Melissa on ERISA, Part Four: The Angle

Constant Readers,

Once upon a time, I was a nice, normal girl (stop laughing, Mom) and then I graduated from law school and was suddenly possessed with the desire - no, the need - to edit, revise and add my two cents to anything and everything. Blueprints, menus, mash notes... In furtherance of this mania, I'll be laying out two arguments (one in this post and one in the next) that form the basis for my opinion that the employer contribution provisions of the Health Care Security Ordinance (HCSO) are preempted by ERISA. These are not arguments that were fully made by the Golden Gate Restaurant Association (GGRA) - I'm basically making this up as I go.

I want to state at the outset that I don't enjoy the fact that the HCSO provisions are unlawful and have made it clear before that I am in favor of health care for all San Franciscans. In fact, I believe that one option here is to try and amend ERISA to permit minimum employer benefits requirements. But as we prepare to spend a couple of years and many thousands of dollars defending the HCSO in the Ninth Circuit and perhaps the Supreme Court, it important to know whether such a fight is worth it. For my part, I don't think so.

And here's how my thinking about this began...

When I first saw the HCSO employer spending requirements, I was struck by how unnecessarily complicated it all seemed. "Pay this amount for this employee for time in the geographic bounds of San Francisco, blah blah blah." So, my first question was: why does the employer contribution part read like a speech by Supervisor McGoldrick?

It could be simpler. In the legal arguments it submitted to the Court (p. 32) the City admits that it could have taxed all business to get the money to fund the HAP but that it wouldn’t be fair because it wouldn’t reward the 90% of businesses that are nice enough to provide health insurance.

Ahem.

Constant Readers: let us not forget that Supervisor Ammiano’s office drafted this part of the Ordinance. A law from Ammiano (bless his heart!) purporting to be considerate of businesses is like a treaty from Sudan purporting to advance human rights.

Extreeeeeeeeemly Suspect.

So, what’s the angle? The angle, y'all, is precisely what makes this law preempted by ERISA.

Consider this hypothetical: Say the City simply increased the payroll tax by 1% for all businesses in San Francisco. And lets assume that such a tax would result in $50 million per year (my numbers may be wildly off the mark, but stay with me here) for use to fund the Health Access Plan (HAP, aka "Healthy San Francisco") program. It would then be a rational business decision for many businesses to stop paying for health insurance and dump their employees into the HAP system – either to offset the increased tax or, you know, ‘cause they can. But, the HAP system consists of a series of local clinics and health care professionals whose capacity is obviously limited. The City would not be able to know ahead of time how many employed-but-now-uninsured HAP members would flood the rolls and they probably couldn’t build out fast enough even if they did know.

At a July 5 Budget and Finance Committee meeting, here's what Department of Public Health Director Dr. Mitch Katz, said about the capacity of the HAP program:

"We did design the program to work at whatever size. And, in fact, we do not believe that ultimately 82,000 [uninsured San Franciscans] will be part of the HAP, nor do we even hope that. Because what we hope, especially for the larger employers, is that they will ultimately choose commercial health insurance as the way to provide for their employees."

Let me put it like this: the HAP system depends on employers maintaining or increasing their health care benefits. Without it, the HAP system would be overwhelmed and unable to function.

So, how do we force employers to continue providing health insurance? We say, “You can either pay $X amount for insurance on behalf of your employees (and reap the retention and goodwill) or you can give the City that same amount and send your employees on down to the clinic.” Knowing full well that no employer, if given the choice, would give the money to the City. The HAP website itself advises applicants not to drop their current insurance because "Insurance is always a better choice." In fact, preventing employers from ending their health insurance coverage and overburdening HAP is precisely why the employer contribution was added in the first place.

At the July 17,2006 Budget and Finance Committee meeting, Mayoral liason to the Board, Wade Crowfoot said: "...the key reason for supporting the minimum spending requirement is that the Mayor does believe that the minimum spending requirement is necessary to ensure that there's not droppage off of insurance by employers."

And right in the HCSO law itself, the "Declaration of Legislative Findings and Intent" says: "San Francisco also has a vital interest in preventing a 'race to the bottom' in which employers stop paying for employee health care to remain competitive and instead shift those costs to San Francisco taxpayers."

So, what does this have to do with ERISA? Everything.

It is unequivocally, absolutely, clearly a violation of ERISA for a City to require employers to provide health insurance to employees. (Sorry guys, sad but true.) Its also unlawful to provide a false "choice" in which there appear to be two options, but in reality no employer in their right mind would choose the non-provide-benefits option. The parties can't (and don't) even argue about these points of law. The City is defending the employer contribution provisions by saying (with a straight face) that the HAP is a perfectly good alternative to employer-provided benefits.

"It is completely up to the employer to decide how to comply with [the HCSO's] spending requirement. The employer may set up its own health care benefits program, or it may make payments to the City on behalf of its employees so that those employees may enroll in the new government program." (P.7.) This argument is repeated in many times over throughout the City's and the Union's legal papers.

Here's the problem: for the City's "Employer insurance or HAP - it doesn't matter to us...honest! Totally your choice!" position to be true, it must be the case that the HAP program is prepared to absorb every single employee in San Francisco who currently gets health insurance at work. Think about it: What if every single employer opted to pay a couple grand to the City for their employees to use the HAP plan? What if even 50% of the employers made that choice?

The extent to which we do not have the infrastructure to provide health services to 750,000, or even 200,000 people, is the extent to which the City knows it is not really giving employers a "choice" about whether to give benefits to their employees or cash to the City.

So, the City's argument that turning one’s employees over to the HAP program is a perfectly viable option that doesn’t require the creation or maintenance of an ERISA health benefits plan both ignores the reality of the benefits an employer derives from providing coverage and is a misrepresentation of the capacity of the HAP system. The employer contribution provisions are set up to effectively prevent employers from reducing or eliminating health care coverage. If it didn’t, we wouldn’t structure it this way.

That’s the angle.

And that's one reason why we ain't gonna win this case.

--Melissa

FUN FACT: If you google "GGRA," you get the Georgia Gay Rodeo Association! Yeehaw y'all!!

Comments

[R.S]

Melissa, the part about once being a nice,normal girl is misleading. You still are.

r.s.

[el Greco]

Melissa, the part about once being a nice, normal girl is fascinating. I would have never guessed.

[sfwillie]

Great series. Great free advice. Next time they should call you.

Or, do you think they passed this cockamamie plan on purpose, knowing it would fail, you know, like wifi?

--sfwillie, Thank you! I have wondered about that myself. I'd like to think our leaders aren't so stupid. If it was passed as a symbolic gesture, I wish we'd stop spending money to defend it. I often think BOS positions should go back to being part-time. --Melissa

[Greg]

The funny thing about SF politicos is that if folks would take off the ideological blinders and think about GTD (getting things done) be it uni health care or whatever, and consult Good Citizens such as yourself, instead of listening to the ranting of idiot ideologues, the head spins at the things one could accomplish.

Of course, no one listens to folks like me, after all as a "huero" and someone who does not quote from the Red Book of Daly, I must be mentally challenged, no?

Next time I consult for a candidte in SF, I plan on consulting you for whatever price you quote. Seriously!

--Greg, I'd be honored to help you. You can pay me in beer and conversation. --Melissa

[Increase Penis Size]

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