The San Francisco court decision and the ERISA issue in general raises the question: why do health reforms seek to raise money from employers, rather than other sources of funds? (The Sacramento Bee’s Daniel Weintraub is like a broken record on this point.)
In front of the LA Times editorial board, Mayor Gavin Newsom gave a good answer a few months ago, in talking about the Healthy San Francisco program:
So $104 million’s there; $56 million comes from individuals in point-of-service fees, which are these co-pays and monthly premiums based on ability to pay.
And the rest comes from — and here’s the controversy, and this, there’s always gotta be a controversy with health care — there’s a mandate to businesses, starting with businesses with 50 employees or more. Incidentally, those represent, the mandate will represent only 13% of the businesses in the city, because 87% fall into the category of 50 employees or more or they fall into a category where they don’t already provide a baseline of services. So you’re affecting about 13% of businesses above 50 employees or more that aren’t necessarily investing in the health care of their employees. It works out to a de minimis cost of the overall $196 million. It’s about $28 million, the business mandate.
The reason we have a business mandate, again, is for no other reason, it’s not intended for the money so much as to create a floor of expenditure. Here’s the reason: I’ve got about 19 small businesses I’ve created, started restaurants and hotels. If the city said, as I have, that we’re gonna take care of health insurance, I’d say fantastic. I’ll dump all my health care; city picks it up. Then our uninsured population goes from 82,000 back to 190,000, 200,000, 300,000, and the system collapses. So we create a floor so there’s no dumping out. And this is the controversy. The restaurant association, of which I’m a former member and large contributor with our nine restaurants, have sued us. And we’ll see if they’re successful. And if they are we’ll have to be more creative.
AB x1 1 also doesn’t raise very much new money from employers, but the employer contribution standard is an important component for practical reasons. The majority of Californians get coverage through their employer, or the employer of a family member. Even if we were to switch to another type of health care system, you would need some mechanism to keep that significant investment in the health system.
Mayor Newsom mentions the issue known as “crowd-out:” The more that a state or city offers coverage up the income scale, the more likely they might replace the coverage of employers that already offer coverage. In a world of limited resources, that’a problem, but can be solved by setting a minimum employer contribution.
Finally, the issue is fairness. Policymakers could simply have a flat tax that impacted all employers, regardless of whether they provide coverage. No one would question that arrangement under ERISA–but that would be grossly unfair to those employers who did offer coverage and were already paying for their workers, in essence asking them to pay more to help pay for the workers of those employers who don’t offer coverage.
And that’s the irony of the Golden Gate Restaurant Association’s lawsuit. Despite their rhetoric, they aren’t actually attacking employer contributions for health care. They are attacking the ability to provide some equity for employers who actually cover their workers.
And now, they is undermining San Francisco’s important health program, and some of the uninsured that were going to be helped. Hopefully–appeals pending–not for long.