Professor Ed Zelinksy has posted this interesting piece on SSRN entitled “Employer Mandates and ERISA Preemption: A Critique of Golden Gate Restaurant Association v. San Francisco.” In the paper, he predicts that, if the Ninth Circuit maintains its position in the case (which you can read about in a previous post here) the Supreme Court will likely overturn the decision. The Golden Gate Restaurant Association has filed a Petition for Rehearing En Banc asking the Ninth Circuit to consider an en banc review of the decision.
One of Zelinksy’s arguments is as follows:
In sum, Golden Gate II concludes that an employer’s ongoing payments under the San Francisco ordinance do not give rise to an ERISA plan because the employer has neither significant administrative tasks nor discretion in connection with those payments. If so, an employer’s ongoing payments to a traditional insurer, HMO, PPO or HSA provider do not constitute an ERISA plan either, since those payments also entail the same, quite minimal administrative burdens and discretion for the employer. These providers, like San Francisco, perform the administrative tasks and execute the discretionary functions necessary to furnish medical care to employees.The Ninth Circuit’s ERISA analysis of employers’ payments to San Francisco disregards the language of the statute and is a classic argument that proves too much. If correct, the Ninth Circuit’s analysis would radically reconfigure our understanding of ERISA by exempting from its coverage the many programs by which employers finance medical care for their employees through payments to insurers, HMOs and PPOs. It is more convincing to recognize that San Francisco under the ordinance acts like any other health care provider, including the exercise of administrative responsibilities and discretionary functions. Consequently, all ongoing payments to these equivalent health care providers, including the City of San Francisco, constitute employee benefit plans for ERISA purposes.
Please note that the DOL makes this same argument in their Amicus Brief filed in support of the Petition for Rehearing. Excerpt:
The Secretary [has] explained that when an employer chooses to fund health benefits for its employees by making payments to the City under the HAP program, the employer establishes an ERISA-covered plan for its employees, just as an employer establishes an ERISA-covered plan when it provides health benefits for its employees through the purchase of insurance. Id. at 13-14 (citing Qualls v. Blue Cross of Cal., 22 F.3d 839, 843 (9th Cir, 1994) (holding that an employer’s purchase of insurance for its employees creates a plan because of the “complex ongoing relationship between the insureds and the insurer which require[s] the constant administrative attention by the insurer”).There is no relevant difference between an employer’s decision to provide benefits through HAP or to provide benefits through the purchase of insurance – in both cases, the employees receive their benefits from a third party and the program is substantially administered by a third party. Nothing in the statute or the case law turns on whether the particular benefit arrangement relies upon a private insurer for the administration of benefits, rather than public employees or contractors hired by the City. Whether the employer provides benefits through private insurance or HAP, it has elected an arrangement for providing ERISA-covered benefits to its employees that meets the established test for determining whether a plan exists.