Businesses find loopholes in Healthy San Francisco law 

More than 80 percent of the money that companies set aside in special funds created by The City’s landmark Healthy San Francisco health care program apparently goes back into the bosses’ pockets without benefiting workers.

During a discussion Thursday about a proposal to prohibit this practice in the future, The City’s Office of Labor Standards Enforcement released data indicating that 705 employers repurposed $50.1 million supposedly earmarked last year for worker health care.

“I was shocked to learn that 80 percent of this money in fact never goes to the worker,” said Supervisor David Campos, who wants to eliminate the loophole.

Under Healthy SF, employers must spend a certain amount on health coverage per employee hour. Some join health insurance plans or pay directly into a city-administered plan. But 860 other employers — mostly restaurants — put money in what is known as a health reimbursement account. And if their employees don’t use the money during the year, that money then returns to the company.

Campos said companies are exploiting this “use it or lose it” provision. He charged that some business owners are not telling workers about the accounts and others are defrauding consumers since many restaurants apply a Healthy SF surcharge. That is unfair to the businesses that do comply with the law, Campos said.

Business advocates blasted his proposal during Thursday’s session of the Board of Supervisors Government Audit and Oversight Committee, saying it will result in job losses and business closures. A city controller’s economic impact report said up to 290 jobs would be lost next year as a result of the legislation.

Paul Geffner, who helped found Escape from New York Pizza in 1986, testified that if the law was enacted he would be forced to close down two of his six locations and lay off 40 workers.

“If this amendment passes, the impact on us is a $200,000 a year cost,” Geffner said.

Campos is proposing that money set aside in these accounts would remain untouched and available for future health care expenses. But Jim Lazarus of the San Francisco Chamber of Commerce said tying up unused money in such accounts doesn’t make sense.

Campos was unable to convince Board of Supervisors President David Chiu and Supervisor Mark Farrell to send the legislation to the full board for a vote next week. Chiu agreed with Lazarus that there are unanswered questions about what to do with the money when an employee leaves.

So Campos vowed that he would employ a rarely used parliamentary rule to bring the legislation before the full board for a vote anyway.

How Healthy San Francisco works

Approximately 4,000 San Francisco employers with 20 or more workers must pay for employee health care.

How employers complied with the law in 2010

  • 90 percent spent $829 million on health insurance
  • 7 percent spent $62 million on reimbursement accounts
  • 3 percent spent $29 million on city-administered plan

In 2011, businesses with 20-99 workers must spend:

  • $1.37 per hour per worker
  • $1,414 for part-timers annually
  • $2,828 for full-timers annually

In 2011, businesses with 100+ workers must spend:

  • $2.06 per hour per worker
  • $2,126 for part-timers annually
  • $4,252 for full-timers annually

Source: Office of Labor Standards Enforcement

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