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News Article

Jan 4, 2008

San Francisco Chronicle: Court Gives San Francisco Health Plan A Boost

By Bob Egelko



A federal appeals court boosted San Francisco's hopes Thursday of reviving its plan to extend health coverage to all uninsured residents and make employers share the cost.
Members of a three-judge panel of the Ninth U.S. Circuit Court of Appeals made it clear they thought U.S. District Judge Jeffrey White was on shaky ground last week when he struck down a key funding provision of the health program, which would require medium and large companies to offer insurance to their workers or pay a fee to the city.
Ruling in a lawsuit filed by the Golden Gate Restaurant Association, White said San Francisco was trying to require employers to provide a specific level of health benefits. That violates a 1974 law prohibiting state and local governments from regulating employee benefit plans, White said.
But San Francisco's lawyers argued - and the appeals court judges appeared to agree - that White had misread the law. The city says the law provides only that employers must spend a certain amount on health care, either in coverage for their workers or in payments to the city.
That's a crucial distinction under past U.S. Supreme Court rulings that have given states and cities some leeway to pass laws protecting their inhabitants' health and welfare, said Judge William Fletcher. If the city's interpretation of its law is correct, he said, "that takes away virtually all of Judge White's reasoning."
When Richard Rybicki, lawyer for the Golden Gate Restaurant Association, conceded that the city was reading its ordinance accurately, Fletcher said, "It seems to me your argument just disappears on you."
Rybicki argued that the San Francisco ordinance still intruded too deeply into employers' health care decision-making and would contradict Congress' goal of national uniformity in health plans. But Fletcher and the other two panel members, Judges Stephen Reinhardt and Alfred Goodwin, seemed skeptical.
The court gave mixed signals on whether it would grant the city's request for an emergency order suspending White's ruling and allowing the ordinance, including the employer fees, to be fully implemented during the appeal process.
But the judges' questions and comments during the one-hour hearing in Pasadena suggested that the court was prepared to interpret the 1974 federal law in a way that leaves room for universal, shared-cost health coverage at the state and local levels, in the absence of a national health care law.
In Sacramento, a statewide health insurance plan approved by the Assembly, and supported by Gov. Arnold Schwarzenegger, would be partly funded by an employer fee if state voters approve the proposal. The ruling in the San Francisco case could determine the state plan's legality.
The city's program, the first of its kind in the nation, provides care at a network of hospitals and clinics for uninsured adults who are not covered by the Medi-Cal program for the poor or Medicare for the elderly. The estimated $200 million annual cost is to be paid from state and local taxes, patient payments and contributions by employers who don't offer insurance.
About 7,350 residents were enrolled in the program during the last half of 2007, when eligibility was limited to those making less than the federal poverty level of $10,210 a year for individuals. Eligibility was extended Wednesday to those making three times the poverty level, which officials say should expand enrollment to about 47,000.
Starting this month, city officials had planned to expand eligibility to the remaining 26,000 uninsured residents, along with thousands of nonresidents working in San Francisco whose companies have no health coverage. Those plans were put on hold by the dispute over the city's requirement that employers foot the bill.
Under the ordinance, private employers with at least 20 employees, and nonprofits with at least 50, were required to provide health coverage at levels set by the city, or pay a fee to cover the program's cost of care for their uninsured workers.
The restaurant association, which has more than 900 members, sued in November 2006. The association's executive director, Kevin Westlye, has proposed replacing employer funding with a quarter-cent local sales tax.
White ruled in the restaurants' favor Dec. 26 and barred enforcement of the cover-or-pay mandate, preventing the city from extending coverage to the final contingent of uninsured residents and employees.
The court will address the city's appeal of White's decision later in the year, possibly in a different three-judge panel. Thursday's hearing concerned the city's request for an emergency stay.
Officials of the health program say it will take 18 months to two years to implement coverage for all the remaining uninsured. Rybicki, the restaurant association's lawyer, noted that the ordinance also gives employers three months to make their first payments, and argued that "there's not an immediate pressing need" to enforce the law during the appeals process.
But Fletcher said that if the court decides the program is legal, denying the city's request for a stay would delay coverage for some who otherwise would have gotten it sooner.
Lawyers for the city and a group of labor unions argued that White had disregarded previous court rulings allowing state and local governments to regulate employee benefits, including wages and health care, as long as they didn't require employers to establish or change benefit plans.
San Francisco complies with those rulings, said Deputy City Attorney Vince Chhabria, by giving employers the choice of providing health coverage or paying to support city-provided care.
Rybicki argued that the ordinance conflicted with federal law by requiring employers to pay different levels of benefits in different cities. He said the result would be reductions in coverage in some areas to pay for higher benefits in San Francisco and other communities following the same model.
Fletcher seemed unpersuaded.
"There's a different minimum wage law in San Francisco," he said. "You have to pay that, too. Tough luck."
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