On Monday, in Golden Gate Restaurant Association v. San Francisco, the U.S. Supreme Court denied review of a legal challenge to San Francisco's universal health care program (the "Healthy San Francisco Plan"). In 2006, the City and County of San Francisco created a local health care plan designed to improve health care access for low and moderate income residents. An important source of funding for the plan came from the employer spending requirements - commonly termed "pay or play" provisions. Basically, this provision requires certain employers to spend a minimum amount on health care for their employees. They can do this directly (for example, by setting up a traditional employee-based health plan, establishing an on-site clinic, or reimbursing employees for certain health care expenditures) or they can satisfy this requirement indirectly by paying into a city-based health plan which their employees can join.

The Golden Gate Restaurant Association challenged this employer spending requirement by claiming that it was preempted by the federal Employee Retirement Income Security Act of 1974 ("ERISA"). This case represents the latest in a long line of legal challenges by employers using ERISA as a shield against state and local regulation designed to improve health care access for consumers. The practical impact of the Supreme Court's denial of review is good because it preserves the Healthy San Francisco plan for now. Unfortunately, the case highlights the legal uncertainty facing states and local governments that want to craft local solutions to their health care crises. This uncertainty is unacceptable given the long history of ERISA being used to frustrate state and local reform efforts and the fact that this kind of local reform will probably still be needed even after federal health reform is implemented.

ERISA Preemption

ERISA was passed by Congress in 1974 to safeguard employees from the abuse and mismanagement of funds collected to finance employee benefits plans. State laws had been ineffective so Congress established extensive federal reporting, disclosure, and fiduciary duty requirements on employers. Congress also wanted to ensure a uniform regulatory regime for employers that operated in multiple states, so ERISA expressly preempted "any and all State laws insofar as they...related to any employee benefit plan."

While ERISA does not address issues specific to health care benefits, it does contain an express exception to preserve traditional insurance regulation by the states. In fact, the U.S. Supreme Court has repeatedly noted that ERISA was not intended to displace general health regulation, which is historically a matter of local concern. Nonetheless, employers consistently try to use ERISA to argue that state health care regulations impacting employers are preempted and thus invalid. Because the scope of ERISA preemption is not clearly defined in the statute, courts have been instrumental in defining how far states can go in regulating employers: How do we know when particular laws "relate to" an employee benefit plan and thus are preempted by ERISA or constitute the kind of health regulation saved from preemption?

Challenges to state and local health reform laws that require employers to share financial responsibility highlight this ambiguity. In 1980, in Standard Oil Co. v. Agsalud, the Ninth Circuit struck down a Hawaii statute that would have required employers to provide health care plans for their employees. The court held that it was preempted by ERISA because it regulated aspects of plan administration, such as reporting and benefits administration, that "related to" ERISA plans. However, in 2008 in Golden Gate, the Ninth Circuit upheld San Francisco's "pay or play" provision, finding that it was not preempted by ERISA. Although the plan required a minimal contribution by employers to help improve health care access for their employees, the court held that it did not "relate to" an ERISA plan for three reasons: it did not require the employer to establish a traditional employee-benefits (ERISA) plan; it did not mandate the kind of benefits that employers would have to provide; and employers had a meaningful choice between satisfying the requirement directly and paying into a city plan open to their employees.

Just one year before Golden Gate , a Maryland "pay or play" law was struck down by the Fourth Circuit in Retail Industry Leaders Ass'n v. Fielder. Like the San Francisco plan, the Maryland law required employer participation and gave employers a choice between providing benefits directly and paying money to the state of Maryland. The court found that the law was preempted by ERISA, however, because the law did not give employers a "meaningful choice" and thus effectively required an employer to establish an employee-based benefit plan. The expenditure required was significant (employers had to spend at least 8% of total payroll on employees' health insurance costs) and, unlike the San Francisco plan, the Maryland law provided nothing in return to the employer or its employees if an employer did pay money directly to the state. No reasonable employer would pay this money to the state instead of paying into an employee benefits plan.

Based on the Fourth and Ninth Circuit decisions, it seems that the law's impact on employers, flexibility in the method of compliance, and meaningful choice are critical factors in determining whether state or local reform laws will be preempted by ERISA. However, none of these factors is clearly defined and we don't know how important any one factor is to the analysis. The Supreme Court's denial means this ambiguity still exists.

Effect of PPACA

The Golden Gate case highlights another interesting unknown: the impact of the federal reform law, the Patient Protection and Affordable Care Act (PPACA), on ERISA challenges to state and local health reform. Before denying review of Golden Gate, the U.S. Supreme Court asked the federal government to weigh in on the issue of ERISA preemption. In an amicus brief, the federal government asked the Court not to review the decision, which meant letting San Francisco's plan remain in place.

