Health Care Ordinance Loophole Closed

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After months of passionate debate, three proposals and Mayor Ed Lee’s first veto, the Board of Supervisors approved a veto-proof initiative last week to close a loophole in the city’s health care ordinance.

The plan, proposed by District 10 Supervisor Malia Cohen, calls for every employer to provide written materials for employees that detail their rights to the health care accounts; it also requires that the money contributed to the reimbursement accounts accrue for two years and be available 24 months after it’s contributed, and for 90 days after the employee is terminated.

In a recent statement, Lee said, “These are goals I have embraced from the beginning of this discussion, and I thank the Board for putting forward amendments that align with these goals.”

“I think most businesses like myself felt it was a reasonable compromise and that we can live with it,” said Paul Geffner, owner of Escape from New York Pizza at 3242 22nd St.

The proposal came after District 9 Supervisor David Campos and others pointed out the loophole in 
the 2008 Health Care Security Ordinance, which requires all San Francisco employers with 20 employees or more — 50 for nonprofit organizations — to offer health insurance for employees.

The 2008 law requires employers to contribute to reimbursement accounts that can add up to $4,252 for employees to use for medical, vision or dental care. To do this, many restaurants have been charging diners a 4 percent surcharge. But the loophole meant that the surcharge ended up being a bonus for the restaurants, because if unused, the funds automatically revert to the employer.

Data show that 80 percent — or roughly $50.1 million — of the allocated money was unused and returned to the 860 businesses that contribute to the program. Sixty-one of those businesses are in the Mission’s 94110 zip code, according to the Health Care Security Ordinance 2010 annual report.

At the same time, city officials discovered that restaurant employees were often unaware their accounts existed, or had difficulties accessing the money set aside.

“Unfortunately, there are bad restaurant businesses casting a bad light on the ethical businesses here in San Francisco,” said Geffner. “We don’t charge a 4 percent surcharge and our employees are fully aware of their health care accounts.”

When the pizza restaurant’s employees were asked if they were aware of their health care rights, most said yes. Cashier Natasha Riggins said, “I use it at Kaiser all the time.”

Yet right around the corner at Luna Park, 694 Valencia St., which adds the 4 percent surcharge to every customer’s check, manager Ashleigh Plasterer acknowledged that many restaurants, including Luna Park, don’t offer employees enough information about their health care rights.

Unlike the employees at Escape from New York, the majority of Luna Park’s workers are not signed up for a health plan.

“We just don’t have the staff,” Plasterer said. “We tell them they have it, but because we don’t have a packet that outlines their rights, if they want it they have to do everything themselves.”

For Geffner, the appeal of the new legislation is that the money allocated to the reimbursement accounts will be available to employees until it expires, but unused funds will still be returned to the employer. An earlier proposal by Campos, which Lee vetoed, had no provision to return the money to the employer.

With 120 employees, Geffner said that Campos’s bill would have forced him to close a restaurant and cost him $200,000 a year: $100,000 for full-time employees and $100,000 for part-time employees, because the accounts for the latter would roll over every year and could not be collected.

“Every employee doesn’t use up all their health care funds,” said Geffner. “The returned unused money helps businesses — like myself — with high employment and low gross [to] pay the bills.”

Geffner remains skeptical about the health care ordinance in general, saying that it puts an extra burden on businesses, discourages new hiring and is unappealing to customers because of the added charge.

Plasterer agreed, and said that customers sometimes deduct the health care surcharge from the tips they leave. She called it a lose-lose situation. “You either don’t charge a surcharge and the business loses money, or you do charge a surcharge and your employees could possibly lose money.”

Geffner added, “This whole system is very poorly thought out, but with all that was given, this was the most pragmatic solution … I guess sanity prevailed.”

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4 Comments

  1. nandro

    I swear to god we have the dumbest supervisors in the country. Why on earth would they have the funds raised revert back to the employers if unused??? It doesn’t make any sense it incentivizes the business owner to discourage use of it by his employers… Why not have it accrue into a general healthcare fund for the company that could supplement each individual’s healthcare fund?

    These clowns have no concept of market economics. Same with the Happymeal toy law. It took McDonalds .1 second to decide to charge 1 penny per toy and completely circumvent the law…

    It is just so infuriating to know that 80% of these huge healthcare surcharges have been going straight to the owner’s pockets.

  2. Tiny Tim

    There is actually another loophole that has not been addressed: employers can dictate which expenses can be reimbursed. For example, one educational institution allows for reimbursing of monthly premiums (if you pay for your own plan) and for glasses and another institution will not allow for monthly premiums or glasses.

  3. Aaron

    Guaranteed healthcare makes San Francisco one of the best places to work in the country. I moved here two years ago from the midwest and I think a lot of people lose sight of how good we have it here. Health insurance, let alone access to routine care, is a luxury in most of this country and the world. Not that we shouldn’t keep striving for improvement, but we could also do a little less complaining.

  4. Aaron

    I admire Ms. Plasterer’s candor about the quality of information provided to her coworkers. Even the most proactive employers and HR managers will tell you that keeping employees engaged about their rights, be it healthcare, overtime, or paid sick leave, is a challenge. Most young, healthy workers simply don’t plan for health expenses. I have many smart friends who know nothing about California’s generous overtime laws, or San Francisco’s mandatory paid sick leave and healthcare rules. And many informed workers of all skill levels in all industries are afraid to ask for anything for fear of being let go in a bad economy.

    As for her claim that some diners reduce their tip because of a surcharge, there are countless reasons, logical or not, real or imagined, that cause people to reduce tips. Tips are subjective and unpredictable. One would go nuts trying to come up with any policy or practice that could withstand the whims of every customer in a stingy mood.

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