Herrera’s Request for Stay in ‘Healthy San Francisco’ Case Granted by Ninth Circuit, City Can Enforce Employer Fee

Court Concludes City Has ‘Strong Likelihood’ of Prevailing on Appeal, That Health Care Program Should Proceed to Prevent ‘Avoidable Human Suffering’

SAN FRANCISCO (Jan. 9, 2008)-A three-judge panel of the Ninth Circuit Court of Appeals has granted City Attorney Dennis Herrera’s request for a stay pending his appeal of a sweeping decision by U.S. District Judge Jeffrey S. White on Dec. 26 striking down a key provision of the City’s groundbreaking universal health care program. The appellate court’s order granting the stay will enable the City to immediately begin enforcing the employer spending provision to fund the program, called “Healthy San Francisco.”

The unanimous 35-page published opinion written by Circuit Judge William A. Fletcher concluded that the City has a “strong likelihood” of prevailing in its argument that the City’s Ordinance is not preempted by the federal Employer Retirement Income Security Act, or ERISA: “The Ordinance does not require any employer to adopt an ERISA plan or other health plan. Any employer covered by the Ordinance may fully discharge its expenditure obligations by making the required level of employee health care expenditures, whether those expenditures are made in whole or in part to an ERISA plan, or in whole or in part to the City.” Because the City is likely to succeed in its appeal, Fletcher continued, the City should be allowed to enforce the employer spending requirement in the interim to prevent “avoidable human suffering.” The Court also noted that “the general public has an interest in the health of San Francisco residents and workers, particularly those workers who handle their food and work in other service industries.” Fletcher’s decision was joined by Senior Circuit Judge Alfred T. Goodwin and Circuit Judge Stephen Reinhardt.

“This is an important victory for thousands of uninsured San Franciscans who will now become eligible to receive health benefits in the next several months,” Herrera said. “I am extremely gratified that the appellate court panel recognized both the strong likelihood that our appeal will succeed on the merits, and the significant harms San Francisco’s uninsured would suffer because of the District Court’s incorrect conclusion. Were the lower court ruling allowed to stand, it would very likely frustrate state and local health care reform efforts throughout the nation.”

The provision at issue in Herrera’s legal appeal would require employers with twenty or more employees to either offer health coverage or to pay a fee that would support the City’s program, which is called “Healthy San Francisco.” An analysis by the Office of the Controller estimates that the large majority of San Francisco businesses with twenty or more employees-roughly 90 percent of them-already provide healthcare benefits to their employees, and would be unaffected by the new requirement. City officials have estimated that the Court’s ruling will allow roughly 20,000 uninsured workers to become eligible for benefits during or immediately following the first quarter of 2008.

Herrera filed an emergency petition with the Ninth Circuit Court of Appeals on Dec. 27, the day after Judge White’s ruling struck down the local program’s employer spending mandate for violating a 1974 federal law called the Employee Retirement Income Security Act of, or ERISA. Herrera vowed to continue his defense of the landmark universal health care ordinance, which has gained national attention as a possible model for local governments to make medical care services accessible and affordable to uninsured residents, from a legal challenge by the Golden Gate Restaurant Association.

Authored by Supervisor Tom Ammiano and signed into law by Mayor Gavin Newsom, the ordinance under legal attack by the association of local restaurateurs seeks to 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. As enacted, the ordinance sought to impose 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 could 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.

Herrera has argued that the City’s program is not preempted by ERISA because it offers complete autonomy to employers 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 in his brief with the U.S. District Court.

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 percent 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.”

The case is Golden Gate Restaurant Association v. City and County of San Francisco et al, U.S. Court of Appeals for the Ninth Circuit, Case No. 07-17370.