Judge Rules San Francisco Health Care Program Violates ERISA; City Appeals Decision

Main Category: Medical Malpractice / Litigation
Also Included In: Health Insurance / Medical Insurance
Article Date: 03 Jan 2008 - 5:00 PDT

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A U.S. District judge on Dec. 26, 2007, ruled that a provision of a San Francisco law requiring employers to meet minimum contribution levels to employee health insurance benefits or help fund a city program violated the 1974 federal Employee Retirement Income Security Act, the San Francisco Chronicle reports (Egelko/Knight, San Francisco Chronicle, 12/27/07). However, city officials said they would move forward with plans to expand health services for uninsured residents while appealing the decision (Engel, Los Angeles Times, 12/31/07).

The program is intended to ensure access to health care services at San Francisco clinics and the city's public hospital for San Francisco's 82,000 uninsured residents. Under the law establishing Healthy San Francisco, private employers with at least 20 employees and not-for-profit groups with at least 50 employees must provide health care benefits at a cost that meets minimum spending levels or help cover the cost of the Healthy San Francisco program. Other funding comes from tax revenue and member premiums.

Lawsuit, Ruling Details
The Golden Gate Restaurant Association challenged the employer contribution provision of the law, arguing that it violated ERISA, a federal law that governs employer-sponsored health benefits. City attorneys maintained that Healthy San Francisco does not violate ERISA because employers can comply without establishing new health plans (Egelko/Knight, San Francisco Chronicle, 12/27/07).

However, U.S. District Judge Jeffrey White in the decision wrote, "By mandating employee health benefit structures and administration, those requirements interfere with preserving employer autonomy over whether and how to provide employee health coverage, and ensuring uniform national regulation of such coverage" (Leff, AP/Contra Costa Times, 12/27/07).

In lieu of the employer mandate, the restaurant association has proposed a quarter-cent sales tax increase to help fund Healthy San Francisco, but Mayor Gavin Newsom and labor leaders say such a funding mechanism would encourage employers to stop providing health care benefits for employees.

Appeal
City Attorney Dennis Herrera requested an emergency stay of the ruling from the Ninth U.S. Circuit of Appeals on Thursday, a move that would permit the employer mandate to take effect while San Francisco appeals the decision (Knight/Egelko, San Francisco Chronicle, 12/28/07). Herrera argued that the ruling ignores past decisions that allowed state and local governments to regulate employee benefits as long as they do not require employers to create new health plans.

However, the Ninth U.S. Circuit Court of Appeals declined to take immediate action on Monday and said it would hold a hearing on the case later this week. It is unlikely that the city's appeal would be decided before next summer at the earliest, the Chronicle reports (Egelko, San Francisco Chronicle, 1/1).

Implications
Beyond San Francisco, the ruling raises concerns about the viability of similar health care programs under consideration by city and county governments across California, as well as a health care coverage expansion backed by Gov. Arnold Schwarzenegger (R) and Assembly Speaker Fabian Núñez (D-Los Angeles), according to the Chronicle (San Francisco Chronicle, 12/27/07).

The text of the ruling is available online (.pdf).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation© 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.