ERISA Strikes in California

A federal judge on Wednesday ruled against San Francisco's brave program to guarantee health care to all.

Merry Christmas.

At issue is the federal Employee Retirement Income Security Act [ERISA] that White concluded in his ruling prohibits the city from regulating employee benefits.

Frank Furtek, chief counsel for the state's Health and Human Services Agency, said his office is studying the ruling and was not ready to comment on its import to the state's health care program. He added, however, that he believed the ruling was overly broad.

It sounds as though Gov. Schwarzenegger's staff is now working on figuring out how to keep that ruling from being applied to AB1X, a healthcare bill that's been worked out between the governor and the Democratic leadership.

The bill is based on the hope that once everyone has access to a doctor and preventive care, the cost of care will go down. All employers will provide insurance for their workers or else pay a tax of 1 percent to 6.5 percent, based on payroll. That's the part that "may provide biggest obstacle to passage in light of White's ruling, which San Francisco intends to appeal."

But there are other issues that could spell trouble for the bill in a hearing set for Jan. 16 before the Senate's health committee, which is chaired by Sen. Sheila Kuehl, D-Santa Monica, a longtime advocate of a single-payer health system that would eliminate private insurance.

Kuehl pointed out that AB1X provides a cap on how much employers would be required to pay into the state purchasing pool. But there's no similar protection included for worker costs in co-pays and deductibles.

She said there's no clear protection that the kinds of policies that employers could offer in the state pool would provide good medical coverage.

ERISA was intended to protect people, not insurance companies. It is, however, always invoked by those who are against health care reform. There's a good round-up of its incomprehensible provisions at the National Academy for State Health Policy. The policy brief there (on the Maryland ruling against that state forcing Walmart to insure its employees) says that a universal health reform that didn't target one particular business would be less likely to trigger a successful ERISA suit. Evidently Judge White saw it differently. Here's the skinny from the NASHP:

Congress enacted ERISA (the Employee Retirement Income Security Act of 1974) to establish uniform federal standards to protect private employee pension plans from fraud and mismanagement. But the federal statute also covers most other types of employee benefits plans, including health plans, and has a potential negative impact on state health care legislation, including health insurance regulation.

Several of ERISA's provisions preempt state laws and complicate state efforts to make health care coverage more broadly available. Among the state approaches that raise ERISA preemption issues: employer mandates, individual mandates, government-operated programs, and state approaches to finance health care for uninsured perople with low incomes or medical conditions that make them uninsurable.

Another resource: There's a discussion of federal and state reform proposals at the International Foundation of Employee Benefit Plans.