Sweet Melissa

Melissa on ERISA: Bring It!

Constant Readers,

On Sunday, I broke the news that the Golden Gate Restaurant Association filed an appeal to Justice Kennedy at the Supreme Court to overturn the Ninth Circuit decision to allow the employer contribution provisions of the SF Health Care Security Ordinance to go into effect.

Well, here's another newscast from Washington, D.C.: Justice Kennedy just gave the City and the Unions until February 20 to respond to the GGRA's appeal.

What does this mean? (1) Minions at the City Attorney's Office will be slaving away this weekend trying to draft response papers in a vain attempt to save this fatally-flawed legislation; (2) Justice Kennedy is taking this issue seriously; and (3) It Has Been Broughten!

--Melissa

PS: I am in Texas right now. I swear, I think people are allowed to smoke in the oncology wards here. (cough! cough!) I wanna come home!

Melissa on ERISA, UPDATE to the UPDATE!!

Constant Readers,

For both of you who have been following my oh-so-prescient posts (starting here) about how the City's Health Care Security Ordinance is doomed to be struck down by a competent court, here's another update for you:

(1) We want to speak to your manager. Last Friday (2/8) the Golden Gate Restaurant Association went to the Supreme Court and filed an Application for an Order Vacating the Stay of the District Court Judgment. In that appeal, the GGRA asks that the Supreme Court reinstate the injunction on the employer contribution part of the HCSO because the Ninth Circuit's ruling allowing it to take effect, which will inevitably be overturned by the Supreme Court, will cause irreparable harm. (And will prolly result in a fat class-action lawsuit against the City.) Big props to these guys for having the guts to go over the Ninth Circus' head and take it to the Supremes before the amount of money the City will have to pay back to employers gets any larger.

(2) Zelinsky with some 'splaining to do. In the meantime, ERISA expert Professor Ed Zelinsky has published an even longer tome about why the HCSO is preempted by ERISA. (Attached at bottom of post.) In it, he argues (persuasively, I think) that employer contributions to the HAP (aka "Healthy San Francisco") on behalf of employees are not an alternative to ERISA plans - they are ERISA plans. (The definition of a "plan" under ERISA is pretty dang broad and includes "any plan, fund, or program...established or maintained by an employer...for the purpose of providing...medical, surgical, or hospital care or benefits" to employees. 29 U.S.C. § 1002(1).)  According to Zelinsky, because under the HAP the employer is basically paying into an "account" for the employee that is administered by the City, the HAP is an ERISA plan, and the law is therefore preempted. We'll add it to the list of reasons...

That's all for now, y'all. I am back on the Best Coast tomorrow!

--Melissa

Download erisa_article.pdf

Melissa on ERISA, UPDATE

Constant Readers,

My grumblings about how the Ninth Circuit was wrong to let the employer contribution provisions of the Health Care Security Ordinance go into effect seem to have been ignored by the Golden Gate Restaurant Association. Doesn't look like they are fixin' to appeal that decision. [UPDATE 1/24: Looks like the GGRA is looking to file an emergency petition with Justice Kennedy of the Supreme Court to get the 9th Circuit's emergency stay order overturned. The 9th Circuit was all, "Bring it!" and now the GGRA will be all, "Oh, it has been broughten!"]

But they should.

'Cause I was right.

And some smaht guys agree with me on this one. Edward Zelinsky, who is a law professor, ERISA expert, and a big fat Democrat (ok, I don't actually know if he is big or fat) just wrote an article about how the Ninth Circuit's decision was wrong. And how it won't be followed by other districts or the Supreme Court. And how this case actually hurts the cause of universal health care because it takes the focus away from where it should be: amending ERISA. And Professor Secunda, editor of the Workplace Prof Blog, seems to agree.

I hate to say it, but I told you so.

Who am I kidding? I love to say that...

--Melissa

UPDATE: After putting up this post, I received an email from Professor Zelinsky:

Ms. Griffin: I am 5'11" -- which I don't consider big. I weigh 186 lbs -- which is definitely not fat for my height. I am, as you say, a Democrat, though a very moderate one -- I ran Joe Lieberman's first campaign for the Connecticut state senate in 1970.

Thanks for clarifying, Professor!

Melissa on ERISA, Part Six: Here we go...

