Tuesday, February 5, 2008

Zelinsky on Golden Gate Restaurant Association: Employer Mandates and ERISA Preemption in the Ninth Circuit

Zelinsky_ed As usual, Ed Zelinsky (Cardozo) is first to weigh in on a significant ERISA preemption issue. This time in the San Francisco Golden Gate Restaurant Association preemption case.  His forthcoming article in State Tax Notes is: Golden Gate Restaurant Association: Employer Mandates and ERISA Preemption in the Ninth Circuit.

Here's the abstract:

This Article focuses on two significant questions in the aftermath of the Ninth Circuit's decision in Golden Gate Restaurant Association, which stayed a District Court ruling that had held the San Francisco Health Care Security Ordinance preempted by federal law. The core of that ordinance is the requirement that covered employers in San Francisco make minimum outlays for their own programs for their employees' health care or instead make contributions in the required amounts to the city to finance either San Francisco's Health Access Program (HAP) or municipally-run health reimbursement accounts. I conclude that under the U.S. Supreme Court's decisions construing ERISA Section 514(a), ERISA preempts the San Francisco Health Care Security Ordinance.

An important, but so far unrecognized, consideration is that employers' payments to the City of San Francisco under the ordinance constitute ERISA-governed health plans because employers, by those payments, either purchase for their employees lower premiums for coverage in the city's Health Access Program or fund municipally-run health reimbursement accounts for those employees. By its ordinance, San Francisco is not just regulating employers' ERISA-governed health plans; it is administering such plans.

San Francisco's regulation of employers' ERISA-governed health plans is deep, intruding substantively and procedurally into each such plan via the ordinance's minimum expenditure and administrative requirements. Moreover, San Francisco's regulation of such plans is broad. Virtually all employer outlays for medical care constitute employee benefit plans under ERISA, whether such outlays are self-administered by the employer, are administered for the employer by a third party such as an insurer, or are administered by the city through its Health Access Program or its municipally-run reimbursement accounts. The San Francisco ordinance regulates the entire spectrum of these ERISA-governed plans. In addition, San Francisco's regulation of employers' ERISA health plans is direct, targeting such plans and impacting upon them directly by means of the ordinance's expenditure mandates and recordkeeping obligations.

I am beginning to sound like a broken record when it comes to Ed's articles, but I'll say it again: I agree. And I'll add what Ed would normally say, but forgot to in this abstract: we need to change ERISA preemption to allow more state experimentation with state health care reform efforts.

PS

https://lawprofessors.typepad.com/laborprof_blog/2008/02/zelinsky-on-gol.html

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Comments

It's not going to happen before 2009, gentlemen. In what material way is the Massachusetts healthcare reform legislation different from Frisco's (I lived there so I can say it)?

Posted by: Juan Kelly | Feb 6, 2008 8:58:11 AM

Paul:
Thanks so much for providing Professor Zelinsky's essay.
He is correct, in my opinion, in his thorough analysis of ERISA preemption.
A couple of commenmts.
First, ERISA will have to be changed to allow states to experiment with employer-provided plans. The professor is correct.
Back in 1983, ERISA was amended to allow states to experiment with regulating MEWAs. Where did that new-found freedom get us?
In particular, California responded to its ability to regulate and experiment with innovative MEWAs by banning self-funded MEWAs after 1995 from forming.
How does this regulation provide relief to small employers?
Don Levit

Posted by: Don L. | Feb 6, 2008 9:44:59 AM

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