The chairman was alluding to an insurance fraud scheme in which McAuliffe was a passive investor without an active role.
State Democrats called Mullin's comments "unacceptable" in a Monday conference call.
"Saying that President Obama is close to death is unacceptable in our discourse," Sen. Donald McEachin said. "This is just another example of how unwilling to change and how unbridled in their opposition to President Obama the Republicans are."
A spokesman for the Virginia GOP said the chairman misspoke and meant to say that Obamacare, not the President, was on life support.
"This is just more manufactured outrage from Virginia Democrats," Virginia GOP communications director J. Garren Shipley told Politico. "But the Democratic hyperventilation is unsurprising, since Obamacare is on life support, and our newly-elected governor is a Democrat who made money by betting on terminally ill patients to die. They're desperate to talk about anything other than their failed policies that are hurting hard-working Virginians."