Key Funding Provision of San Francisco Health Care Plan Overturned

A provision of a San Francisco law that requires employers to meet minimum contribution levels to employee health insurance benefits or help fund a city program was rejected on Dec. 26, calling into question expansion plans for the Healthy San Francisco Program, the San Francisco Chronicle reports.

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.

The Golden Gate Restaurant Association challenged the employer contribution provision of the law, arguing that it violates the 1974 federal Employee Retirement Income Security Act. The law, called ERISA, bars states and local governments from regulating employee 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 found that the requirements of the San Francisco ordinance run afoul of ERISA. He 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 (D) and labor leaders say such a funding mechanism would encourage employers to stop providing health care benefits for employees.

On Jan. 2, eligibility for Healthy San Francisco will expand to uninsured city residents whose incomes do not exceed 300% of the federal poverty level.

The program was scheduled to expand to all uninsured residents, but the expansion relied on funding from employers.

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.

The city attorney's office requested a decision on its request by Dec. 31, 2007, but the appeals court said it will hold a hearing later this week.

The appeal likely will not be decided until next summer at the earliest, according to the Chronicle (Egelko, San Francisco Chronicle, 1/1).

Frank Furtek, chief counsel for the California Health and Human Services Agency, said that his office is reviewing the ruling but that he is not prepared to comment on how it might affect the proposed overhaul to the state health care system (Chorneau, San Francisco Chronicle, 12/28/07).

Furtek said the state backs the San Francisco program and is considering filing an amicus brief in support of San Francisco's appeal of the ruling (Engel, Los Angeles Times, 12/31/07).

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) (San Francisco Chronicle, 12/27/07).