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January 01, 2008

ERISA pre-emption ruling bites San Fran health care coverage mandate

What better way to return from a week of vacation than with a little ERISA pre-emption jurisprudence.  To repeat my precis on the subject from just about this time last year: In a nutshell (and with apologies to ERISA lawyers), Federal ERISA law pre-empts state law that relates to insurance in the context of employee benefits.

It's always interesting to see which health care coverage mandates founder on the rocks of ERISA pre-emption, which get a pass, and which don't even have to be defended because nobody bothers to challenge them.  As usual, the bottom line is more about realpolitik than The True Meaning of ERISA (or whatever other law may be at issue); folks whose noses aren't out of joint don't sue -- the lesson being: do your homework. 

For better or worse, witness the Massachusetts experience (no ERISA pre-emption challenge due in large part to the fact that employers and the SEIU were brought into the big tent early on) vs. Maryland and -- this week's poster child -- San Francisco (both challenged and held pre-empted). 

For further reading on the recent San Fran ordinance being struck down, see the WSJ Health Blog and Stephen Rosenberg's Boston ERISA and Insurance Litigation Blog.  (Rosenberg bemoans the choice of Maryland as test case; again, it seems to me that such challenges are brought only if the plaintiffs aren't seated at the table.)  See my earlier post on the Maryland Wal-Mart ERISA decision here.

Update 1/10/08:  The federal appeals court ruled the San Francisco pay or play plan may be implemented pending appeal.  Score one for the city.  Employers are less than thrilled.

-- David Harlow

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. . . "witness the Massachusetts experience (no ERISA pre-emption challenge due in large part to the fact that employers and the SEIU were brought into the big tent early on)" . . .

David, could you expand on which parts of the Mass. plan you would have expected to be challenged under ERISA? I was not aware that it included any employer-related mandates liked the Md. and Cal. efforts, but Mass. admittedly isn't my bailiwick so I might've missed it.

Paul -- I'm thinking of the pay or play employer mandate for firms with more than 10 FTEs. See http://www.mahealthconnector.org.

Very interesting. Thanks for the link!

The key is for states to approach this issue via their national legislators. Hawaii got an exclusion despite legal challenges. If enough states push the issue they should be able to do so also. The two national parties appear open to the states pushing this issue as a means to "test the waters" for national action.

Wade -- Excellent point. As the national health care debate gets teed up for the next Congress (or the one after that, or the one after that . . .), the states should continue to act as laboratories for experimentation in this arena. It would be nice if they could do so without having to look over their shoulders at the spectre of ERISA pre-emption.

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