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Despite Early Fears, San Francisco's Health Care Plan Doesn't Hurt Small Business

New America Media, News Report, Viji Sundaram Posted: Sep 03, 2009

SAN FRANCISCO When the Health Care Security Ordinance (HCSO), the citys program to cover uninsured residents, mandated that employers provide health insurance for employees or pay into a fund, the Golden Gate Restaurant Association (GGRA) filed suit against the city, and small business owners in general complained loudly that the law would put them out of business and cost the city many jobs.

About 25 percent of San Francisco restaurant owners promptly added a line at the bottom of their menu cards, telling customers that they will be billed a service surcharge to support the program.

Most other restaurant owners have simply increased food prices, or charge a flat fee to pay for the program. A few have done nothing at all.

But in the year since the employer mandate took effect, there is no evidence that HCSO has caused the doomsday scenarios that critics predicted. In fact, some employers have figured out how to make the law work to their advantage. Patient satisfaction in Healthy San Francisco, the city health care program for uninsured residents, has been rated as high by an independent survey, and the citys key goal of providing health care for those without it is being met.

As the national debate on health care reform rages on, San Franciscos model offers lessons on the contentious issue of whether an employer mandate will hurt business, especially small business. And so far, the lesson seems to be that it can work to everyones benefit.

Two of the most controversial issues in the national debate a public option plan and a shared responsibility by the employer will not hurt businesses, said Ken Jacobs, a UC Berkeley labor researcher and author of a recent study of Healthy San Francisco.

Healthy San Francisco is not health insurance but direct care provided on a sliding scale to the uninsured at city and private health clinics. The program began in July 2007 providing care to the citys uninsured, who number over 60,000. It has now covered about 75 percent of them at a cost of roughly $120 million a year, including city money, state grants, employer contributions and participants fees. The average monthly cost per person is $280.

In the health reform proposals under consideration in Congress, employer responsibility generally takes the form of play-or-pay, meaning, firms that do not directly provide adequate health care to their employees (or play), are required to pay into a public pool.

Since 2008, employers with 20 or more workers, and not-for-profit groups with 50 or more employees, are required to either spend a minimum amount on health insurance, set aside money in health reimbursement accounts or pay a fee to the citys fund, the HCSO. The minimum amount is determined by multiplying the hours paid to the employee by the expenditure rate mandated by law, which is currently set at $1.23 for businesses with 20 to 99 employees, and $1.85 for businesses with 100 or more employees.

Businesses contribute about 15-20 percent of the $230 million needed to fund the program annually.


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