Constant Readers,

First, let me thank all of y'all who sent me the 9th Circuit's recent ruling.  I got about 10 of them in the span of four minutes after the ruling was posted - and I am very happy knowing so many of you are looking out! (Muah!)

Here's what happened: After the District Court Judge ruled against the City and struck down the employer contribution provisions of the HCSO, the City did two things: (1) it filed a notice of appeal to the Ninth Circuit (this is a one-page document telling the appeals court and the opposing party that it wants to appeal the lower court's judgment); and (2) it filed an Emergency Motion for Stay Pending Appeal.  In the Motion for a Stay, what the City Attorney asked for was an order by the Circuit Court that would "stay" (i.e. prevent) the District Court ruling from taking effect until the appeal in the Ninth Circuit can be ruled upon. The parties have already agreed to an expedited appeal process, so the estimated time the appeal process will consume is 6-8 months. (Trust me, y'all, that is A LOT faster than usual!)

What happened today is that the Motion for a Stay was granted, so the HCSO gets implemented as if the District Court decision had never happened. Read: employers have to pony up. (Note that there has not been a decision on the underlying appeal of the District Court's ruling - though there really can't be much doubt about how that will go in light of today's ruling.)

The GGRA could appeal the decision and that would likely stop the contribution requirement for a bit while the appeal is ruled upon. Such a decision is being mulled as I type this. On the one hand, I want the GGRA to appeal the decision because we are rolling out a huge mess that may not be possible to roll back later.  On the other hand, I am eager to see how this sucker works. And I don't have any employees, so, whatev.

Personally, I am a bit surprised by the ruling. (Of course, like I wrote before, no one can predict the Ninth Circuit.) Given the douchy behavior of at least one of the judges during the hearing, we could see that the court was prolly going to rule against the GGRA on the merits of the appeal, but granting a stay is a pretty extreme measure. Ah well. So now we know that the Ninth Circuit will grant the City's Appeal. Then there will be a "split" in the circuits (the Fourth Circuit already struck down a law that looks a whole lot like this) and one of the ways to get before the Supreme Court is to have such a split. Since businesses all over the nation are having a collective heart attack right now at the prospect of this happening in their city, and employees-rights groups will rush to copy our system, there will be a lot of pressure for the Supreme Court to take this up.  And the Supreme Court ain't no Ninth Circuit.

And yes, my next post will be about something else. For now.

--Melissa

Melissa on ERISA, Part Five: Don't Tax Me, Bro!

Constant Readers,

A friend once called my blog a "stream of vulgarities" (I told him to "kiss my country ass" and promptly bought him another beer) but the criticism that I hear more frequently is that I do not post often enough. Well y'all, I am really going to try to post more often this year. And to prove my dedication to You, my Constant Readers, I did something so boring, so dorky, so pack-my-bags-I'm-going-to-the-Star-Trek-Convention, that I hope it will cause you to forgive my past sins of omission:

I read big chunks of the US tax code.

This post, therefore, is my attempt at a PDA.

[NOTE: You are reading a nitty gritty section, where I am assuming the reader has a fair amount of knowledge about the proposed Health Care Security Ordinance and the case of Golden Gate Restaurant Association v. City and County of San Francisco. If you don't, you can check my other posts, I'm not repeating all that crap here.]

Okay, so last time I promised you two arguments for why the employer contribution provisions of the Health Care Security Ordinance are preempted by ERISA. I then gave you one argument; here comes the second one.

And it starts with something many of us recognize: the annual employee benefits open enrollment period. Ever wonder why (absent a major life event) you can only change health insurance plans once per year? Its because IRS Section 125 (26 U.S.C. Sec. 125) allows employees to pay for health benefits (and other kinds of benefits) with pre-tax dollars when the employer offers benefits though a "cafeteria plan." Yay! Thank you IRS! But there's a hitch: unless the employee can prove a major life event occurred, the employee is stuck with that particular plan for the calendar year; the calendar year is defined by the employer. So, what kinds of things constitute major life events? Well, that is defined by each "cafeteria plan" (which is an employee plan that offers paricipants a choice between at least 1 taxable benefit and 1 qualified benefit). But Federal Regulations give a list of the kinds of events that can qualify as a major life event: marriage, divorce, kids, death of a dependent, etc. (26 CFR Sec. 1.125-4.)

