Feds rethink giving local governments power over employer health benefits

The Department of Labor has announced it is withdrawing a proposed regulation allowing state and local governments to mandate that businesses provide healthcare for their employees or pay into a government health program.

The regulation was being developed prior to passage of the healthcare reform law, the department says, and the new law may negate the need for it.

"With the enactment of the Patient Protection and Affordable Care Act, the department has decided to review whether and to what extent further regulation in this area is necessary or appropriate in light of a national health care reform program," the department said in a statement. "The department will be requesting OMB to return the proposed regulation to the department for further review and consideration."

The regulation would have authorized programs such as San Francisco's ordinance requiring employers to pay a tax to support a city-administered health benefits plan if the employer did not provide employee health coverage, according to the industry group America's Health Insurance Plans.

AHIP and a coalition of employers spelled out their opposition to the regulation in an earlier letter urging the Office of Management and Budget to reject it as incompatible with the healthcare reform law and the federal statute that regulates employer-sponsored health plans.