Preempting Reform, Cont.

Brad Cain, Senior Editor-Managed Care, January 9, 2008

Last week I wrote about the ongoing debate over the Healthy San Francisco program and whether a key provision for making the plan financially feasible is actually allowable under federal law.

Federal Judge Jeffrey White issued an order last month blocking the city from implementing the program's employer mandate, finding that a provision requiring employers to spend a minimum amount on healthcare coverage for their workers or to pay an equivalent amount into the city-run program is preempted by the federal Employee Retirement Income Security Act. The city appealed and may have found a friendly ear at the Ninth Circuit Court of Appeal.

A hearing last week before the Ninth Circuit focused on the city's request for an emergency stay of Judge White's order, and was not a hearing on the full appeal. However, reports from the hearing indicated significant support for the city's position that the mandate complies with ERISA and is not a benefit mandate.

But I'm writing this week not just to update the situation in San Francisco. I'm also interested in hearing your thoughts on the issue of ERISA preemption as it relates to the ongoing efforts at the state and local level to offer universal or near-universal coverage programs.

Is ERISA still the boogeyman that it's made out to be? A nearly insurmountable barrier to the pay or play ideas floating around state capitals and city halls? Or is Massachusetts' success in getting a program up and running evidence to the contrary? That ERISA preemption can be avoided even in cases where an employer mandate is involved? Or should legislators be looking in other areas beyond employer mandates?

Judge White in the San Francisco case noted that the program could avoid the ERISA issue entirely by pursuing other funding mechanisms, such as a sales tax hike or an assessment on all employers to fund the public health system and then provide a tax-credit for those employers who provide coverage.

Or should state legislatures back off the reform agenda altogether and leave the issue to Congress? After all, ERISA preemption was created to do just that--to ensure that regulation of employee benefits would be handled at the federal level thereby creating a level playing field in all markets.

So where does that leave us?

I'm not sure Massachusetts' success in creating a consensus that prevents an ERISA challenge from even being filed can be replicated in another market, but I'm almost positive that Congress will be unable to address the issue anytime soon.

Brad Cain is editor of California Healthfax and executive editor for managed care with HealthLeaders Media. He may be reached at
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