Why do employers love Section 125 plans? Because they pay less in taxes. Here's how: Say you have 10 employees, each of whom earn $1000 per month. Each month, you must pay 7.65% of your $10000 payroll in FICA taxes. Unemployment and Worker's Compensation are also dependent upon payroll. (And I'm not even getting into state and local payroll taxes.) But if your employees each pay $100 per month in pre-tax dollars for health insurance, you only pay those taxes on a $9000 payroll. For big companies, the savings here can be in the millions and even for small companies the employer's tax savings can help offset the amount the employer pays toward employee health insurance. (Its also one reason why many employers wouldn't choose the HAP - they don't get the tax benefit from employee contributions.)

A pretty good deal, huh? This is why a recent MetLife survey (p.2) reported that 33 percent of employers offer cafeteria plans.

What does this have to do with the HCSO? Everything.

Remember that the basic thrust of the employer contribution provisions of the HCSO is that employers either have to provide employees health benefits or they have to pay the City so the employees can use the HAP program. Okay? Here comes the prollem:

The HCSO exempts from its coverage "those persons whose employers verify that they are receiving health care services through another employer, either as an employee or by virtue of being the spouse, domestic partner, or child of another person; provided that the employer obtains from those persons a voluntary written waiver of the health care expenditure requirements of this Chapter and that such waiver is revocable by those persons at any time." (Sec. 14.1(h).)

FUN FACT: Both the HCSO and the waiver form employees are supposed to use only allow an employee to waive health care benefits if they have alternative EMPLOYER PROVIDED health care. So, people with independent insurance (say, an independent contractor who is hired on by an employer full-time and wants to keep her insurance) still have to enroll in an employer plan or the HAP. And the HAP requires a quarterly employee participation fee (p. 12).

Consider this hypothetical: I am an employer who agrees with the HAP itself that "Insurance is always better" than the HAP, and I am paying the required amount for my employees to have health insurance through a cafeteria plan. I get a notice from an employee that he wants to waive his right to employer-provided insurance or HAP contribution because he wants to be covered by his wife's insurance. (Whether the HCSO makes the employer liable for the fact that an employee can't leave a cafeteria plan without a major life event is unclear.) A few months later, that employee now wants to exercise his right to revoke his prior waiver "at any time." Only it is not open enrollment time at my company. And no major life event has occurred. As an employer, I have no choice but to pay into the HAP program on the employee's behalf. For some small employers, this will be no biggee. But for others, it will require the creation of new systems to track, report and deal with the HAP payment.

Like I explained before, the broad preemption clause in ERISA is specifically designed to ensure national uniformity in the administration of employe benefits plans. Too much local administrative bullshit can cause a law to be preempted by ERISA. In GGRA v. SF, the City argues that the administrative burdens imposed by the law are minimal (p. 16). The City maintains that employers who provide the right amount of benefits will be able to keep their same systems in place and just create some simple reports. Well, I'm sorry y'all, but that's just a big ol' plate of wrong.

See, ALL employers who provide insurance will be forced to both renegotiate their ERISA plans and create new administrative systems to track, report and pay the HAP for their San Francisco employees if these scenarios occur: (1) employees want to revoke a waiver outside of the open enrollment period (for employers with cafeteria plans), or (2) employees do not want employer-provided health insurance and have no other employer-provided health insurance. (Without a waiver or an insurance election, the employer is on the hook to pay into the HAP - the law does not contemplate employees who just don't freaking want to pay for insurance. I believe that the number of people in this category is larger than anyone expects.**) In fact, the more employees an employer has, the more likely it is that one of these problems will arise - and large and medium-sized employers are often the very ones for whom it is a huge administrative problem to change massive multi-state insurance payment systems. To put it in technical legal terms, this is the kind of local administrative bullshit that ERISA was designed to prevent. (Who wants to negotiate with an insurance company to provide health benefits to employees where there is one city in which everyone can opt out and still cost you the same amount out of your budget?) And that's another reason why this law will ultimately go down - if not in the Ninth Circuit, in the Supreme Court.

**I have to say though, I'd be amused to see the City go after an employee for the quarterly HAP employee contribution where the employee is all "F-you I don't want your silly HAP, neether.....Wait! Don't taze me, bro!"

--Melissa

Now, on to the conclusion of all this...