First, the government asserted that "[a]lthough [PPACA] accomodates state authority over regulation of health insurance, it significantly reduces the potential that state or local governments will choose to enact health care programs like [this one]." While, this may be true to some extent, health policy experts agree that PPACA's tax "penalty" on employers is not significant enough to influence decisions to establish or keep benefit plans, a number of people will remain uninsured because they will not be able to afford insurance, and states with large numbers of undocumented immigrants will be forced to craft local solutions to improving access and reducing costs for this population. PPACA will not obviate the need for state and local reform, so more ERISA challenges are likely.

Second, the federal government admitted that it does not yet know what impact the PPACA will have on the question of ERISA preemption, and it needs more time to figure this out. In fact, in 2008, the U.S. Department of Labor had sided with the employers in Golden Gate, arguing that the employer spending requirement was preempted and indicating its intent to promulgate regulations consistent with that position. Since Obama took office and the PPACA was passed, however, the agency has decided not to issue the proposed regulations.

Although the government urged the Supreme Court to deny review of the legal challenge, it did not take a position on the question of ERISA preemption. Rather the federal government said that it needed time to determine whether the new federal requirements of PPACA have independent preemption consequences or otherwise help to define the scope of state power under ERISA. The government felt it would be premature for the Court or the Department of Labor to determine preemption before the full regulatory scope and impact of PPACA could be fleshed out -- creating even more uncertainty about the impact of ERISA on state and local health reform efforts.

In sum, while the Supreme Court's denial of review preserves the Healthy San Francisco plan for now, it also leaves unanswered two very important questions: To what extent does ERISA limit states' power to require employer participation in local health reform? And what impact, if any, will the PPACA have on the scope of this power? The Supreme Court's decision on Monday means we have to wait for the U.S. Departments of Labor and Health and Human Services to answer these questions.

In a recent post titled "California May Get Jump on Feds with Prior Approval of Health Insurance Rates," Frederick Pilot discusses legislation approved by the California state Assembly last week that would require prior approval of insurance premiums for managed care service plans and traditional indemnity insurance policies. For more information on health insurance reform, go to the Health Insurance Crisis Blog.

A recent New York Times article describes a growing trend among states to restrict access to abortion. These restrictions are coming in various forms: some are outright bans on abortion after a certain time, some ban insurance coverage for abortions in the new health insurance exchanges, and some try to discourage abortion through the use of ultrasound and the interrogation of women about their reasons for seeking an abortion. In an earlier posting, I have explained why mandatory ultrasound laws are unconstitutional and unethical, and I will continue to look at other laws to examine their legality and impact on health care for women. For a comprehensive overview on state laws regulating abortion, you can visit the Guttmacher Institute website at http://www.guttmacher.org/sections/abortion.php. The Guttmacher Institute is an organization dedicated to advancing sexual and reproductive health through research, policy analysis, and public education. It monitors these state developments and provides regular updates.

There is a growing trend among states to try to make abortions more difficult to access, and a law passed in Oklahoma provides the latest example of this trend. In April, Oklahoma passed a law that requires women seeking an abortion to undergo an ultrasound, and during the ultrasound, the woman must be shown a fetal image and hear a verbal description of fetal characteristics, such as heartbeat and size. The hope is that if women view a sonogram and hear details about the embryo or fetus they will change their minds and decide to preserve the pregnancy.

Supporters of these "mandatory ultrasound" laws try to justify them on "informed consent" grounds - they claim that this is necessary to ensure that women have all the information they need to make an informed choice about abortion. However, a closer look at the Oklahoma law reveals a much more insidious purpose and strategy to undermine informed consent and interfere with women's reproductive choice. The law is an unethical invasion into the physician-patient relationship and an unconstitutional burden on a woman's reproductive rights.

The Supreme Court established the current test for determining when government regulation of abortion is unconstitutional in Planned Parenthood v. Casey. Under Casey, states can enact laws that ensure a thoughtful and informed choice and provide a "reasonable framework" for a woman to make a decision about abortion. The state may also enact rules and regulations designed to "encourage [the woman] to know that there are philosophic and social arguments of great weight that can be brought to bear in favor of continuiung the pregnancy to full term." On the other hand, regulation that "has the purpose or effect of placing a substantial obstacle in the path of a woman seeking an abortion of a nonviable fetus" would be considered an undue burden, and therefore unconstitutional. In short, while the state can express a preference for childbirth through its laws, it can only do so in a way that is reasonable and respects the woman's right to make an informed choice.

