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Examining Legal Barrier Faced By States To Provide Universal Health Care

Armen Hareyan's picture

Universal Health Care

USA Today on Thursday published two articlesthat examined how federal law might restrict some states and the city of San Francisco fromenacting health care programs that require employers to offer workers healthcoverage or contribute to a public fund to help cover the uninsured. Thefederal Employee Retirement Income and Security Act of 1974 exempts from stateregulation employer-sponsored health insurance, pension plans and otherbenefits provided by employers.

  • Reform efforts: USA Today highlights different approaches states have taken to expand health coverage. In California, Gov. Arnold Schwarzenegger (R) has proposed a $14 billion health care plan that would extend health coverage to all uninsured residents and would be funded by the state, federal government, tobacco taxes, hospitals and a 1% to 6.5% payroll assessment on employers who do not offer health insurance to workers. Meanwhile, Minnesota lawmakers have proposed legislation that would impose fees on large employers who do not spend at least 10% of their payrolls on health care, and a similar bill is pending in the Michigan Legislature. USA Today also examines a San Francisco ordinance that provides universal access to health care services for city residents and requires employers to offer health coverage to workers, pay into workers' health savings accounts, reimburse workers for medical costs or pay into a health care fund. The Golden Gate Restaurant Association in 2006 filed a lawsuit against the city, saying the ordinance violates federal law. Incoming group president and restaurant owner Dan Scherotter said the law violates ERISA and it also is unaffordable and an administrative nightmare for business owners (Appleby [1], USA Today, 1/17). U.S. District Judge Jeffrey White last month ruled that the employer spending provision violated ERISA, but a three-judge panel of the Ninth Circuit Court of Appeals last week granted a temporary stay of the district court order and allowed San Francisco to move forward with the program while it appeals the restaurant association's lawsuit (Kaiser Daily Health Policy Report, 1/10).
  • Legal disputes: Several states -- including California, Colorado, Michigan and Minnesota -- have health care proposals pending that rely on partial funding by employers, and the San Francisco plan is providing an "early legal test" of such initiatives, USA Today reports. According to USA Today, resolution of disputes over ERISA violations, which have "set off a legal battle pitting lawmakers against employers," could "determine how far state and local lawmakers can go with their plans to cover the uninsured." The law "poses the biggest challenge in California," where Schwarzenegger has been working for a year on a $14 billion health reform measure. If the Ninth U.S. Circuit Court of Appeals rules in favor of San Francisco's program, the case could go to the U.S. Supreme Court because the Fourth Circuit Court of Appeals in January 2007 reached a conflicting conclusion over a Maryland law that would have required large employers to spend a certain percentage of payroll on workers' health coverage or pay a fee, according to Phyllis Borzi, a health policy professor at George Washington University. Borzi said that if the appeals courts disagree, "it sets up a conflict, which is the classic pathway to having the Supreme Court resolve it." Although Massachusetts requires employers to pay an annual fee if they do not offer employee health benefits, the fee's "small size and early support from businesses are credited with preventing a legal challenge," USA Today reports (Appleby [2], USA Today, 1/17).

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.