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Judge strikes down San Francisco’s health insurance mandate

SAN FRANCISCO In a victory for the restaurant industry, a federal judge has overturned a measure that would have required local employers to either provide their staffs with health insurance or pay a per-employee fee to fund coverage from the city. The citywide mandate was set to take effect Jan. 2.

The employer obligation, known as a play-or-pay plan, has figured into a number of state and local proposals to fund universal health insurance coverage. But U.S. District Judge Jeffrey White said on Wednesday that states and local jurisdictions are forbidden by a 1974 federal law from regulating employee benefits. By setting requirements on employers, San Francisco was “mandating employee health benefit structures and administration,” White reasoned. He struck down that provision of the law, which aims to insure the estimated 82,000 local adults who currently lack coverage.

Under San Francisco’s law, any business employing at least 20 people would have been obliged either to insure all of the staffers or pay a fee to an urban health program, which was expected to cost $200 million annually. The exact fees had apparently not been determined.

Mayor Gavin Newsom said he would proceed with the plan despite the loss of funding from restaurants and other employers. City attorney Dennis Herrera intends to appeal the decision and will ask the 9th U.S. Circuit Court of Appeals to allow the employer fee to be assessed as planned until the challenge is decided, the San Francisco Chronicle reported on its website.

The article described San Francisco’s “groundbreaking” law as “a potential model for other California cities and the state.”

Gov. Arnold Schwarzenegger surprised the restaurant industry when he called in January for statewide universal health insurance, with the coverage to be funded in part by a play-or-pay plan. The Republican governor proposed that businesses employing at least 10 people be required either to provide insurance or pay a 4-percent tax on their payrolls. In May, Democratic state lawmakers proposed a funding mechanism that would have required employers to contribute 7.5 percent of what they spent on their payrolls.

The California Restaurant Association has proposed that the state instead levy a 1-cent sales tax to pay for the statewide program.

The Golden Gate Restaurant Association, one of the groups that challenged the San Francisco health care plan in a November 2006 lawsuit, has voiced support for imposing a 0.25-percent sales tax instead of levying mandates on employers.

“Illegally pushing the crushing cost of health care onto the backs of the small businesses who are working to create jobs in this city and whose income helps pay for vital city services is not the answer,” said GGRA executive director Kevin Westlye.

Asales-tax increase would have to be approved by voters in a ballot initiative. In a statement, Westlye said that similar levies have been used by San Francisco to pay for transportation and education initiatives.

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