San Francisco’s “pay-or-play” health care mandate will be allowed to continue operating following a ruling by the Ninth U.S. Circuit Court of Appeals decreeing the program does not violate federal law governing employee benefit plans.
The controversial program, known as Healthy San Francisco, requires every business in San Francisco County with between 20 and 99 workers to spend $1.17 per employee per hour for health care benefits, and those with more than 100 employees to spend $1.76 per hour, either on their own plan or in payments to the city to fund public health care.
Multiple Legal Challenges
Healthy San Francisco was scheduled to go into effect in its current form on January 1, 2008 but was delayed by U.S. District Judge Jeffrey White’s ruling the program violated the Employee Retirement Income Security Act (ERISA), a 34-year-old federal law preventing state and local governments from imposing benefit mandates on employers.
On January 9, a three-judge panel from the Ninth Circuit Court of Appeals stayed White’s ruling, pending a full review of the case, and San Francisco’s mandate was allowed to go into effect.
That full review was concluded at the end of September, when the same three-judge panel officially ruled the employer mandate is not a violation of ERISA and therefore should be allowed to remain in place.
The Golden Gate Restaurant Association, the organization that originally filed the legal challenge against the mandate, will seek a rehearing by the full Ninth Circuit Court or a review by the U.S. Supreme Court, according to a statement released by the group.
‘Cruel Blow’ to Employers
San Francisco Mayor Gavin Newsom (D) called the ruling “a huge victory for the city and for the 46 million Americans who don’t have health insurance,” at a press conference following the court’s decision. He added, “By thinking outside the box, every city and state in this country can provide health insurance if they are willing to challenge the conventional wisdom.”
Health policy experts disagreed with Newsom’s assessment, warning the program is unsound and the ruling would probably be overturned by the Supreme Court.
“In the short term, this judgment is a cruel blow to San Francisco’s small businesses, who will continue suffering higher taxes to fund an unwieldy public health bureaucracy run by the city,” said John R. Graham, director of health care policy at the San Francisco-based Pacific Research Institute.
“As a result of this ruling, organized labor and those who advocate increasing taxes to throw more money at government-run health care will waste no time relaunching their attacks all over the country,” said Graham.
“There are problems in our health sector,” said Grace-Marie Turner, president of the Galen Institute, “but for cities to take it upon themselves to violate federal law, as San Francisco has done, does not solve the problem. In fact, it creates unintended consequences, which will likely include a loss of jobs within the city.”
Experts were uniform in their belief the Ninth Circuit, currently the nation’s most-overturned court of appeals, will again be overruled by the Supreme Court.
“The Ninth Circuit has continued its tradition of issuing rulings that are certain to be overturned by the Supreme Court,” said Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute.
“Every Supreme Court decision since 1974 has been consistent in disallowing states and cities from telling employers what to do with their health benefits,” Scandlen said. “The only exception to this is Hawaii, whose employer mandate required an act of Congress that was approved only because that state’s law predated ERISA.
“ERISA applies not only to benefit design but also to costs, taxes, and even whether an employer provides coverage at all,” Scandlen added. “It can be argued whether ERISA is or ever was a good idea, but until it is changed by Congress it is the law of the land and the Supreme Court will uphold it.”
Graham agreed, saying, “This gives us an opportunity to reexamine the role of federal legislation and regulation in health insurance.”
Katie Flanigan ([email protected]) writes from Georgia.