- Action item: Employers with 11 or more full-time equivalent employees in Massachusetts should be preparing to file their Fair Share Contribution (“FSC”) and Health Insurance Responsibility Disclosure (“HIRD”) information online at https://fsc.detma.org. The filing, relating to the October 1, 2007 - September 30, 2008 reporting year, must be completed between October 1st and November 15th. Please see our previous Alert entitled, “Mass Confusion: Update on Massachusetts Health Care Reform” dated November 9, 2007, for further details regarding the FSC and HIRD requirements. To see the Alert, click here.
- Legislative Changes: The Massachusetts Division of Health Care Finance and Policy issued final regulations on the FSC on September 30, 2008. No immediate action is required as these regulations do not affect the October 1, 2007 - September 30, 2008 filing noted above. The regulations modify the tests used to determine an employer’s FSC liability. In addition, recent legislation will require the director of unemployment assistance to determine each employer’s liability for its FSC on a quarterly, rather than an annual, basis. Employers will have to file required reports and pay any FSC assessments on a quarterly basis. Finally, revisions to the minimum creditable coverage regulations have been proposed. Future Alerts will address these and other changes in more detail.
The 9th Circuit Court of Appeals recently upheld a challenge to the employer spending requirements of a San Francisco health care ordinance (“Ordinance”). Golden Gate Rest. Ass’n v. City and County of San Francisco, 2008 U.S. App. LEXIS 20574. The Ordinance requires employers to make minimum health care expenditures on behalf of covered workers. Employers that fail to contribute at the required expenditure levels (an hourly rate based on employer size and for-profit status) satisfy their spending requirement by remitting the difference to the city. The remitted funds are used to assist with the funding of a city-administered health care program for non-insured workers. The Appellee, the Golden Gate Restaurant Association, supported by various entities including the Department of Labor, argued that ERISA preempts the Ordinance either because such requirements create an ERISA plan or because they “relate to” employers’ ERISA plans. Under ERISA, if a state law conflicts with ERISA in an area under ERISA’s purview, it is deemed invalid.
In holding that the Ordinance was not preempted by ERISA, the court noted that state and local laws enjoy a presumption against preemption when operating in a field traditionally reserved for states, and went on to opine that regulation of health matters is a traditional state concern. The court also determined that the obligation to make payments to the city (and the associated administrative burdens) did not create an ERISA plan, nor did the city-administered health care program rise to the level of an ERISA plan. Further, the court found that the Ordinance lacked either i) a “connection with,” or ii) a “reference to” an ERISA plan that would cause the Ordinance to “relate to” employers’ ERISA plans and cause ERISA preemption. In order to reach its decision, the court had to distinguish other decisions with similar facts, including Retail Industry Leaders Association v. Fielder, 475 F.3d 180 (4th Cir. 2007), in which a Maryland law requiring employers to spend at least 8% of their total payrolls on employees’ health insurance costs or pay the amount of the shortfall to the state, was held preempted by ERISA.
The 9th Circuit’s interpretation of ERISA preemption under these facts and in the face of conflicting case law, accompanied by the growth of similar health care reforms and related challenges in other states, may well invite future Supreme Court review of the issue and possibly this case