|
San Francisco Approves Health Access Plan:
Summary and Perspective for Business Owners
Eighty-five percent of San Francisco businesses offer their workers health insurance, covering more than 80% of employees working in the city. But more than 82,000 (10.5%) San Franciscans do not have health insurance and do not qualify for Medicare or Medicaid. Most uninsured residents are lower-income adults aged 18-64. More than half work for small businesses with few employees; others are self-employed or employed part-time.
On July 18, 2006 the San Francisco Board of Supervisors passed the Worker Healthcare Security Ordinance and voted the ordinance into law on July 25. The San Francisco Health Access Plan
(SFHAP) will have a phased roll-out date based on employer size, but is
scheduled to take effect on July 1, 2007.
This edition of ArlenGroup’s Insight provides an overview of the SFHAP program and its implications for workers and employers in San Francisco.
What Is The San Francisco Health Access Plan?
In short, the SFHAP will offer access to health care services to uninsured residents and workers in San Francisco through the allocation of funds from the San Francisco health budget, state and federal funding, as well as employer contributions and employee participation. The SFHAP is not an insurance program but rather an integrated package of public health care services available to San Francisco residents only inside San Francisco.
What Will SFHAP Cover?
SFHAP is expected to emphasize preventive care and will cover only medical treatment received inside the city
limits. Care would be provided by nurses and doctors at participating health care facilities already treating city residents who are eligible for
Medi-Cal.
| Covered |
Not Covered |
- Comprehensive preventive and catastrophic health care
- Prescription drugs, for covered services only
- Emergency room care
- Acute inpatient mental health services
- Home health care
|
- Dental
- Vision
- Infertility services
- Cosmetic services
- Services received outside city limits
|
Who’s Eligible?
- SFHAP covers only adults. Children already have health services available through other public assistance programs such as Healthy Families and Healthy Kids. Healthy Kids covers lower income children up to age 24.
- Only San Francisco residents are eligible, regardless of employment status or pre-existing conditions. Persons who work in San Francisco and live elsewhere are not eligible.
- Employees gaining access to the SFHAP through their employer must work for the employer for 90 days to become eligible.
- Employees must work a minimum of 12 hours per week to be eligible to join SFHAP through their employer. The requirement drops to 10 hours in 2008, and to eight hours in 2009.
How Will The Uninsured Join the SFHAP?
Individual enrollees can join the SFHAP by paying a premium based on a sliding scale. Employers will be able to enroll their employees as a group by paying their premiums. Enrollment rules will be governed by The Department of Public Health and the regulations will discourage employers who currently provide health insurance from dumping their employees into the Health Access Plan. Uninsured employees will not be required to enroll in
SFHAP. Those who choose not to enroll in SFHAP and later utilize public medical services would receive a full-cost bill for services.
How Will the Program Be Funded?
The program is estimated to cost $200 million annually and is expected be funded through the following sources:
- $104 million redirected within the current San Francisco public health care budget, which is already used to pay for care provided to the uninsured
- $28 million from mandated employer contributions
- $10 million federal and state funding
- $56 million from employee contributions (income-based, ranging from $3 to $201 per month, but expected to average $35/month).
The program will be administered by the San Francisco Health Plan
(SFHP), a governmental entity that is part of the San Francisco Health Authority and currently administers a number of public health programs. The SFHP will coordinate enrollment, customer service, billing, utilization review, and communication with participants.
Mandated Employer Contributions
SFHAP would require businesses with 20 or more employees to pay into the system or otherwise prove they are funding a minimum level of health care for their employees. Employer contributions into the program would be based on hours worked per employee per month, as shown in the table below:
| Size of Business |
Cost per Employee |
Begin Paying |
|
Small: Under 20 employees |
Exempt |
Exempt |
| Medium: 20 - 49 employees |
$1.06/hour up to 172 hours/month |
March 31, 2008 |
| Medium: 50-99 employees |
$1.06/hour up to 172 hours/month |
July 1, 2007 |
| Large: 100+ employees |
$1.60/hour up to 172 hours/month |
July 1, 2007 |
Employer contributions will be calculated based on “covered employees” which include both part-time and full-time employee hours; overtime hours are exempt. An employer’s maximum contribution is based on a 40-hour work week. Managerial, supervisory, and confidential employees who earn over $72,450 per year (in 2007) are not considered covered employees, nor are employees who are eligible for Medicare and/or
CHAMPUS/TRICARE. Employees who verify they are already covered by a health care plan through their employer or as a spouse, domestic partner or dependent of a covered employee, can be exempt if the employer obtains their voluntary written waiver, but the individual may revoke their opt-out at any time.
The calculation below will help determine if an employer is meeting the spending threshold levels:
| Employer Size |
Employee Class |
Calculation |
Minimum Health Care Expenditure |
| Large (100+) |
Full-Time |
172 hours x $1.60 |
$275/ee/month |
|
Large |
Part-Time |
80 hours x $1.60 |
$128/ee/month |
| Medium (20-99) |
Full-Time |
172 hours x $1.06 |
$182/ee/month |
| Medium |
Part-Time |
80 hours x $1.06 |
$85/ee/month |
Employers already spending more than the minimum threshold on employee health care coverage would not be required to pay into the city plan. Health care expenditures are defined as “any amount paid by a covered employer to a covered employee or to another party on behalf of its covered employee for the purpose of providing health care services for its employees.” This includes insurance premiums, health savings accounts and direct reimbursement to employees for health expenses and excludes payments for workers’ compensation and Medicare benefits.
