Health reform should not sicken businesses

Two years after the official end of the Great Recession, San Francisco’s economy remains depressingly sluggish. January’s 9.5 percent unemployment rate, which had slowly headed downward this year to 8.4 percent in May, jumped back up to 9 percent in June.

Clearly The City’s ailing business sector could use a booster shot. But instead, Supervisor David Campos plans to submit legislation to the Board of Supervisors today that will likely hurt employers, increase unemployment, decrease wages and reduce consumer spending.

Campos wants to amend the Healthy San Francisco program so employers would no longer be able to keep the funds placed in an employee’s health reimbursement account that are not used by the employee. Instead, employers would be required to roll over the funds every year and continue making them available in perpetuity, even after the employee is no longer working for the business.

Campos correctly points out that it’s unfair for a restaurant to add a surcharge to the bill for employee health care when many of that restaurant’s employees don’t take advantage of the funds. Currently, there’s only a 20 percent reimbursement rate from the $62.5 million annually placed into these accounts by the 860 businesses using the program.

And Campos is justifiably concerned that some businesses don’t adequately inform their employees about how they can access these funds to help pay their medical bills. The accounts range in size from $1,414 for a part-time employee in a business with 20 to 99 workers to $4,252 for a full-time employee in a business with 100 or more workers. Businesses with fewer than 20 employees are exempt.

But where Campos goes wrong is by forcing businesses to tie up these funds, resulting in a potential $50 million annual increase in employee expenses. This would result in a potential loss of 390 jobs in the next two years that would otherwise have been created, according to The City’s chief economist, Ted Egan.

“When you increase the cost of labor, you create a disincentive to hire labor,” Egan recently told the Board of Supervisors Government Audit and Oversight Committee, which is chaired by Campos.

The news also is bad for employees who keep their jobs but have their wages cut to offset some of the additional expense. Egan estimates that could amount to $10 million in reduced wages. Because 70 percent of The City’s workers live in San Francisco, that’s $7 million less that could be spent in the local economy.

Instead of Campos’ sledgehammer approach that kneecaps struggling employers, it makes more sense to work with the business community to increase the employee participation rate in their health accounts.

The San Francisco Chamber of Commerce and the Small Business Commission support beefing up the requirement to inform employees about how much is in their accounts, how to access the funds and the health care that is eligible for reimbursement, and doing so on a quarterly basis and in their employees’ native languages. There also should be a convenient hotline for employees to blow the whistle on companies that fail to comply, and stiff penalties for those businesses after a warning.

Healthy San Francisco can and should be healthy for both employees and employers.

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