Herrera Launches Defense of San Francisco’s New Health Care Program

City’s Papers Argue that Employer Health Care Spending Requirement is not Preempted by Federal Law

SAN FRANCISCO (July 16, 2007) — Last Friday City Attorney Dennis Herrera asked a federal judge to dismiss a lawsuit brought last year by the Golden Gate Restaurant Association challenging San Francisco’s landmark new ordinance that provides health care to the City’s uninsured residents. The Association argues that the Health Care Security Ordinance, which was enacted in August 2006 and took effect July 1st of this year, violates the federal Employee Retirement Income Security Act (“ERISA”).

“ERISA was designed to prevent private companies from mismanaging employee benefits,” Herrera said. “It was never intended to prevent cities like San Francisco from enacting programs to protect the health and welfare of its people. The creators of this ordinance were careful to avoid ERISA preemption, and we are confident the Court will recognize that.”

The ordinance, authored by Supervisor Tom Ammiano, creates a new city-run health care program, called Healthy San Francisco, that will provide comprehensive health benefits to San Francisco’s uninsured, including inpatient and outpatient hospital treatment, primary and preventive care, diagnostic and radiological care, mental health treatment, and prescription drug benefits. The ordinance also imposes a minimum spending requirement on medium and large businesses in San Francisco, requiring medium businesses (those with 20-99 employees) to spend $1.17 per hour per employee, and requiring large businesses (those with 100 or more employees) to spend $1.76 per hour. It is up to employers to decide how to satisfy this requirement – they may do so by paying into plans of their own, or by paying the City so that it may provide the employees with care through its new program.

In his brief, Herrera argued that the program is not preempted by ERISA because it provides employers with complete autonomy in deciding how to comply:

“Although state and local laws that dictate employer choices about ERISA plans are preempted, legal requirements that employers may readily satisfy without altering or adopting ERISA plans are not because they do not interfere with uniform benefit plan administration,” Herrera argued. “San Francisco’s Ordinance clearly falls in this latter category, because it allows employers to comply with the health care spending requirement without adopting an ERISA plan or altering an existing ERISA plan. If an employer wishes to avoid the burdens of setting up a plan, or wishes to maintain plan uniformity across jurisdictions, it can simply make payments to the City, and those payments will make their employees eligible for substantial health benefits — benefits that would cost a great deal more in the private market.”

Herrera’s brief also emphasized the fairness of the program, noting that the City might have instead chosen to impose a tax on all employers regardless of whether they already provide health benefits:

“Of course, that would have made a lot less sense – it would have failed to account for the fact that 90% of businesses with 20 or more employees have already chosen to provide health benefits to their employees,” Herrera explained. “And it would have created an incentive for employers to drop that coverage. So instead San Francisco adopted a more sensible (and more just) health care reform program that gives employers credit for the health care dollars they may already spend, while allowing employers to comply without creating or modifying ERISA plans.”

A hearing on the validity of the Health Care Security Ordinance is set for Friday, August 31, 2007 at 9:00 a.m. in the courtroom of the Honorable Jeffrey White of the United States District Court for the Northern District of California, 450 Golden Gate Ave., 17th Floor.