A federal appeals court gave San Francisco the green light Wednesday to
require employers to help pay for health care for uninsured workers and
residents, and it signaled that it is likely to uphold the city's groundbreaking
universal coverage law.
A three-judge panel of the Ninth U.S. Circuit Court of Appeals allowed San
Francisco to enforce its law and extend coverage to all uninsured adults while
the city appeals a federal judge's decision striking down a key funding
provision.
That provision requires large and medium-size companies to offer insurance to
their employees or pay a fee to the city for the cost of their coverage. The
court said the city probably would win its argument that U.S. District Judge
Jeffrey White was wrong when he ruled Dec. 26 that local governments lack the
power to force employers to contribute to a health care program.
That the ruling allows the law to take effect during the city's appeal is
unusual. Generally, appellate courts refuse to allow enforcement if a lower
court has found part of a law invalid. In this case, however, the appeals court
said it was granting San Francisco's request for an emergency stay of White's
ruling because the city had a strong argument and because of consequences for
people who cannot get health coverage.
"Otherwise avoidable human suffering, illness and possibly death will result
if a stay is denied," Judge William Fletcher said in the 3-0 decision.
The court's attitude makes it more likely that a proposed state health care
law, which the Assembly has approved and Gov. Arnold Schwarzenegger supports,
will survive any legal challenge. Like the San Francisco measure, the state
measure depends in part on funding from employers. The Senate has yet to take up
the bill.
"It's a tremendous victory for those who want to see the state do something
in this area," said Stacey Leyton, lawyer for a group of labor unions that
joined in the defense of the San Francisco law.
City Attorney Dennis Herrera said the ruling would make thousands of
uninsured San Franciscans eligible for health coverage in the next few months. A
ruling against the city, he said, "would very likely frustrate state and local
health care reform efforts throughout the nation."
The law was challenged by the Golden Gate Restaurant Association, which
represents more than 900 Bay Area establishments. Dan Scherotter, the
association's incoming president, said the restaurants were disappointed but
would comply with the ruling and remained confident of winning after the court
hears all the evidence.
The judges put the case on a fast track. Final written arguments are due in
April, and a ruling in the summer or fall is a possibility.
Scherotter, chef and owner of Palio D'Asti restaurant in the Financial
District, said he and other restaurant owners would have to lay off employees
and raise prices to comply with the ordinance. He said he now provides insurance
for most of his 65 employees, but not at the levels mandated by the city.
"The reason we're suing is that (health insurance) is unaffordable for a lot
of people and businesses," Scherotter said. The restaurant association has
proposed a quarter-cent increase in the local sales tax to replace employer fees
as a source of health care funding.
The San Francisco ordinance, the first of its kind in the nation, is designed
to provide care at a network of hospitals and clinics for about 73,000 uninsured
adults who are not covered by the Medi-Cal program for the poor or Medicare for
the elderly.
Most of the estimated $200 million annual cost is to be covered by state and
local taxes and by payments from patients based on their income. The rest, less
than 20 percent of the total, would come from fees paid by employers who don't
offer insurance.
About 7,350 residents were enrolled during the last half of 2007, when
eligibility was limited to those making less than the federal poverty level of
$10,310 a year for individuals. The city had planned to remove the eligibility
limits Jan. 2, but White's ruling against the employer fees led officials to
restrict enrollment to those making up to three times the federal poverty level.
That left about 26,000 uninsured residents out of the program. Some of those
are among an estimated 20,000 employees in San Francisco whose companies provide
no insurance. The ordinance provides coverage for those employees - some of them
nonresidents - either in the city program or in a new health plan offered by
their employers.
The provision that the restaurant association challenged requires private
employers with at least 20 workers, and nonprofits with at least 50, to provide
coverage at dollar amounts set by the city or to pay a fee to cover the city's
cost of care for their uninsured employees.
White ruled that the provision violated a 1974 federal law that prohibits
state and local governments from regulating employee benefit plans. But the
appeals court said the federal law, intended to promote uniformity in benefit
plans, leaves a city free to protect its residents' health and welfare as long
as it does not require an employer to adopt a particular health care plan, or
alter an existing plan to provide specific benefits.
To comply with the San Francisco ordinance, "employers need not have any
(health) plan at all; and if they do have such a plan, they need not make any
changes in it," said Fletcher, who was joined by Judges Stephen Reinhardt and
Alfred Goodwin. Fletcher said companies are simply required to spend a certain
amount on employee health care, either as insurance premiums or as payments to
the city.
He also said the hardships that the city and its residents would suffer from
a delay in implementation would be far greater than the harm to restaurant
owners from having to abide by the law during the appeal.
E-mail Bob Egelko at begelko@sfchronicle.com.