As written, the Oklahoma law violates both of these constitutional requirements. One problem with the law is the obligatory nature of the ultrasound and the manner in which both the ultrasound and information is being forced on women. A woman seeking an abortion must undergo an ultrasound despite the fact the medical standard of care does not require this to determine fetal age in the first trimester. (Some providers use ultrasound to determine age and check for abnormalities, but others use a less expensive and less intrusive means for gathering this information.) The law expressly requires the ultrasound to be performed using a vaginal or abdominal transducer, "whichever displays a clearer image." This essentially requires women to undergo an ultrasound using the more intrusive vaginal probe as a condition for obtaining an abortion, with no medical justification.

Moreover, during this intrusive and unnecessary procedure, the law requires the ultrasound screen to be positioned so that the woman can see it, and the physician or ultrasound technician is supposed to describe characteristics of the fetus or embryo, such as its heartbeat and dimensions, in detail. The woman is forced to avert her eyes to avoid seeing the screen (which the law allows), but there is no provision in the law permitting the woman to opt-out of the ultrasound itself or from hearing this information.

Forcing women to receive information in this manner is not really designed to ensure that women have the medically or other relevant information they need to make their decision. Indeed, Oklahoma, like many states, already has a comprehensive regulatory scheme that requires physicians to make such information available to women. By the state and supporters' own admissions, the image is being used to try to elicit an emotional response that will cause the woman to change her mind. While I have not yet seen reports of women changing their minds, women subjected to these kinds of laws so far have described the experience as "intrusive," "very cruel," and "emotional torture." They have been offended at the implicit assumption by the state that they somehow have not adequately considered the impact of their decision. And the worst part is that their health care provider - the one they are turning to at this vulnerable and scary time, they one they must trust to see them through an already traumatic medical procedure - is the one required to do the torturing.

Proponents of the law claim that this is simply designed to give women more information and thus is the "ultimate example of informed consent." However, this is a perversion of the ethical and legal doctrine of informed consent. Informed consent is a doctrine used to ensure that patients have relevant information to be able make an informed decision about medical treatment. But there are important corollaries to this duty. Physicians must respect the patients' autonomy, including whatever social or moral values guide the patient's decision. Physicians should not use their position of power or greater knowledge to trick or coerce a patient into a course of treatment based on the physicians' own moral values. More specifically, physicians should not provide information that distorts or unduly influences a patient to choose a particular course of action; information used in this way denies patients' real choice and thus undermines their autonomy. Finally, in addition to promoting autonomy, informed consent is supposed to promote rational decision making by patients. But information designed to elicit an emotional response that subverts or overwhelms the patients' ability to think through her decision does not further this goal.

Another problem with the law is a licensing requirement that has not gotten as much media attention, but which demonstrates even more clearly the real intent of this law: that's the requirement that the ultrasound be performed by a physician or "certified ultrasound technician." This is problematic for two reasons. First, it establishes a special licensing requirement for personnel performing ultrasounds in cases of abortion only; this requirement does not apply to ultrasounds performed on pregnant women carrying a pregnancy to term or on men or women getting ultrasounds to diagnose or monitor other medical conditions. Currently, ultrasounds can be and are safely performed by other medical professionals, such as licensed practical nurses who are trained and supervised by physicians. Indeed safety and qualification are clearly is not the motivating concerns if this heightened licensing requirement isn't being applied to women actually carrying their pregnancy to term given the state's express interest in protecting fetal health.

So why single out abortion for this requirement? The answer is clear when one considers the law's practical effect, detailed in a recent legal challenge to the Oklahoma law filed by the Center for Reproductive Rights. It describes the difficulty providers already face trying to recruit physicians to provide abortions due to the added legal burdens, stigma, and danger involved. The heightened licensing requirement would significantly increase the cost and practical difficulty providers face in recruiting physicians and certified ultrasound technicians to do ultrasounds, which, in turn, would create significant barriers for women seeking an abortion. This different regulatory standard for abortion ultrasound is not related to any medical or other legitimate government interest; it is a transparent attempt to make accessing abortion more difficult, if not impossible.

In short, the Oklahma law is an unconstitutional attempt to unduly burden women's attempts to access abortion by placing additional emotional, physical, financial, and legal barriers in their path. And by comandeering physicians in this "war on abortion" and using ultrasound as its latest weapon of choice, the law is also an unethical invasion into the physician-patient relationship.

