more money for doctors and hospitals.

"Prices for health care and insurance are rising twice as fast as inflation, twice as fast as wages," the governor said in a broadcast announcing the plan. "That is a terrible drain on everyone and it is a drain on our economy. My solution is that everyone in California must have insurance. If you can't afford it, the state will help you buy it, but everyone must be insured."

Under the plan, individuals would be required to carry health insurance, but many of the state's poorest people would be covered under Medi-Cal, the state's Healthy Families Program or a state health insurance pool.

The state would subsidize the estimated 1.2 million low-income people who do not currently qualify for coverage under Medi-Cal. They would be able to buy insurance through a state-run pool and will have to make a small contribution toward their premiums.

All uninsured children whose families earn less than 300 percent of the federal poverty level - or up to $60,000 for a family of four - would be eligible for state subsidized coverage programs. The plan would include children in the country illegally.

Another proposal in the governor's plan would require all businesses with 10 or more workers to offer insurance or pay 4 percent of their payrolls into a state fund that would provide insurance for them.

Some business groups said the proposal could hurt small businesses and drive others out of the state.

"Everyone is saying the devil is in the details, but there are a few inherent concerns. …One is that small businesses don't pay more than their fair share," said Jim Conran, a spokesman for the California Small Business Health Coalition, which opposes state requirements forcing small businesses to provide health coverage.

Assembly Republican leader Mike Villines said in a statement that he opposed requiring businesses to pay taxes in lieu of providing health insurance.

"Imposing a new jobs tax on employers of any size and expanding costly government mandates is the wrong approach, one which will devastate our economy," Villines said. "We continue to agree with the governor's statements in 2004, when he argued that a new jobs tax will be a job killer and force many businesses to lay off workers, move out of state or close their doors for good."

The plan also drew strong reaction from those who oppose state benefits for illegal immigrants. Several local Republican lawmakers, including state Sen. Mark Wyland, R-Carlsbad, said they would oppose enrolling illegal immigrants in state-funded health programs.

"I don't think we should be asking citizens to cover benefits for those who are here illegally," Wyland said.

Acknowledging that covering illegal immigrants is a controversial proposal, Schwarzenegger said federal law already requires hospitals to accept everyone, regardless of immigration status, into their emergency rooms. He said preventive care would help reduce expensive emergency room costs.

"There is no debate about whether to provide medical care to people who are in California illegally," Schwarzenegger said. "I know this is controversial, but federal law requires us to treat anyone who shows up at an emergency room in need of care. So, the decision for my team was, do we treat them in emergency rooms at the highest cost available or do we do it right and do it efficiently?"

Health care advocates said providing coverage for children should not be bogged down by arguments over immigration. According to some estimates, children in low-income families make up about 750,000 of the state's uninsured population and are among the most cost-effective to insure.

"If we can get beyond the argument on who is documented and who is undocumented, we can get going, rolling up our sleeves and get to work," said Irma Cota, chief executive officer of North County Health Services, a network of community clinics based in San Marcos and serving predominantly low-income and uninsured patients.

Kim Belshe, Schwarzenegger's health secretary, said just as everyone benefits from a healthy work force, everyone should share in the cost.

"Fixing our broken health care system requires changes from all of us, individuals, government, doctors and hospitals, insurance and employers," she said.

Belshe said $10 billion to $15 billion in new money, including increased Medi-Cal rates, would go to doctors and hospitals under Schwarzenegger's plan.

Schwarzenegger is betting that his plan will save $10 billion to $15 billion a year by cutting health care costs and redirecting money already in the system. He said the savings will offset the new fees he is asking doctors and hospitals to pay.

Hospitals would have to pay 4 percent of their revenues, while doctors will pay 2 percent. The state also would increase what it pays doctors and hospitals through Medi-Cal, which is widely seen as woefully underfunded.

- The Associated Press contributed to this story. Contact staff writer Edward Sifuentes at (760) 740-3511 or esifuentes@nctimes.com.