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Health reform comes slowly for California

State leaders vow to try to extend insurance coverage, though a Dec. 26 US court ruling complicates their efforts.

By Staff writer of The Christian Science Monitor / December 31, 2007



Oakland, Calif.

California political leaders are pushing forward with a healthcare reform effort backed by the star power of Gov. Arnold Schwarzenegger despite an ominous legal ruling last week.

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The city of San Francisco had tried to mandate that employers spend a certain amount of money on health programs for their employees. A district judge found that violated the Employee Retirement Income Security Act (ERISA), a 1974 federal law that has preempted healthcare initiatives from Maryland to Suffolk County in New York.

The ruling reiterates the almost Sisyphean nature of healthcare reform at anything but the national level, say legal experts. But despite Wednesday's decision, Governor Schwarzenegger and Assembly Speaker Fabian Núñez released key details late Friday of their own health plan, signaling they are still willing to try to push the boulder back up the hill.

"We knew from the outset that there will always be a risk with ERISA, but we've made a point of trying to work with two top ERISA experts," says Steven Maviglio, spokesman for Mr. Núñez, in an e-mail.

"Quite frankly, the only alternative is to do nothing and wait for the federal government, which has made it pretty clear they aren't doing anything," he wrote.

Expanding health coverage to the uninsured requires some funding mechanism. One route is a broad-based tax. That's both unpopular and risky: Employers, who are the main providers of health insurance, may decide to drop coverage and let government pick up that burden.

Instead, many plans – including San Francisco's – have tried to force employers who are not providing health insurance to shoulder some of the burden.

But that's proved to be nearly impossible given ERISA, a law preventing state and local government interference in employer-provided benefits.

In his written opinion striking down San Francisco’s employer mandate, Judge Jeffrey White suggested a workaround to lawmakers: lawmakers should tax all businesses but offer tax credits to those that already provide health coverage. [Editor's note: This paragraph was mistakenly removed from the original version of this story.]

The state's reform proposal does just that, argues Anthony Wright, executive director for Health Access California, an advocacy group that helped draft the legislation.

The California plan requires "contributions" from businesses ranging from 1 to 6.5 percent of the wages paid to employees. However, employers can deduct the money they spend on employee health insurance, wellness programs, or other types of health assistance.

"I don't think any lawyer will say this is a slam-dunk, but this is perhaps the best chance we have" at skirting ERISA, he says.

The plan also relies on a $1.75 per pack hike in cigarette taxes and new fees on hospitals. The diversity of revenue streams, as well as the fact that they must be ratified by voters through a ballot initiative, will strengthen the plan if it's challenged in court, says Mr. Wright.

But legal experts aren't so sanguine.

The plan still affects – in a direct enough way – how employers will set up and manage their benefit plans, says Paul Secunda, professor of law at the University of Mississippi. "This is a real no-no."

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