Legislative News

Healthcare San Francisco Style
 by Leila Morris

San Francisco’s experiment with universal healthcare is underway. More than 730 businesses signed up for the city’s universal healthcare access plan. Under a city ordinance, employers must spend a minimum amount on healthcare coverage for workers or make payments to the city through the Healthy San Francisco program. So far, businesses have contributed about $6 million to the program, according to the Department of Public Health.

The Golden State Restaurant Association has sued claiming ERISA preemption and won an initial decision. The city appealed to the U.S. Ninth Circuit Court of Appeals, which took oral arguments on April 17th with no verdict yet.

It’s an interesting experiment that’s still in the very early stages, said Alan Katz, of the Alan Katz Group who has been president of both the National and the California Association of Health Underwriters. “Not only don’t we know if it will accomplish its purpose yet, but we don’t even know if it’s legal. It’s highly likely to be struck down by the courts as violating HIPAA,” Katz said.

Critics say that the San Francisco law will restrict employers’ ability to uniformly administer multi-state health plans by forcing employers to make certain choices that result in modification or establishment of an employee benefit plan – exactly the sort of state or local regulation ERISA was intended to preempt.”

How It Works

Businesses with between 20 and 49 employees have to meet the minimum spending requirement for healthcare while employers with 50 or more workers have to meet the minimum spending requirement in January. More than half of the 12,900 employees from these businesses qualify for coverage through Healthy San Francisco and the rest are eligible for healthcare reimbursement accounts. The program is expected to cost about $200 million annually. The Golden Gate restaurant Association has handouts on its site explaining how to comply with the requirements: www.ggra.org/news.asp?menuid=1248&submenuid=1794&newsid=24125

Jeff Miles, founder and two-time president of the California Association of Health Underwriters, said that the mandate has been a success in that it has achieved coverage for approximately 25% of the city’s uninsured. But the difficulty is the same with any mandate – someone has to pay.  Should businesses pay from their bottom line? Should the individual contribute? Miles notes that many San Francisco restaurants have begun adding a 3.5% surcharge on all checks. Restaurants are informing customers that the extra fee is to satisfy the city’s requirement, giving many patrons pause. It’s startling to those who support government funding increases and business and individual mandates to find that someone bears the costs of healthcare, he said.

The Effect on Brokers

Miles said, “In my opinion, this is an anti-competitive measure to the brokerage community unless the government plan has to be self sustaining as to the cost of premiums.  If that level playing field is in place, there should be an increase in private plan sales.  Finally, while waiting for the courts to issue their decision on ERISA preemption, most other states and localities are postponing aggressive plans to expand health care through an employer mandate.”

Given the legislature’s failure to pass healthcare reform, will this kind of homegrown health reform spread statewide? Katz said, “I don’t think workable comprehensive reform is going to emerge at the state or local level. The challenges of affordability and access require a national solution and the power of the federal government. So I don’t think we’ll see the San Francisco approach spreading to many other cities.”
–––––––––
Leila Morris is editor of California Broker Magazine.