Kaiser Permanente has been prominently featured as a model of success that should guide our future health care reform efforts by a number of sources, including the Economist, the Los Angeles Times, and the NBC Nightly News. Yet each time these stories appear, people come to me confused because of the bad experiences they've had with Kaiser, heard about from others, or read about in the paper. Indeed, in the last five years, Kaiser has been the target of law suits, regulatory action by the California Department of Managed Health Care, and numerous media stories about the way it mishandled its kidney transplant program, endangering lives and causing deaths. A few years ago Kaiser hospital got into trouble for dumping homeless patients in Los Angeles. And currently, Kaiser is one of the plans being sued for discriminating against children with autism by denying them medically necessary care that it provides for other kinds of patients. Even a very cursory internet search yields a number of websites whose purpose seems to be to expose bad faith denials and poor quality of care by Kaiser by offering patient testimonials and compiling examples of lawsuits.

Many people can't believe that this Kaiser would be considered a model for reform, so why is there such a disconnect between the people who see this Kaiser and those who paint a picture of a "successful" Kaiser that should be emulated?

The main reason is that the "success" these articles highlight is based on efficiency and cost savings - key indicators for business success. For example, the Economist article explains how Kaiser's integration of fixed-price health insurance with treatment using its own hospitals and clinics allows it to achieve efficiency gains that make it one of the cheapest healthcare providers in most regional markets in which it competes. The LA Times article similarly highlights aspects of Kaiser's structure that help it reduce cost - consolidating billing and administrative functions for physicians, using advanced technology to conduct electronic consultations, and centralizing access to electronic medical records. The LA times article was primarily focused on how Kaiser was able to continue growing its business in the midst of a troubled economy, keeping costs down and margins high.

Quality of health care is mentioned in these articles, but only briefly and in a very narrow sense. The Economist noted that Kaiser's approach achieves good health outcomes as well as good financial ones, but the focus was clearly on preventive care. The health care strategies and outcomes praised - wellness programs, early diagnosis of breast cancer, and the use of medical technology to facilitate healthy lifestyles and early diagnosis - all relate to prevention. This is important because for providers, like Kaiser, that have an integrated health care and financing model, prevention is directly linked to financial success. Keeping people healthy and catching illness early keeps costs down. In fact, the LA Times article highlighted Kaiser's "cradle-to-grave emphasis on prevention" as key to its financial health. It makes perfect business sense then that Kaiser focuses so many of its resources on prevention, and I think it is fair to say that prevention is one of Kaiser's strengths.

Unfortunately, two very important factors are missing in this analysis of Kaiser's "success": access to care and quality of care for the sick patient whose illness could not be prevented and who may need expensive, on-going care. People may suffer from illnesses that are not easily or inexpensively treated, such as certain kinds of cancer, heart problems, or diseases that require expensive surgery, like transplants. Many people also have chronic or disabling conditions, such as autism, that require long-term or regular care that can become very costly over time. Indeed this is a critical function of insurance and the reason many people purchase it - to ensure access to care which would otherwise be prohibitively expensive, and to avoid the severe financial consequences (like bankruptcy or homelessness) of medical catastrophe and exhorbitant health care bills.

In these cases, the financial interests of Kaiser (or any other insurer) are not clearly aligned with their health care obligations, and in fact are often viewed as conflicting. This can lead insurers to deny care or employ strategies to discourage treatment in order to reduce cost, and we've seen countless examples of this. It is precisely because of this strong financial incentive to prioritize cost over medical necessity that we have laws prohibiting bad faith denials by insurance companies and requiring independent medical reviews of insurance denials. Yet, stories about Kaiser's transplant program, autism discrimination, and patient dumping show that this conflict continues to infect our health care system, especially when the financing and delivery parts are integrated.

While I don't want to devalue the importance of Kaiser's specific successes in the areas of prevention, technology, and other forms of cost reduction, I think that before we start using labels like "success" or "model for reform," we need a more complete story that asks how well Kaiser treats the very sick, people with disabilities, and the chronically ill.
Moreover, we need to be careful about what information we use to generalize about patient satisfaction and outcomes. For example, it's not clear from the article in the Economist where it got support for its statements about the good health outcomes and patient satisfaction at Kaiser, and there are significant challenges to measuring quality of care through patient satisfaction surveys. One challenge is that disatisfied people who can leave plans often do, and surveys that only go to current enrollees may miss this group. In fact, the LA Times article reported that Kaiser lost 30,000 members in 2008, but we don't know why: Did people choose to leave because they were disastisfied? Or did people leave for other reasons, such as unemployment or children aging out of their parents' plans?

Before we can determine whether the Kaiser model is one that should be emulated, we need a more comprehensive assessment of its overall "success." While Kaiser is most certainly a business, it is a "health care" business, with statutory, professional, and contractual obligations to deliver quality care in a timely manner to all of its members. Its business success cannot and should not be measured without looking at how well Kaiser performs this "health care" piece. Only then can we learn from Kaiser's successes and failures, and integrate these lessons in our future health care reform efforts.