Victory for Employers in City of San Francisco

Employer Mandated Healthcare Struck Down By Courts

On December 26, 2007, Federal Judge Jeffrey White awarded summary judgment to the Golden Gate Restaurant Association in its challenge of the City of San Francisco Employer Mandate for Healthcare. In striking down the law, which was scheduled to go into effect yesterday, the court cited conflicts with ERISA which preempt the city ordinance.

The ordinance would have created a new city-run “Healthy San Francisco” program 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. However, the ordinance also would have imposed a minimum spending requirement on medium and large employers 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. The ordinance would have allowed employers   to satisfy this requirement  either by paying into plans of their own, or by paying the City so that it could provide the employees with care through its new program. 

In issuing his decision, Judge White stated, “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.”

 The city has appealed the decision, but the Ninth Circuit Court of Appeals  denied the city’s request for an immediate stay of the lower court decision pending appeal.  The appellate court is scheduled to hear oral arguments later this week.