19 Jul 2011

A letter to San Francisco Supervisor David Campos

19 Jul 2011

San Francisco Supervisor David Campos has proposed amending the groundbreaking Health Care Security Ordinance,
eliminating the use of Health Reimbursement Accounts (HRA) and employer-funded Flexible Spending Accounts (FSA) as a compliance option. Here is the full text of the yet-unanswered email I sent on July 12, 2011. District 10 Supervisor Malia Cohen was also addressed, as my small business is located in Potrero Hill.

Dear Supervisors Campos and Cohen,

As an independent health insurance broker and small business advocate, I want to share my opinion of Supervisor Campos’s proposed legislation change to the San Francisco Health Care Security Ordinance (HCSO). A little bit about my background, as is relevant to this discussion:

– 5 years as HR/Operations manager – managed benefits for growing San Francisco tech firm
– 8 years as small business owner, advising small businesses of 2-50 employees re: health benefit plan design
– Current Vice President of the Potrero Hill Association of Merchants & Businesses
– Current Vice President of the San Francisco Small Business Network

The planned amendments to the HCSO as I understand them are a vast departure from the original intent of the ordinance passed by the voters; i.e., provide increased access to the basic health care for San Francisco’s workforce.

The per-hour cost to employers was never intended to be an addition to the minimum wage, nor a retirement benefit. It was intended to increase access to health care.

A health reimbursement arrangement is an intelligent, cost-effective way to finance health care. Companies that provide this type of arrangement have a financial incentive to invest in the health of their employees, to keep usage of HRA low. When this type of arrangement is paired with Healthy SF, or high-deductible insurance, this type of arrangement can accomplish that exact intent of the ordinance — far fewer people falling through the cracks without access to basic health care.

How to fix this program without turning the dollars spent into an entitlement benefit, which appears to be Supervisor Campos’s intent? 3 steps:

1. Amend the language to catch the businesses that are circumventing the system by cleverly designing HRA/FSA plans to be unduly restrictive and not in the spirit of the HCSO. For example, an employer can offer an HRA/FSA for dental services only, and still meet the HCSO requirements. But because dental utilization is low (employer could probably expect 75%+ of funds to go unused), I think this qualifies as trying to get around the intent of the HCSO.

2. Improve enforcement to go after employers who are failing to meet even a minimum standard of educating their employees on how the plan works. No better way to keep reimbursements low than to not tell your employees how to do it. These employers are probably a small percentage, but making changes to bring them up to standard will improve the overall program, while maintaining the integrity of the original HCSO.

3. Amend the HCSO to add incentives for employers who invest in health education for their employees. Smoking cessation, chronic disease management, nutritional counseling, exercise and weight loss — these will get at some of the major cost drivers of health care delivery. Create a small pool of funds to encourage businesses to implement this type of health program — many these are minimally expensive. In fact, consider requiring health education programs for employers who want to use an HRA/FSA to meet the HCSO minimums.

If this is done right, everybody wins — employers get healthier employees while maintaining or reducing costs. Employees get healthier, and have access to basic health care services when needed. And a healthier workforce, without raising the cost of doing business in the City, benefits the City as a whole.

I appreciate your consideration and would look forward to speaking with both of you further on this issue.


Bradley Vaccaro

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  1. Eric Steckel October 19th, 2011 12:27PM

    This is an excellent discussion of the two sides. Thanks for articulating it well, Bradley. Hopefully wise minds prevail on this one.

  2. Bradley July 21st, 2011 7:55AM

    Supervisor Campos – thank you for taking the time to post your thoughtful response here. I am also curious on your take re: my general rejection of your assertion of HRA’s being a loophole:


    Given the length of that argument, I will boil it down to one primary statement for further discussion:

    The most economically efficient strategy to the benefit of both employer and employee is for the employee to enroll in a low-cost health insurance/health services program (e.g., Healthy SF, Medi-Cal, individual market high-deductible health plan) while the employer provides an HRA or FSA to help employees pay for critical out of pocket expenses not included with their primary coverage.

    Agree/disagree? I’ll put that question to anyone reading this, not just Sup. Campos….

    I fully understand the issue re: ERISA and the 9th Circuit. But the City could require employers to obtain simple employee signatures confirming that they understand their options outside of the HRA (e.g., Healthy SF), and that they understand the HRA funds do not roll over. In fact, participation in an HRA *requires* employees to opt-in and review a Summary Plan Document.

    It seems like there are numerous actions the City could take re: changing reporting and enforcement that would not run afoul of ERISA.

    Lastly, I am posting here because I think the public discussion is valuable, but I would be pleased to sit down with you and any of your colleagues to discuss these issues, including whether a wellness component could be implemented into any possible changes.

  3. David Campos July 20th, 2011 8:26PM

    Dear Mr. Vaccaro:

    Thank you very much for writing to me regarding this important issue. I apologize if you haven’t received a response from me or my office. Please know that our failure to respond was not intentional. We take public input very seriously but some times it is difficult to respond in a timely basis due to the large volume of emails we receive.

    I appreciate your points and suggestions. I strongly agree with suggestion number 2, which is something the legislation is already doing — enhancing enforcement. As you note, we are talking about a small percentage of businesses that are exploiting this loophole; the vast majority of businesses in San Francisco are actually following the letter and spirit of the law. With respect to point number 3, you raise an interesting idea and is definitely something we should explore. I would love to get any additional information or specifics you may have on that.

    With respect to suggestion number 1, however, there isn’t much that we can do. Unfortunately, federal law precludes local jurisdictions like San Francisco from micromanaging these accounts. While your suggestion presents an easy fix (and one which I would love to be able to make), legally, we are not allowed to dictate what restrictions an employer may place on the accounts. The Ninth Circuit Court Of Appeals has made this very clear; the only option we have is to focus on the definition of expenditure, which is why that legislation is doing.

    I would be more than happy to discuss this matter with you further and again apologize for the delayed response.

    Respectfully yours,

    David Campos