The U.S. Ninth Circuit Court of Appeals has upheld the employer spending requirement of the San Francisco Health Care Security Ordinance (HCSO). The court ruled that the city ordinance was not preempted by ERISA. The ruling is important because many of the state programs that have been enacted or are being formulated to expand health insurance coverage include employer spending requirements similar to the one in the HCSO. However, an appeal to the U.S. Supreme Court is likely. Golden Gate Restaurant Association v. City and County of San Franciso, No. 07-17370 (9/30/08).
The HCSO requires covered employers to make minimum healthcare expenditures (HCE) for each of their covered employees. Covered employers can satisfy their obligation in several ways, including purchasing health insurance coverage for their covered employees, making payments to the city for the benefit of their covered employees, or making the required HCE in a variety of other manners. For-profit employers with fewer than 20 employees and nonprofit employers with fewer than 50 employees are not covered by the HCSO.
In 2008, "covered employee" includes any person who has been employed by his or her employer for at least 90 calendar days and performs at least 10 hours of work per week within San Francisco. The requirement for work in San Francisco drops to 8 hours per week in 2009.
The HCE rates for 2008 and 2009 are as follows:
- Employers with 100 or more employees--$1.76 per hour in 2008 and $1.85 per hour in 2009
- Employers with 50 to 99 employees--$1.17 in 2008 and $1.23 in 2009
- For-profit employers with 20 to 49 employees--$1.17 per hour from April 1, 2008, through December 31, 2008, and $1.23 per hour in 2009
The Golden Gate Restaurant Association challenged the HSCO in court claiming that it was preempted by ERISA. ERISA Sec. 514(a) expressly provides that ERISA "supersedes any and all state laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. The appeals court determined that the spending requirement does not create an ERISA plan and does not relate to an ERISA plan because it applies whether or not an employer provides health benefits for its employees. Employers remain free to provide any health benefits that they want or provide no benefits at all.