The health care expenditure rate for medium and large size businesses will increase five percent each year through December 31, 2009, after which time the rate will be based on an aggregate average contribution for a full-time employee.
Employers’ health care expenditures will be paid quarterly. The City Controller will be responsible for keeping these funds separate from the general fund and ensuring they are used only for the Health Access Program. Payments will be enforced by San Francisco’s Office of Labor Standards Enforcement
(OLSE).
Employers must maintain accurate quarterly records of health care expenditures and provide an annual report to the
OLSE. Federal and state privacy laws will supersede the OLSE’s disclosure requirements. Detailed OLSE regulations have not yet been developed, but administrative requirements are required to be published by
January 31, 2007. The City plans to develop an education program to assist employers with compliance. Administrative penalties for not complying may include up to 1.5 times the health care expenditure the employer did not make, plus 10% interest.
Business Owner Perspective
Business owners are generally not in favor of the proposal, fearing that the mandated employer contributions will stunt business growth, lead to employee layoffs and hurt the
City's economy. The
City’s own Economic Impact Report estimates:
- 150 to 620 job losses due to the increased cost of doing business in San Francisco.
- 14,070 to 19,570 currently uninsured employees of San Francisco companies gaining increased access to health care benefits in the first year of the program, translating to about one-third to one-half of the currently employed but uninsured residents of San Francisco.
- 150 to 240 healthcare jobs created.
The San Francisco Council of District Merchant Associations cites the following concerns about the proposed program:
- Widespread impact to all businesses in San Francisco with 20 or more employees, including local restaurants, hotels and shops.
- Lack of small business owner input into the legislation, and lack of employer input into a government-mandated program with few cost containment or quality controls.
- No exemption for employers that already offer health benefits but spend less than the minimum spending threshold. If an employer does not meet the minimum spending limit, the employer will have to pay the difference into the city plan.
Local and National Trends
San Francisco is a forerunner in a growing trend for cities and states to take the issue of universal health care into their own hands:
- Earlier in 2006, Maryland became the first state to enact a law requiring employers spend a certain percentage of payroll on employee health benefits. The Maryland Fair Share Health Care Fund Act requires employers with more than 10,000 employees state-wide to spend at least 8% of payroll for in-state employees on health insurance costs.
- As of July 1, 2006, Massachusetts requires all adults, including 460,000 who are now uninsured, to buy health insurance. It also requires businesses to contribute to workers' health plans.
- At least 28 other states are considering similar types of legislation that would mandate that employers either provide a certain level of benefits or contribute to a state insurance program.
- San Mateo County, CA will explore universal health care for its uninsured residents. The San Mateo County Board of Supervisors has appointed a task force to study feasibility, including who would pay for such a program and how it would be structured.
- Oakland, CA Mayor-elect Ron Dellums is looking into the possibility of offering universal health care to the
City's uninsured.
Legal Challenges
The Maryland Fair Share Health Care Fund Act was ruled illegal by a federal judge on July 19, 2006. The judge’s ruling decreed that ERISA supersedes Maryland law. The judge also ruled that the Maryland Act violates the Equal Protection Clause of the US Constitution because only one company in Maryland, Wal-Mart, meets the all the criteria for the law, causing Wal-Mart to object that it had been singled out unfairly.
This ruling is expected to cast a legal shadow over the San Francisco ordinance which, like the Maryland plan, requires employers to reach a threshold level of spending on health care benefits and to report details on the total number of employees, health care expenditures and payroll costs.
Unanswered Questions
If the San Francisco health care ordinance gets past the inevitable legal challenges, there are a number of unanswered questions facing both employers and the City of San Francisco.
The ordinance does not specify whether employers can offer both an employer-sponsored benefits program for eligible employees and SFHAP enrollment for those ineligible to join the plan, making it unclear whether the program will positively or negatively impact employer sponsored benefit eligibility for part-time employees. While the ordinance prohibits employers from reducing employee head count or hours to avoid having to comply, it is uncertain who will judge whether these business decisions are “legitimate” and how the other compliance requirements will be enforced.
For the City of San Francisco and its residents, it is unclear whether there will be enough money from all intended sources to fund the program long-term; whether there are enough sustainable city services to provide care; and, ultimately, whether the plan will lose its desired effects by drawing uninsurable residents into San Francisco just to receive health care services.
For Further Reading:
San Francisco Health Care Security Ordinance File No. 051919
San Francisco Chronicle, SF Plan a Path to Universal Health Care, Glen Rosselli, July 13, 2006
USA Today, San Francisco may get universal health care, July 7, 2006
San Francisco Chronicle, 2 health proposals for uninsured 'fit together' Supes panel votes to merge Newsom, Ammiano plans, July 6, 2006
City and County of San Francisco, Office of Economic Impact, Economic Impact Report
of the Proposed Worker Health Care Security Ordinance File No. 051919, June 2006
San Francisco Health Plan, Mayor Newsom Announces That San Francisco Health Plan Will Administer Health Access Program, July 2006
San Francisco Council of District Merchant Associations, Setting the Record Straight: Compulsory Healthcare in San Francisco, July 2006
National Conference of State Legislatures, Maryland's Fair Share Health Care Fund Act Overturned in ERISA Challenge, July 20, 2006
This document is not intended to provide any legal advice or analysis. Please
consult your own legal counsel for further information on the topics discussed in this
issue of Insight.
|