Melissa on ERISA, Part Four: The Angle

Constant Readers,

Once upon a time, I was a nice, normal girl (stop laughing, Mom) and then I graduated from law school and was suddenly possessed with the desire - no, the need - to edit, revise and add my two cents to anything and everything. Blueprints, menus, mash notes... In furtherance of this mania, I'll be laying out two arguments (one in this post and one in the next) that form the basis for my opinion that the employer contribution provisions of the Health Care Security Ordinance (HCSO) are preempted by ERISA. These are not arguments that were fully made by the Golden Gate Restaurant Association (GGRA) - I'm basically making this up as I go.

I want to state at the outset that I don't enjoy the fact that the HCSO provisions are unlawful and have made it clear before that I am in favor of health care for all San Franciscans. In fact, I believe that one option here is to try and amend ERISA to permit minimum employer benefits requirements. But as we prepare to spend a couple of years and many thousands of dollars defending the HCSO in the Ninth Circuit and perhaps the Supreme Court, it important to know whether such a fight is worth it. For my part, I don't think so.

And here's how my thinking about this began...

When I first saw the HCSO employer spending requirements, I was struck by how unnecessarily complicated it all seemed. "Pay this amount for this employee for time in the geographic bounds of San Francisco, blah blah blah." So, my first question was: why does the employer contribution part read like a speech by Supervisor McGoldrick?

It could be simpler. In the legal arguments it submitted to the Court (p. 32) the City admits that it could have taxed all business to get the money to fund the HAP but that it wouldn’t be fair because it wouldn’t reward the 90% of businesses that are nice enough to provide health insurance.

Ahem.

Constant Readers: let us not forget that Supervisor Ammiano’s office drafted this part of the Ordinance. A law from Ammiano (bless his heart!) purporting to be considerate of businesses is like a treaty from Sudan purporting to advance human rights.

Extreeeeeeeeemly Suspect.

So, what’s the angle? The angle, y'all, is precisely what makes this law preempted by ERISA.

Consider this hypothetical: Say the City simply increased the payroll tax by 1% for all businesses in San Francisco. And lets assume that such a tax would result in $50 million per year (my numbers may be wildly off the mark, but stay with me here) for use to fund the Health Access Plan (HAP, aka "Healthy San Francisco") program. It would then be a rational business decision for many businesses to stop paying for health insurance and dump their employees into the HAP system – either to offset the increased tax or, you know, ‘cause they can. But, the HAP system consists of a series of local clinics and health care professionals whose capacity is obviously limited. The City would not be able to know ahead of time how many employed-but-now-uninsured HAP members would flood the rolls and they probably couldn’t build out fast enough even if they did know.

At a July 5 Budget and Finance Committee meeting, here's what Department of Public Health Director Dr. Mitch Katz, said about the capacity of the HAP program:

"We did design the program to work at whatever size. And, in fact, we do not believe that ultimately 82,000 [uninsured San Franciscans] will be part of the HAP, nor do we even hope that. Because what we hope, especially for the larger employers, is that they will ultimately choose commercial health insurance as the way to provide for their employees."

Let me put it like this: the HAP system depends on employers maintaining or increasing their health care benefits. Without it, the HAP system would be overwhelmed and unable to function.

So, how do we force employers to continue providing health insurance? We say, “You can either pay $X amount for insurance on behalf of your employees (and reap the retention and goodwill) or you can give the City that same amount and send your employees on down to the clinic.” Knowing full well that no employer, if given the choice, would give the money to the City. The HAP website itself advises applicants not to drop their current insurance because "Insurance is always a better choice." In fact, preventing employers from ending their health insurance coverage and overburdening HAP is precisely why the employer contribution was added in the first place.

At the July 17,2006 Budget and Finance Committee meeting, Mayoral liason to the Board, Wade Crowfoot said: "...the key reason for supporting the minimum spending requirement is that the Mayor does believe that the minimum spending requirement is necessary to ensure that there's not droppage off of insurance by employers."

And right in the HCSO law itself, the "Declaration of Legislative Findings and Intent" says: "San Francisco also has a vital interest in preventing a 'race to the bottom' in which employers stop paying for employee health care to remain competitive and instead shift those costs to San Francisco taxpayers."

So, what does this have to do with ERISA? Everything.

It is unequivocally, absolutely, clearly a violation of ERISA for a City to require employers to provide health insurance to employees. (Sorry guys, sad but true.) Its also unlawful to provide a false "choice" in which there appear to be two options, but in reality no employer in their right mind would choose the non-provide-benefits option. The parties can't (and don't) even argue about these points of law. The City is defending the employer contribution provisions by saying (with a straight face) that the HAP is a perfectly good alternative to employer-provided benefits.

