Closing the Loophole in SF Health Care Ordinance

From Chinese Progressive Association

July 14, 2011

Dozens of San Francisco’s workers, business and community leaders turned out today in support of an amendment to close a loophole in San Francisco’s landmark Health Care Security Ordinance that prevents thousands of San Francisco employees from accessing accumulated health care benefits. The amendment, introduced by Supervisor David Campos, simply re-affirms the layman’s traditional understanding of a “health care expenditure” by allowing employees to carry over funds from health reimbursement accounts from year to year. At present, some employers are taking back unspent HRA balances at the end of the year, denying employees the use of those funds.

“This amendment is a common sense approach that restores the spirit of the original legislation,” said Supervisor David Campos.  “It levels the playing field for our city’s small businesses, provides access to meaningful health care for thousands of San Francisco’s employees, and ensures that our taxpayers are not shouldering the burden.”

SF’s Health Care Security Ordinance & Employer Spending Requirement Works

Since the Employer Spending Requirement of San Francisco’s Health Care Security Ordinance went into effect in 2008, the vast majority of covered San Francisco businesses are providing health care benefits for their employees, and more than 54,000 previously uninsured workers now have access to health care. More than 90 percent of employer health care spending goes to purchase health insurance for employees.  Another three percent is spent to cover employees through Healthy San Francisco, the city’s public program. The remainder of the funds are placed into reimbursement plans.

The Harmful Effects of the HRA Loophole

A loophole in the law has inadvertently created a financial incentive for employers to restrict access to these accounts.  Employers place arbitrary restrictions on the use of the funds and reclaim more than 80 percent – or $4 out of every $5 – at the end of each year when employees cannot make use of them. Many of these businesses, such as restaurants, are also levying surcharges on customers to pay for health care expenditures – so they are in effect cheating consumers and employees.

Moreover, because the accounts are wiped clean each December, workers who get sick in January and February – the height of flu season – are often unable to cover those expenses because there is not enough money in the accounts.

“Last year, I had to spend a lot of money when I got sick,” said Raciel Esperanza, a waiter at a San Francisco restaurant.  “I couldn’t get reimbursed for my out of pocket expenses, which is a hardship for me.  I also wasn’t allowed to use the funds for dental, vision or even to purchase my own insurance.”

In addition, the loophole creates an uneven playing field that is bad for the city’s small businesses who abide by the spirit of the law.  In fact, the vast majority of San Francisco businesses are playing by the rules – they are meeting the employer spending requirements and providing health care benefits for their employees.  However, when a significant minority takes advantage of the system, it is unfair for the rest of the city’s businesses.

“We’ve had a good experience since the Employer Spending Requirement went into effect,” said Jennifer Piallat, owner of Zazie restaurant.  “We’ve covered our expenses through a small customer surcharge and we were able to purchase insurance to cover all of our eligible employees.  As a small business owner, I’d like to see a more level playing field – especially for those of us playing by the rules.”

What the Campos Amendment Does

The Campos amendment closes this loophole by clarifying that employers are only credited for satisfying their Employer Spending Requirement if they actually spend the money on their employees’ health care.  In other words, the amendment requires funds placed into the HRAs to rollover from year to year so employees can have meaningful protection if they fall ill or are injured.  It also allows employees to save for or pay medical bills over time or to use the funds to purchase their own insurance.

New Study Analyzes Impacts of Ordinance

Since 2008, San Francisco’s Health Care Security Ordinance and the Employer Spending Requirement have successfully provided tens of thousands of San Francisco’s workers with health care coverage.  At the time it was enacted, many in the business community claimed that the ordinance and requirement would cost jobs and economic hardship.  A new study, released this week by the National Bureau of Economic Research, has found that not to be the case.  In fact, the study found that in the first 27 months since the enactment of the policy, there has not been any discernable reduction in employment or earnings in San Francisco.

For more information, visit www.ClosetheHealthCareLoophole.org

FCJ Editor

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