Ed Lee To Veto Health Care Reform Bill

10/06/2011 04:13 pm ET | Updated Dec 06, 2011
  • Aaron Sankin Assistant San Francisco Editor, The Huffington Post

Mayor Ed Lee will likely issue the first veto of his administration on a bill designed to close a loophole in San Francisco's health care law.

The amendment, which was proposed by Supervisor David Campos and narrowly passed a sharply divided Board of Supervisors earlier this week, would have expanded employee access to employer-provided health care reimbursement accounts.

Lee's move effectively dooms the legislation, as it is unlikely to secure the additional support on the Board needed to overcome the veto.

Enacted in 2008, San Francisco's Health Care Security Ordinance fundamentally reorganized the way health care is funded in San Francisco. The law requires all businesses with over 20 employees (and non-profits with more than 50) to provide health insurance for their workers and created a public health care plan for the uninsured. It also mandates participating employers pay up to $4,252 into an account for each employee to cover various health care costs; however, that money would return to the company if it wasn't used by the end of the year.

A loophole in the law allows employers to place restrictions on how those funds were used and, as a result, 80 percent of the money in those accounts ended up going back to the businesses at the end of each year—last year the unused funds totaled just over $50 million. Another reason behind the large pool of unused money is that personal health care expenditures tend to fluctuate heavily from year to year, causing employees to leave the account virtually untouched one year and then completely tap it out the next.

Many businesses, most commonly restaurants, have been passing "Healthy San Francisco" surcharges onto their customers to cover the costs associated with the program. So when these numbers came to light earlier this summer, it sparked outrage across the city that much of the extra charges weren't being spent on employee health care at all.

Campos's amendment would have closed that loophole by allowing money in the accounts to roll over from one year to the next. Employers wouldn't be able to withdraw the funds until 18 months after an employee leaves the company.

"This amendment is a common sense approach that restores the spirit of the original legislation," said Campos at a rally in support of the measure earlier this year. "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."

In the place of Campos' proposed fix, the Mayor offered an plan of his own to close the loophole. The San Francisco Chronicle reports:

The legislation he introduced Tuesday would forbid employers from touching the unused money for 18 months while a survey is taken to determine the extent that employers restrict what the money can be used for. For example, some plans prohibit workers from using the money for dental care or to purchase insurance.

Federal law forbids local jurisdictions from dictating the exact scope of health care coverage in the workplace. But Lee suggested that if the review finds that the restrictions are too tight, he will back Campos' plan, or something similar

Board of Supervisors President and mayoral aspirant David Chiu has his own plan that would require employers keep one year's worth employer contributions available for each employee in perpetuity.

The Campos amendment was strongly opposed by the city's business community. A post on the website of Economic Recovery SF, a local small business advocacy group, said the legislation would add up to 15 percent to citywide labor costs and saddle businesses with the heavy burden of having to manage the health care accounts for former employees long after they've left the company.

"It will be the largest tax-fee burden on the business community in at least 40 years," Golden Gate Restaurant Association (GGRA) Executive Director Rob Black told the San Francisco Examiner. Black said there are other ways to address the issue, including requiring notification of the benefits and capping the funds in an account at a year’s value.

Healthy San Francisco has been the subject of fierce debate since it initially passed the Board of Supervisors in 2006. The GGRA sued the city to block the law's implementation but their case stalled when the U.S. Supreme Court refused to hear the issue after an appeals court refused to overturn the law.

Not all local businesses owners are against amending the health care law. "It levels the playing field," Zazie owner Jennifer Piallat told the San Francisco Bay Guardian. "A loophole should not disadvantage those of us who agree with the spirit of the Health Care Security Ordinance and who believe that employers should contribute to the well being of our employees."

CORRECTION:The article originally stated that Lee had already vetoed the legislation.