The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

California Health Care Reform’s Likely Long Legal Journey

Posted by Alan on January 5, 2008

California’s health care reform effort awaits action by the State Senate which will take up Assembly Bill X1-1 around January 16th. Crucial to its fate will be a report from the Legislative Analyst analyzing the legislation’s impact on the state’s finances (which, for those who may have forgotten, is a wreck). Backers of the bill, specifically Governor Arnold Schwarzenegger and Assembly Speaker Fabian Nunez, claim the legislation’s won’t effect the budget deficit because funding for the reform package comes from new, specified taxes and fees plus additional health care reimbursements flowing to California from the federal government. This overlooks the fact that money raised for health care is money unavailable for other obligations of the state, but, for purposes of this post, let’s assume the Legislative Analyst agrees with the Governor and Speaker.

Then let’s assume the Senate passes ABX1-1. The legislation takes effect only if voters approve a financing initiative supporters are seeking to place on the November 2008 ballot. That initiative includes all those new taxes and fees.

Since we’re in an assuming mood, let’s say the ballot measure passes. ABX1-1’s provisions become law, right? Maybe yes, maybe no. And it could take a long time to find out.

The end of a successful initiative campaign would be an astounding political achievement. It would only mark, however, the start of the court battles. Yes, plural. A raft of law suits would be filed on several grounds, among them a claim the law violates ERISA, federal legislation regulating employer-sponsored benefit plans. This is exactly what happened when San Francisco Supervisors sought to implement a health care reform ordinance.

To oversimplify, ERISA preempts state and local governments from interfering in certain ways with those benefit plans. Late last month a Federal District Court judge struck down a San Francisco health care program on the ground it violated ERISA. (For more information on the court case, Golden Gate Restaurant Association v City and County of San Francisco, here’s an earlier post on the topic). San Francisco’s lawyers appealed this ruling to the Ninth Circuit Court of Appeals and a three judge panel was assigned to consider whether it was appropriate to reverse the lower court without a full appellate hearing. The panel took testimony earlier this week.

The San Francisco Chronicle, in an article written by Bob Egelko, reports the panel “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 ….”

The panel focused on whether the San Francisco health care program requires employers to provide a specific level of health benefits or whether it requires employers to spend a certain amount on health care. In fact, the city ordinance requires employers to either purchase insurance for their workers or pay the city to provide coverage. Based on this, the three Circuit Court judges seemed “prepared to interpret [ERISA] 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,” according to the Chronicle. It should be noted that ERISA creates several hoops state and local laws need to navigate to avoid preemption. The prohibition against defining a specific level of health benefits is just one of them.

What’s significant about all this is that California’s ABX1-1, like the San Francisco ordinance, requires employers to spend a specified percentage of their payroll on health care services for their employees or to pay a fee equal to that amount to the state. The state, in turn, would use the fees to help pay for the cost of offering eligible individuals coverage through a government-run insurance purchasing pool. This approach, which avoids defining what benefit package employers must offer their workers, would seem to avoid an ERISA preemption based on where the Circuit Court panel appears to be headed.

Not everyone agrees. Chris Reed has written frequently on this topic over at the San Diego Tribune’s blog. Mr. Reed is convinced the Supreme Court will overturn the “pay-or-play” aspect of the San Francisco health care plan and the similar provision in ABX1-1. He cites a list of Supreme Court precedent to support his argument.

One of the things I learned in law school (other than the realization I really didn’t want to practice law) is that while folks can predict whatever they want about how a case will be resolved, in the end the courts do what the courts do. (Not that my professors put it this way). It doesn’t matter whether the court is conservative or liberal, strict constructionists or activists. Where’s there’s a will, there’s a way. So no one can be sure what the Supreme Court will rule on this — if they even take up the case.  The only thing certain is that no matter what the Ninth Circuit decides on the San Francisco law, someone will appeal to the Supreme Court.

Meaning ABX1-1 could be suspended in judicial limbo for a very long time. Assuming, of course, it gets even that far.


One Response to “California Health Care Reform’s Likely Long Legal Journey”

  1. Judy Millin said

    I hope you are right re: 9th circuit & ERISA & appeals. We all know how legally bizarre the 9th Circuit can be.

    Judy, SDAHU Leg committee

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