"It is completely up to the employer to decide how to comply with [the HCSO's] spending requirement. The employer may set up its own health care benefits program, or it may make payments to the City on behalf of its employees so that those employees may enroll in the new government program." (P.7.) This argument is repeated in many times over throughout the City's and the Union's legal papers.

Here's the problem: for the City's "Employer insurance or HAP - it doesn't matter to us...honest! Totally your choice!" position to be true, it must be the case that the HAP program is prepared to absorb every single employee in San Francisco who currently gets health insurance at work. Think about it: What if every single employer opted to pay a couple grand to the City for their employees to use the HAP plan? What if even 50% of the employers made that choice?

The extent to which we do not have the infrastructure to provide health services to 750,000, or even 200,000 people, is the extent to which the City knows it is not really giving employers a "choice" about whether to give benefits to their employees or cash to the City.

So, the City's argument that turning one’s employees over to the HAP program is a perfectly viable option that doesn’t require the creation or maintenance of an ERISA health benefits plan both ignores the reality of the benefits an employer derives from providing coverage and is a misrepresentation of the capacity of the HAP system. The employer contribution provisions are set up to effectively prevent employers from reducing or eliminating health care coverage. If it didn’t, we wouldn’t structure it this way.

That’s the angle.

And that's one reason why we ain't gonna win this case.

--Melissa

FUN FACT: If you google "GGRA," you get the Georgia Gay Rodeo Association! Yeehaw y'all!!

Melissa on ERISA, Part Three: Your Online Law Degree

Constant Readers,

If you are familiar with the Golden Gate Restaurant Association v. City and County of San Francisco case and/or are a lawyer, you can skip this post. I am writing this one because the facts and legal concepts of the case are not intuitive and people like my Mom (who thinks ERISA is what you get when you ride a bike for too long) might need some more background.

Basics of the Case:

The case of GGRA v. SF was filed on November 8, 2006 in the U.S. District Court for the Northern District of California. The suit alleges that the City and County of San Francisco violated federal law (which is why it was filed in federal court) by adopting the Health Care Security Ordinance (HCSO).

In April of 2007, the San Francisco Labor Council, Local 1021, Local 2 and the United Healthcare Care Worker’s West (collectively "the Union") claimed to have a special interest in the case and got the Judge to grant it "intervenor" status. Which just means that the Union can file papers and participate in the legal process but it is neither the Plaintiff nor Defendant. In its papers, the Union sided with the City and argued that the HCSO is perfectly lawful, thankyouverymuch.

Was there a trial?:

Nope. In cases like this one, where the question is only a difference in legal interpretation and there are no facts in dispute (i.e. the City doesn't deny passing the law at issue) the parties can file for what is called "summary judgment." In this case, both parties filed summary judgment motions. This just means that each party wrote long, boring documents setting forth their arguments. (See the bottom of this post.) The Judge then based his decision on those papers, a short oral argument that took place on November 2, 2007, and his Chinese horoscope. He's a Rooster. Hardworking, moody, loner.

What is the GGRA trying to do?:

The point of the GGRA's lawsuit is to invalidate the employer contribution parts of the HCSO (Secs. 14.3 and 14.4) - the lawsuit does not seek to invalidate the Health Access Plan (HAP, aka "Healthy San Francisco"). Because the GGRA won the case, Sections 14.3 and 14.4 of the HCSO are unenforceable. The HAP can still move forward, and Mistermayor says it will, only without the $30 million or so that would have come from employer contributions. Without employer contributions, instead of providing coverage for all uninsured San Franciscans, HAP Program Director Tangerine Brigham (has there ever been a better name?) says that the plan will be limited to people making 300% of the federal poverty level (about $30,630 for a single person) or less.

What is "preemption"?:

When the federal government passes a law on a subject and it wants that law to be the only one out there, it is said to "preempt" the field on that issue. In other words, no pesky state or local laws can be enforced that would conflict with federal laws and decisions in that area. Common examples of federal territory are foreign policy and immigration. (Though San Francisco has never given a rat's ass about federal authority in either of those areas!)

