SF Board of Supervisors Unanimously Close Health Loophole

On Tuesday, June 10th, the San Francisco Board of Supervisors unanimously voted to close a loophole in San Francisco’s Healthcare Security Ordinance. Here’s a report from Rose Auguste, Health Access Northern California Regional Organizer who worked hard on this effort with a broad coalition. For more information, contact her at rauguste@health-access.org

First, some background In 2009, led by former Board of Supervisor Tom Ammiano, San Francisco Board of Supervisors passed their historic legislation which required employers with twenty or more workers to provide healthcare.  Employers could fulfill this requirement in three ways:

1.  Provide health insurance to their workers.

2.  Make contributions into Healthy San Francisco on behalf of their workers (Healthy SF is a city run healthcare program in which residents can get health services).

3. Provide their workers with Healthcare Reimbursement Accounts (HRAs). Workers pay out of pocket for a medical expense and then provide their employer with receipts for reimbursement.

Since the Healthcare Security Ordinance’s implementation in 2009, the employer HRA contribution have had incremental increases. In 2013, the employer expenditure was $2.33 per hour worked for employers with 100 employees or more and $1.55 per hour worked for employers with between 20-99 employees and for non-profits with 50 employees and more. This year, the required employer expenditure was $2.44 per hour worked for employers with 100 employees or more and $1.63 per hour worked for employers with between 20-99 employees and for non-profits with 50 employees and more.

While a majority of employers fulfilled the ordinance by providing health insurance or making contributions into Healthy San Francisco, a minority choose to provide Healthcare Reimbursement Accounts. Some of these employers exploited a loophole which existed in the usage of HRAs. For the first two years, many workers who had healthcare reimbursement accounts were unaware of the existence of these accounts because their employers had not informed them.  Another issue with the HRAs was many workers believed that their employers were overly restricting the usage of the funding in these accounts (e.g. one worker complained of not being able to get reimbursement for their prescription glasses or dental services).  The third and most egregious issue was the “use it or lose it” policy with these accounts.  If a worker did not use their account funds by December 31st the money would be taken back by their employers.  Often times, it wouldn’t be until the end of the year that workers would have enough money in their accounts for a reimbursement but come January 1st these funds were no longer available to them.

Because of the many calls their office received regarding issues workers were having with access to their HRAs, Supervisor Campos decided to write an amendment that would close this loophole.  Unfortunately, while the initial legislation was supported by a diverse coalition of workers, organizations and labor groups and passed the Board of Supervisor in Fall 2010, Mayor Ed Lee vetoed the amendment.

A substitute amendment was drafted by Supervisor David Chiu and Supervisor Malia Cohen in which the funds accumulated in Health Reimbursement Accounts would remain in workers accounts for two years and required employers to improve notification regarding these accounts. The amendment did pass the Board of Supervisors and was signed into law by Mayor Lee. Despite the attempts made to ameliorate the issue with this amendment, the loophole in the Healthcare Security Ordinance continued to be exploited by employers.  In 2013, over ninety million dollars that should have gone to 27,000 San Francisco workers for their healthcare, was taken back by the employers.  Moreover, the usage for these Healthcare Reimbursement Accounts remained low. For example, in 2013, of $124,348,105 allocations made to HRAs, $30,477,944 was reimbursed. The amount reimbursed is equivalent to 24.5% of the allocations.

Because of continued issues with the Healthcare Reimbursement Accounts, Supervisor Campos decided to draft new legislation which would permanently close the loophole.  This legislation states that the HRA loophole will close over a three year period: in 2015, 60% of the money in HRAs will be irrevocable (remain in the workers accounts for healthcare reimbursement); in 2016- 80%, and in 2017, 100% will remain with workers.  A coalition of workers, labor groups, healthcare advocates (including Health Access), community groups and businesses supported and worked hard to garner legislative support for this amendment.  After four years of working on this issue, we are happy that this amendment has resolved the problem and thereby will allow workers to have improved healthcare access.

In addition to the of passage of the loophole amendment, San Francisco’s Board of Supervisors unanimously voted to put a minimum wage increase on November’s ballot, which will gradually raise San Francisco’s minimum wage to $15 by 2018 (making it the highest in the nation!).  In a few years between minimum wage and healthcare payments, San Francisco workers will be making over $18/hour and will be better able to meet basic needs: rent, food and healthcare.

This is a collective victory for San Francisco, the Bay Area and for California.

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