Same Judges to Rule Again on San Francisco Health Law

The three-judge appeals court panel that earlier this year allowed San Francisco to temporarily implement its controversial health care spending law will decide the fate of the ordinance.

The 9th U.S. Circuit Court of Appeals disclosed Monday that Judges William Fletcher, Alfred Goodwin and Stephen Reinhardt will hear oral arguments April 17 on a lower court ruling that found the federal Employee Retirement Income Security Act pre-empted the San Francisco law that requires employers to spend a certain amount of money on employees’ health care coverage or pay certain fees.

Those judges in January allowed the law, being challenged by a San Francisco restaurant trade association, to go into effect pending a final decision by the appeals court. In allowing implementation of the law, Judge William Fletcher wrote that San Francisco has a “strong likelihood” of prevailing in its argument that ERISA does not pre-empt the ordinance.

The San Francisco Health Care Security Ordinance does not require employers to adopt an ERISA plan or other health plan and does not require offering specific benefits in a health plan, the judge wrote.

Under the San Francisco measure, large employers are required this year to spend no less than $1.76 per hour per eligible employee on health care. Employers have a variety of options to meet the spending requirement, including paying employees’ health insurance premiums, contributing to health savings accounts or health reimbursement arrangements, or paying fees to the city.

Since the law went into effect in January, many San Francisco employers have discovered that the law affects them even though the costs of their health care plans exceed the minimum requirements set in the statute. For example, the spending requirements apply to employees working as little as 10 hours a week and who rarely are covered in corporate plans.

Interest in the outcome of the challenge to the law extends beyond San Francisco. If the law is upheld, it could set the stage for cities and states to adopt their own health care spending measures, imposing on multi-state employers both administrative burdens to keep track of the mandates and cost pressures if they have to upgrade their health care programs.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com