San Francisco Health Law Falls to ERISA Preemption

This development can hardly be considered surprising given the outcome of the Walmart Bill in the 4th Circuit, but I thought that perhaps the North District of California would be more receptive to a municipality's claims that its health reform efforts survive ERISA preemption.  I was mistaken.

The North District of California in Golden Gate Restaurant Assoc. v. City and County of San Francisco, No. 06-06997 (N.D. Cal. Dec. 26, 2007) squarely held, on a summary judgment motion, that the San Francisco health care ordinance (written about here) was preempted under both the "connection with" and "reference to" prong of Section 514(a) of ERISA.

Here are some of the more important quotes from the opinion:

In 2006, the San Francisco Board of Supervisors unanimously passed, and the Mayor signed into law, the San Francisco Health Care Security Ordinance (the “Ordinance”). The Ordinance contains two key components related to the regulation of health care in San Francisco. The first is an employer health spending requirement and the second, is a government health care program, funded in part by those employer contributions . . . .

The Ordinance’s health care expenditure requirements are preempted because they have an impermissible connection with employee welfare benefit plans. 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.  The Ordinance’s provisions also make unlawful reference to benefit plans because they refer to, are designed to act immediately upon, and cannot operate successfully without the existence of employee welfare benefit plans . . . .

Although the City contends that the Ordinance’s health care expenditure requirements do not necessarily affect the levels contributed to any specific private employer’s ERISA plan, the Court finds that the Ordinance affects plan administration, a core area of ERISA concern . . .

Without wading into the legislative dominion, the Court can envision such a tax program that takes existing health care expenditures by private employers into account in the form of tax credits. Further, as the parties allude, there are alternatives such as funding a public health care system by requiring a hourly rate paid to the City. (See Intervenors’ Motion at 6-7; Opp. Br. at 10 n.8.) Whatever the legislative solution to the problem facing our nation of providing adequate health care, the Court must nevertheless conclude that the San Francisco Ordinance fails to withstand the expansive test of ERISA preemption.

It still boggles the mind that the court comes to these conclusions, while still recognizing that, "[t]he Supreme Court has also emphasized more generally that the 'principal object of the statute [ERISA] is to protect plan participants and beneficiaries,'" Boggs v. Boggs, 520 U.S. 833, 845 (1997), not to ensure national uniformity or lower costs for employers to run such plans.

In any event, I expect an appeal to the Ninth Circuit where all bets are off and panel composition will be key.

PS