And so it is with employer-provided benefits. The Employee Retirement Income Security Act of 1974 (ERISA) was passed because employers were acting sketchy with regard to employee benefits. ERISA covers any employer "plan, fund, or program"...[which is] maintained for the purpose of providing for its participants or their beneficiaries...medical, surgical, or hospital care or benefits..." 29 USC Sec. 1002(1). ERISA regulates these medical plans with rules that do things like require plan descriptions be given to employees and prohibit discrimination in plan availability among employees.

So, when ERISA was being considered in Congress, employers were all, "Dude. How are we supposed to screw over our employees once we have all these new rules? Aw, man. Ok. Ok. We'll let you make these rules if you promise that they are the only rules we have to deal with. No state or local bullshit on top of all this. We don't need more rules and we definitely don't need more paperwork." (I totally saw this in the Congressional Record somewhere...)

And, soooooo....ERISA was passed with a seriously broad preemption clause; it states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 USC Sec. 1144(a).

Wrapping it up:

So hopefully now you can see what the GGRA v. SF case is about: the GGRA is saying that the HCSO employer contribution requirement "relates to" ERISA-covered health benefits and is therefore preempted.

The GGRA generally makes three arguments about the HCSO: (1) that it forces employers to create and maintain a specific level of ERISA benefits, (2) that it requires employers to set up a separate system for SF, which defeats the uniformity promised by ERISA, and (3) that it requires an examination of employee benefits in order to determine compliance and liability (which is an impermissible reference to ERISA plans).

The City argues that (1) the employers can just pay into the HAP, which is a perfectly good alternative that does not require setting up an ERISA benefit plan, (2) the administrative requirements are minimal, and (3) employee benefits must only be examined if the employer chooses to offer health insurance as opposed to paying into the HAP program.

Constant Readers, you are ready to discuss. Remember me when you are boring people at your New Year's Eve party!

--Melissa

And, since I had to grossly oversimplify the parties' arguments here, I am including the actual summary judgment filings so you all can read the arguments for yourselves. Now that you are experts, it should be a breeze!

Motion #1
City of San Francisco's Motion for Summary Judgment
Union's Motion for Summary Judgment
GGRA's Response to the City's and Union's Motions for Summary Judgment
City of San Francisco's Reply to GGRA's Response
Union's Reply to GGRA's Response

Motion #2
GGRA's Motion for Summary Judgment
City of San Francisco's Response to GGRA's Motion for Summary Judgment
Union's Response to GGRA's Motion for Summary Judgment
GGRA's Reply to the City's and Union's Responses

Melissa on ERISA, Part Two: Boring But Important Details

Constant Readers,

Before we jump into the specifics of the Golden Gate Restaurant Association v. City and County of San Francisco case, I want to take moment to go over the specifics of the Health Care Security Ordinance (HCSO), so I don’t have to keep spelling it out later.

The law itself basically has two parts: (1) the employer spending requirement (Sec. 14.3 and 14.4), and (2) the Health Access Program (HAP, aka "Healthy San Francisco") which is government-provided health care (in part funded by the employer spending requirement) for all uninsured San Francisco residents regardless of employment status. (Sec. 14.2.) [NOTE: The recent ruling did not strike down the HAP system - only the employer spending requirement part.]

The employer has to contribute a certain amount of money (see chart below) for each hour worked by a “covered employee”. A covered employee is one who has been employed for at least 90 calendar days and performs at least 10 hours of work per week in San Francisco. (Sec. 14.1(2).) The chart below is from the Office of Labor Standards Enforcement (the agency that is supposed to enforce the employer spending requirements) and sets forth the employer contribution rates:

So, where are the contribution rates supposed to go? Well, Section 14.3(a) of the HSCO says that a contribution must be “paid by a covered employer to its covered employees or to a third party on behalf of its covered employees for the purpose of providing health care services for covered employees or reimbursing the cost of such services for its covered employees.” Examples are:
“(a) contributions by such employer on behalf of its covered employees to a health savings account [];
(b) reimbursement by such covered employer to its covered employees for expenses incurred in the purchase of health care services;
(c) payments by a covered employer to a third party for the purpose of providing health care services for covered employees;
(d) costs incurred by a covered employer in the direct delivery of health care services to its covered employees; and
(e) payments by a covered employer to the City to be used on behalf of covered employees.” (Nonresidents who work in San Francisco aren't part of the HAP system but would get a City-administered health care reimbursement account.)

