WASHINGTON—Benefit experts were disappointed but not surprised that the U.S. Supreme Court declined last week to review a federal appeals court ruling that upheld San Francisco's controversial health care spending law.

The San Francisco law, which took effect in 2008, requires employers with at least 100 employees to spend $1.96 per hour per covered employee on health care. Employers with between 20 and 99 employees must spend at least $1.31 an hour on health care. The requirement applies to employees working at least eight hours per week.

Funds generated by the assessment are used to provide medical services to the uninsured.

That spending requirement can be satisfied in various ways, including paying employees' health insurance premiums and contributions to health savings accounts and health reimbursement arrangements.

The enactment of the San Francisco law—challenged by a local restaurant trade association that said the statute was barred by the Employee Retirement Income Security Act that pre-empts state and local laws that relate to employee benefit plans—attracted national attention from employer groups. They feared the law would lead other cities and states to pass health care spending measures and result in multistate employers having to comply with a hodgepodge of health care benefit requirements.

But the interest of states and cities in such approaches has cooled since this year's enactment of federal health care reform legislation, which includes new programs to provide subsidized health insurance coverage to the lower-income uninsured, starting in 2014.

Because of the federal health care reform law, “there is no policy reason” for other cities and states to pass San Francisco-type measures, said J.D. Piro, an attorney with Hewitt Associates Inc. in Norwalk, Conn.

The federal law is a key reason why there was no need to review the San Francisco law, the Obama administration told the Supreme Court.

The brief noted that since the federal appeals court ruling upholding San Francisco's law, federal health care reform “significantly reduces the potential that state or local governments will choose to enact health care programs” like San Francisco's and “may also affect the question whether such programs are pre-empted by federal law.”

Just as the Labor Department decided that regulatory action on the pre-emption issue is premature, the Supreme Court's “review of the issue is not warranted at this time,” the brief said.

Still, the issue may return one day.

If federal health care reform does not succeed in expanding coverage, the interest of states and cities in finding ways to expand it could return, said Andy Anderson, a partner with Morgan, Lewis & Bockius L.L.P. in Chicago.

“There is no reason not to believe others one day may follow San Francisco's lead. It would have been appropriate for the Supreme Court to take up the case and settle the pre-emption issue once and for all,” said Gretchen Young, senior vp-health policy with the ERISA Industry Committee in Washington.

Meanwhile, employers with employees in San Francisco will have to continue to comply with its law, with reporting and other requirements that “are a real pain in the neck,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

San Francisco Mayor Gavin Newsom, though, said in a statement that the Supreme Court's decision not to take up the 9th Circuit ruling was “a victory for the 53,000 San Franciscans who have health care today through our groundbreaking universal health care program.”