Pay or Play Lives On in San Francisco

I haven’t had a chance yet to talk about San Francisco’s bold plan to cover the city's uninsured using a mixture of existing employer-based insurance and a public plan that anyone under 500% of the poverty line can buy into.  But there’s big news on that front today:  the 9th U.S. Circuit Court of Appeals has rejected the appeal by the Golden Gate Restaurant Association, which is challenging the employer mandate in San Francisco’s Health Care Security Ordinance.  Why should the legal challenges to a local universal health care program matter to those of us not in the City by the Bay?

Two words:  precedent, baby!

It hasn’t gotten much ink compared to other fault lines in the national health care debate, but the employer mandate (a.k.a. “pay or play”) has been a source of controversy in the past.  Bill Clinton’s employer mandate sparked resistance from small business, who then helped kill his plan.  Massachusetts was more or less at a stalemate over its modest employer mandate until Gov. Romney won businesses over by insisting on an individual mandate as well, under the auspices of “shared responsibility.”  Small businesses this time around have been vocal advocates for health care reform, but many – including me -- are waiting for the shoe to drop, especially since the “pay or play” model is necessary to the success of the comprehensive plans put forward by Sen. Baucus and the president.

The idea is simple enough – businesses must either “play” by providing quality health benefits (“quality” to be defined later) or pay into a common fund which helps subsidize those who want to purchase private insurance but can’t afford it (Massachusetts), a public coverage plan (SF’s Healthy San Francisco) or both (Obama/Baucus).  In all cases, the smallest businesses are exempted (in San Fran, it’s businesses with 20 employees or fewer) and the employees are covered through the public coverage option.  For businesses over 20 employees, the going rate is $1.23 per worker per hour and goes up to $1.85.  The business owner can either offer benefits at a rate equal or above that (play), give money equal or above into health savings accounts (play-kinda) or pay it directly to the city.  So far, $35 million has been collected this year from employer to help pay the $170 million projected cost of Healthy San Francisco. If you’re making the $8/hour minimum wage for a small business in California, the cost to employers for your health care equals 15% of your salary.

It all sounds reasonable until you take it into court to challenge the very concept, which really hasn’t done before.  Then, who knows?  Since we’ve been thinking of the New Deal so much, it’s worth mentioning that a fair number of those progressive programs were struck down by the Supreme Court in the early years.  Opponents have long questioned the constitutionality of pay-or-play and whether it conflicts with ERISA and other federal laws.  But there’s a 50-50 chance that our Supreme Court will decline to hear the further appeal, and a very good chance that they’ll uphold prior rulings, even if they do.

I’d rather have the Golden Gate Restaurant Association take one for the team to establish the precedent than have this be a still-open question when the federal government passes its own comprehensive health care reform.

(Photo credit:  SF Brit on Flickr.)