Finally, and this is important: there is a requirement that all covered employers keep records of (1) actual health care expenditures, (2) required health care expenditures, (3) proof of such expenditures made each quarter each year, and (4) voluntary waiver forms (submitted by employees who get health insurance through a spouse or some other source). (14.3(b) and Regs. 3.2(A)(5)(b).) Also the OLSE can make up whatever additional recordkeeping rules it wants. (14.4(a).) The penalties for failure to keep required records are no joke: $25 per worker per day. (Sec. 14.4(e)(2).)

Okay, got all that? On to the lawsuit...

-Melissa

Melissa on ERISA, Part One: Magic 8 Ball Says "Revise Law"

On December 26th, my friend Harry sent me the Judge'€™s ruling that struck down SF's Health Care Security Ordinance. My first thought was: "Yay! Finally a topic to write about that kinda rhymes with 'Melissa'!"

Second thought: "No one listens to me. People out here are just like family!"

Back in June, I wrote a post about San Francisco'€™s Health Care Security Ordinance (HCSO) in which I stated three things: (1) the Judge will prolly say it is preempted by ERISA, (2) it suffers from inexcusably poor and shortsighted draftsmanship, and (3) it is SO crappily written that it might actually be unconstitutional.

On December 26, Judge White of the United States District Court of the Northern District of California proved point #1 and ruled that the employer contribution part of the HCSO is preempted by ERISA. (I'll explain what that means in the third post of this series. Suffice it to say, the employer contribution part of the HCSO is dead for now.) Which makes points #2 and #3 moot. The case is Golden Gate Restaurant Association v. City and County of San Francisco.

In the next few posts, Ima tell you about the HCSO, ERISA and the recent case we'€™re gonna spend at least a year appealing to the Ninth Circuit, and why we need to stop the legal wrangling and either come up with a new funding mechanism or have Madame Speaker lead a charge to amend ERISA. Who knows? I may even offer some suggestions...like a tax on unnecessarily slow walkers, people whose cigarettes get smoke in my face on the sidewalk and crappy local bands.

Here's another forecast: I think that City Attorney Herrera's Emergency Appeal the Ninth Circuit is fixin' to fail. And I suspect he knows this. But he has to do everything in his power for the sake of appearance. Bless his heart! He is trying to argue that the employer contribution part of the HCSO needs to move forward even though Judge White just struck it down. However, the fact that we have lots of uninsured people does not constitute an emergency unless some catastrophe just caused the loss of insurance. And if the Court permits the employer contribution machine to get rolling, stopping the behemoth and issuing refunds to employers once the law is struck down will be like trying to put toothpaste back in the tube. Messy. Impossible. I think that the Court will opt for the unfortunate status quo. Then again, they don't call it the "Ninth Circus" for nothing.

But first, some Boring But Important information on the HCSO.

--Melissa

You Only Hurt the Ones You Love

San Francisco fancies itself to be far more than just a City. We are the smarter, prettier, more enlightened cousin of the troglodyte that is the rest of America. And if the rest of the nation won’t stop watching media coverage of Paris Hilton’s choice of hairclips long enough to get off their obese asses and pressure the State or Federal Government to do what’s right, we will do it ourselves. We declare our own foreign policy. Our own interpretation of the Second Amendment. Our own right to gay marriage. And now, our own universal health care.

Of course, being the legal trendsetter in this country means that other cities and states watch what we do here because they are too wussified to take risks. Will the world end if gay people can marry? (No, New Jersey.) Will the economy collapse if we make paid sick leave mandatory? (No, Massachusetts. Stop raising your hand.)

Because we are scrutinized, we have a special obligation to make sure that our dramatic endeavors into the spotlight are intelligent, thoughtful and properly executed. With the rollout of the initial stages of the Health Care Security Ordinance set to begin on July 2, I turned my attention to the text of this law to make sure there are no embarrassing errors. Let's just say that I am fixin' to write several posts about this here topic.

Before I begin, let me state once loudly for the people in the cheap seats: I am in favor of universal health care.  Assuming the employer-contribution provisions are not stricken down in court (which I believe they likely will be), I want the law to look like something other places will want to copy.  Hence the title of this posting.

