Restaurant industry insiders expect universal-health-care proposals involving employer mandates to remain a hot topic this year, even after a federal court in late December overturned a San Francisco law requiring businesses to provide insurance for their employees or pay fees to support the city’s new insurance program.
That ruling in favor of the co-plaintiff Golden Gate Restaurant Association cited federal law prohibiting local and state jurisdictions from regulating employee benefits. The city has appealed, but even if the 9th U.S. Circuit Court overturns District Judge Jeffrey White’s decision, his ruling nonetheless highlights the idea that health care reform should be a nationwide effort, not a hodgepodge of state and city initiatives that only invite other aggrieved plaintiffs to wage legal battles, say operators and industry activists.
“If [the appellate] decision comes down in our favor, I think it would encourage others to fight a patchwork of ordinances,” said Kevin Westlye, executive director of the Golden Gate Restaurant Association, which was one of the groups that sued the city after it passed its universal-care act. “But the real solution needs to be national, not city or even state.”
Last year, 23 states introduced bills specifically requiring employers to provide health care benefits or pay a fee to the state, according to the National Restaurant Association. Other states, such as Colorado and Utah, have created task forces to examine reforms that would provide health care to all state residents.
An estimated 47 million Americans did not have health insurance in 2007, a 2.2 million increase from 2006, according to the U.S. Census Bureau, and the cost to businesses continues to rise. The Kaiser Foundation projects that companies will see a 6-percent increase in premiums in 2008, while the portion of health care costs paid by workers is expected to go up twice the rate of inflation, as it did last year.
While no state has been successful in mandating health insurance since Massachusetts enacted a plan in 2006, operators are closely watching the progress of several states that include some type of employer “play-or-pay” mandate and could be effected by the recent court rulings, said Kelly Benedetti, vice president of state industry relations for the NRA.
Just after Christmas, U.S. District Judge White overturned a measure by the city of San Francisco set to take effect Jan. 2 that would have required local employers with 20 employees or more to either provide their workers with health insurance or pay a per-employee fee to fund a city program.
White ruled that the employer obligation violated a 1974 federal law forbidding local jurisdictions and states from regulating employee benefits.
Known as the Employee Retirement Income Security Act, or ERISA, the law originally was passed to protect pensions, but it also protects employers from state mandates for specific health insurance benefits. The idea was to prevent companies that operate in several states from having to deal with numerous and differing insurance plans, Benedetti said.
“This is the biggest challenge states face,” she said of the ruling. “Many of their ideas do violate ERISA.”
The San Francisco ruling has operators keeping a close watch on California’s recently proposed statewide legislation for universal coverage. The $14 billion plan calls for employers to spend from 1 percent to 6.5 percent of their payrolls—depending on the size of their workforces—on health care benefits. If they don’t offer benefits, they would be asked to pay the equivalent into a state fund that would help workers obtain coverage. Funds also would come from a tax on hospitals and a tobacco sales tax.
If the proposed state plan becomes law, it will undoubtedly also face legal challenges, said Jot Condie, president of the California Restaurant Association, which supports a proposed 1-cent sales tax to fund universal coverage.
“I don’t think the judge’s ruling will necessarily impact the Senate’s position on the bill, as a number of lawyers have advised those drafting the bill that they believe this would withstand ERISA scrutiny,” Condie said. “There is a lot of momentum and I would imagine substantial pressure to pass the bill.”
The court ruling in San Francisco also may offer strong arguments against a recent proposal in the District of Columbia to establish a sick-leave bill, said Andrew Kline, general counsel for the Restaurant Association of Metropolitan Washington.
The D.C. City Council this month was debating the measure, which would require businesses with 51 or more employees to provide seven days of paid leave. Smaller businesses would be allowed to offer fewer days.
“We’re looking at that [San Francisco] decision to see if it has some applicability to what may pass in the District,” Kline said. “Many of our members already provide certain benefits to employees. The labor market is too tight, particularly in the Washington, D.C., area, that you have to offer something extra to attract employees. If everyone is offering what you offer, you have to offer more, so your costs will increase. But with a 4-percent profit margin, there’s not a lot of room.”
In 2008, health care reform has become the new minimum wage—a volatile issue to bring out voters in an election year, said Carol White, chief executive of the New Mexico Restaurant Association.
Minimum wage “was a way to get people to the polls to vote positively for a [higher] wage for themselves, and health care looks like that kind of issue—[to get people] to go to the polls and vote for health care, no matter what it does to the economy or businesses,” White said.
New Mexico’s governor, Democratic presidential candidate Bill Richardson, is calling on the state’s legislators to fine-tune a multimillion-dollar measure for voters that would mandate that all state residents have health coverage by 2010. Revenue would come in part from taxes on insurance companies and from fees paid by employers.
Early drafts call for employers who don’t offer health insurance to pay a fee of $500 per full-time employee and $250 per part-time employee, White said.
“We’ve had single-payer proposals for the last four or five years, and although the legislature has a short session this year—30 days begin Jan. 15—it’s a serious threat this year,” she said. “The governor may call for a special session to pass this legislation.”