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California Pregnancy Disability Coverage

A new California law will require employers to extend health insurance coverage for up to 16 weeks to employees classified as disabled due to pregnancy, childbirth or related medical conditions.
The measure, S.B. 299, which governor signed into law last week with the effective date of 01/01/2012, states that employers continue health care coverage for up to 16 weeks to disabled pregnant employees on the same basis as prior to the employee taking disability leave.

In certain ways, the California law mirrors the 1993 U.S. Family and Medical Leave Act, but there are several key differences. The federal law mandates that health care coverage be continued for up to 12 weeks, rather than the 16 weeks mandated in the California law. In addition, the FMLA applies to employers with at least 50 employees. The California law applies to employers with as few as five employees.

Some observers say, though, that the California law may not pass legal muster. Specifically, the law runs afoul of the 1974 Employee Retirement Income Security Act, which pre-empts state and local rules that relate to employee benefit plans. The intent of that provision was to prevent multistate employers from having to comply with myriad state benefit laws, which could discourage them from offering benefit plans. Employers unsuccessfully battled a SF law requiring organizations to spend a certain amount of money on employees’ health care coverage. But a three-judge panel of the 9th U.S. Circuit Court of Appeals ruled in 2008 that the law was not pre-empted by ERISA. Nothing in the San Francisco statute required an employer to set up a benefit plan or interfered with the uniformity of ERISA regulation, the appeals court panel ruled.

In addition, employers might be reluctant to challenge a law extending additional health care coverage for pregnant employees or employees who have given birth, due to the potential for public relations problems, said Mr.Asensio, a VP of Aon Hewitt Inc. in LA.