Ahem. Here we go. Despite being amended once to “work out the kinks” the law still has a number of problems. My friends have asked me (begged, really) to keep the postings here short so I will only go into one issue today. Others will follow. As most of you know, once the employer contribution piece of the HCSO kicks in on January 1, 2008, employers will be required to contribute anywhere from $1.17 to $1.76 per employee, per hour to one of several health insurance vehicles for the employee or pay that amount to the city to cover the cost of the uninsured employee.

One of the most important questions here then, is: WHO IS AN EMPLOYEE? Well, the law gives us two answers. Section 14.1(b)(2) of the HCSO says that a "'covered employee" is one who, in a particular week performs at least twelve hours of work for an employer within the geographic boundaries of the City.

Umkay. That’s a LOT of people – including a lot of wealthy ones whose health insurance travails I do not care to be bothered with.

Surely there must be a way to make sure we are spending our resources looking after the people for whom this legislation was intended? Surely there is a limitation in the law to prevent the taxpayer-funded Office of Labor Standards Enforcement (OLSE) from having to police the benefits offered to partners at Hellarich & Proudofit, LLP?

Which brings me to the second definition of employee in the HCSO. Its a limitation on the prior definition. According to Section 14.1(b)(2)(d) of the HCSO, “the term ‘employee’ shall not include persons who are managerial, supervisorial [sic], or confidential employees, unless such employees earn annually under $72,450 [figure to be adjusted annually].” Okay, I see where the drafters were going with this. The reason to exclude supervisors, managers and confidential employees is the (perhaps erroneous) presumption that they have enough money to be off the list of people we are concerned about.

However, let me state unequivocally that using "supervisor" "manager" and "confidential" as categories of people to exclude from the HCSO is wrong. Wrong. Wrongitty McWrong. Couldn’t be more wrong.

For folks familiar with labor law, the terms “managerial”, “supervisory” and “confidential” look very familiar. That’s because these are the main categories of people necessarily excluded from the coverage of the National Labor Relations Act (NLRA)(this is the law that gives employees the right to unionize). Lets start with the big momma of all labor law: the definition of a Supervisor. (Manager and Confidential will be dealt with in a separate post.) Do you know a labor attorney? Want to make them cry? Call them up and ask them to determine who is a “supervisor” for the purposes of the NLRA.

“Supervisors” have been excluded from the NLRA since 1947 and employers and unions have been fighting about what it means to be a supervisor ever since. According to one estimate, since 1995, there have been 1500 National Labor Relations Board cases and Court of Appeals cases that reference the NLRA's definition of "supervisor". (That's right - the NLRA even has a definition of supervisor - the HCSO does not!) That's because questions of authority and responsibility necessary to the determination of supervisory status are painfully fact-specific.

MAIN POINT ALERT: the NLRA excludes supervisors because the purpose of the law is to protect the rights of employees to unionize. It is fundamental to the nature of protecting those rights that supervisors (whose allegiance is likely to the employer) stay the heck out of unions and union meetings. So, yes, exclude supervisors from the NLRA. But the HCSO doesn’t need that kind of distinction. Does giving a supervisor health care impinge on the rights of non-supervisory employees to get proper health care? No.

Like I said before, I don’t care about what rich folks do about health insurance so I agree that they should be excluded. But using the “supervisor” definition to make that distinction is just dumb as hell. It will create massive problems that are totally unnecessary. What we are after is inclusion of the neediest among us and an exclusion for those who do not need the law's protection.

Its like we want peanuts so we're buying an airplane.  There is a better way to get peanuts, y'all.

Instead of saying supervisors, managers and confidential employees are excluded unless they make less than $72,450, why not just say all people who earn less than $72,450 are covered and those earning more are not? (Or some other annual salary cutoff – the number is not as important as the simplified inquiry.)

Let’s amend the law while we still can – before the effective date of January 1, 2008.  Would be a shame if we tripped on our lovely progressive frock at the national coming-out party.

-Melissa

BONUS Law Nerd Quiz: The US Constitution requires that laws be written so that the average person can know whether they are violating the law. Laws that are written so crappily that you can't know if you are following them or not are said to be "void for vagueness." If implemented in its current form, the HCSO is unconstitutionally vague because neither the law nor the regulations define "supervisor" "manager" or "confidential" employee. How can an employer know who is covered?  When a lawsuit is brought to strike down this law because it is unconstitutional, guess whose tax dollars will have to be spent in the futile exercise of defending the HCSO in court?