by Jerry Geisel of Business Insurance

San Francisco- The 9th U.S. Circuit Court of Appeals’ decision last week not to review a 2008 appeals panel ruling upholding a San Francisco health care spending law brings one step closer to a potential U.S. Supreme Court review and perhaps a final resolution on the legality of employer spending mandates.

In a case followed by employers nationwide due to its potential impact on the design, cost and administration of corporate health plans, a majority of appeals court members rejected a request for the full appeals court to review a unanimous ruling by a three-judge panel of the court that the law could stand.

Under the law, San Francisco must spend as much as $3,600 per employee annually on health care in order to avoid stiff fines. The Golden Gate Restaurant Assn., a San Francisco-are employer group that brought the case, argued that the law runs afoul of a provision in the Employee Retirement Income Security Act that pre-emts state and local ordinances that relate to employee benefit plans.

Under the ordinance, which went into effect in January 2008, employers with at least 100 employees have to make health care expenditures of at least $1.85 per hour for each employee working at least eight hours per week. Employers have a variety of options to satisfy the spending mandate, including payment of health insurance premiums, contributions to health reimbursement arrangements and health savings accounts, and payments to city fund.

Judge William Fletcher, who also wrote last year’s appeals court ruling, said ERISA pre-emption did not come into play. “Nothing in the ordinance requires the employer to establish an ERISA plan, and nothing in the ordinance interferes in any way with the uniformity of ERISA regulations,” he wrote.

In a dissent, Judge Milan D. Smith Jr. wrote that the city ordinance strikes at the heart of what ERISA pre-emption was designed to prevent the proliferation of varying state and local benefit laws and requirements.

As it stands, the decision will “undoubtedly serve as a road map in jurisdiction across the country on how to design and enact a labyrinth of laws requiring employer compliance on health care expenditure balkanization ERISA was designed to avoid,” he wrote.

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This entry was posted by Adam V. Russo on Monday, March 23rd, 2009 at 8:41 am and is filed under 9th. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.