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California Dreamin’: Covering the Uninsured in San Francisco

San FranI recently traveled to the fair city of San Francisco. After an evening meal with family members there, I noticed that $1.25 had been added to the bill to pay for “employee healthcare.”

This extra charge reminded me that restaurants and other businesses with at least 20 employees (and not-for-profits with at least 50 employees) are mandated to provide health care benefits for their workers as a result of the “Healthy San Francisco” (HSF) legislation that the city passed in 2006.

To be clear, HSF does not provide insurance coverage for the uninsured.

Instead, it provides a medical home for participants, as well as access to specialty care, emergency care, mental health and substance abuse services, inpatient hospitalization, and laboratory, radiology and pharmaceutical services.

As might be expected, the restaurants pass the cost of this program on to their customers.

They also make it quite clear to patrons where this additional fee comes from by labeling it on the check.

It’s no secret that restaurants are opposed to the legislation. Employers represented by the Golden Gate Restaurant Association filed a lawsuit against the city, claiming that the program violates the Employee Retirement Income Security Act (ERISA). The Act pre-empts certain state and local government requirements regarding employer-sponsored benefits.

The 9th Circuit Court of Appeals in California just rejected the Restaurant Association’s appeal to review an earlier decision that found the spending requirement legal.

Kevin Westlye, executive director of the Association, vows to appeal this decision all the way to the U.S. Supreme Court.

He made this interesting comment after the most recent ruling was released: “This country has a health care crisis, and it needs to address it on a national basis. What we don’t need is one municipality to put out its own version for an expenditure for health care.”

The HSF program illustrates two points that we make in our latest As We See It piece, “What Role Should the States Play in National Health Care Reform?”

First, we applaud the states and local governments for taking steps to increase access to health services for the uninsured. Without such initiatives, many uninsured folks would have continued to go without affordable (and perhaps life-saving) health care services.

In the recent past, the federal government idled on the sidelines while the ranks of the uninsured swelled and the healthcare crisis exploded nationwide. Fortunately, some legislators made the important and tough decisions to do what they could about this problem at the local level.

To date, HSF has enrolled 38,000 residents (more than half of the city’s uninsured population).

The majority of the enrollees are also low-income: 70% of HSF participants have incomes at or below 100% of the Federal Poverty Level (FPL).

  • The program aimed to target the low-income population first, but has now been expanded to include folks making up to 500% of the FPL (or about $110,000 for a family of four).

At the same time, we do agree with Mr. Westlye’s arguments that these local healthcare reform initiatives should not take the place of a national overhaul of our health system. When it comes down to it, the states and local governments don’t have the financial resources to insure everyone, and to administer the programs.  This will require a national approach.

In implementing initiatives such as HSF, governments pass much of the cost of our overpriced health care services onto local businesses and consumers.  These “fixes” do not attack the cost; they just pass it on.  Municipalities are just too small to have the bargaining clout to address the bigger cost issues head on.

Learning from a local program:

Already, data from the HSF experiment shows that it is actually cheaper to provide services to the uninsured through the HSF program than it would be buy each participant private insurance on the individual market.

  • Services provided through HSF cost $280 per person per month.
  • This is significantly less than private insurance: the average monthly cost of a Kaiser Permanente health plan is $338.  Folks pay $618 per month for Anthem Blue Cross coverage.
  • Maybe the federal government should set up a similar program, rather than mandating that everyone buy private insurance on the individual market??

We must also encourage and support national action on healthcare reform, so that businesses and local governments are not forced to break the bank in providing coverage for their employees and residents.

Read our full argument on this topic here.

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