Why the ERISA Ruling in San Francisco is a Big Deal

The ruling on the San Francisco health care ordinance is important for several reasons: first, it clearly dismisses the arguments of the fast food industry and the Chamber of Commerce that the employer requirement violates ERISA.

Second, the ruling takes head on the decision by the Second Circuit Court on Maryland (known as RILA after the Retail Industry Leaders Association that filed that case). The Ninth Circuit says that the other court demonstrated that Wal-Mart was the only employer required to change their behavior as a result of that law and that the Maryland law did not give Wal-Mart (or any employer) a genuine alternative for providing health benefits for workers. In contrast, the San Francisco health plan is a real alternative for employers (and their employees). An employer that is not meeting the requirements of the SF ordinance can choose to provide health benefits to more employees—or they can keep doing what they were doing and pay into the City plan which their uninsured employees can access. What is critical here is that the City plan, the Healthy San Francisco Plan, provides a real choice by offering health care for low and moderate income San Franciscans, including basic services such as physician and hospital care with only modest out of pocket costs.

Third, the San Francisco ordinance is a per-worker per-hour obligation (now $1.17 per hour or $1.76 per hour, depending on employer size and non-profit or for-profit tax status). This means that the San Francisco ordinance creates the equivalent of a minimum wage for health benefits: employers must spend a specified minimum on health benefits for each worker. (There are of course some exemptions and caveats, as there are for the minimum wage.) It is no surprise that the same elements in the business community that routinely oppose minimum wage increases and living wage ordinances have led the fights, both political and legal, against an obligation for employers to contribute to health benefits.

Yet economic research has demonstrated that moderate increases in the minimum wage actually stimulate the economy because low wage workers spend what they make: indeed the original micro-economic case study by Card and Krueger found that employment in fast food restaurants increased, apparently because low wage workers and their families were able to spend more at fast food restaurants! The same thing applies to health benefits: providing low and moderate income working families affordable health benefits with reasonable out of pocket costs gives those families more disposable income to spend on other things—though as health people, we recommend more fruits and vegetables rather than fast food!

Over the last several years, the UC Berkeley Labor Center has done several research pieces that estimate the impact on businesses and the economy of various reform proposals: these have consistently found that a thoughtfully designed employer obligation is not a job killer. Instead, in analyzing AB8 (Nunez/Perata) and the Governor’s proposal, in July, 2007, Jacobs et al found a net positive economic impact. More on this to follow.

Health Access California promotes quality, affordable health care for all Californians.

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