San Francisco is launching its groundbreaking universal health access plan as scheduled on July 1, even as a major element of the city’s vision for expanding health care services for the uninsured —- a mandatory employer subsidy — is under legal challenge.
Starting this summer, trained personnel will be on hand at city and community health care facilities to enroll uninsured residents in Healthy San Francisco, one of two programs established through legislation passed in July 2006 by the board of supervisors. The San Francisco Health Care Security Ordinance also created the Employee Spending Requirement, a second program mandating that employers contribute to employee health care costs based on the number of hours they have worked — a mandate that is the focus of a lawsuit filed by the Golden Gate Restaurant Association.
Healthy San Francisco, an overhaul and restructuring of a broad-based but fragmented health care safety-net system, is designed to encourage the city’s 82,000 uninsured residents to access primary and routine preventive care instead of waiting for a crisis to arise and then seeking more costly emergency services.
Care will be provided through a network of public and private health care facilities, including San Francisco General Hospital. Point-of-care copayments and monthly fees for program members will be determined on a sliding scale based on household income.
The Health Care Security Ordinance combined separate initiatives from Mayor Gavin Newsom and Supervisor Tom Ammiano. The health care access plan — unlike the employer mandate — has solid support across the board, including among business interests.
“To the extent that uninsured residents don’t get the primary care that they need, which leads to chronic conditions, which leads to emergency room care, which leads to very high-priced treatment, which drives up the cost of insurance and medical treatment for everyone, it’s really good business to figure out a way to get people access,” said Steve Falk, president and CEO of the San Francisco Chamber of Commerce and a member of the plan’s advisory committee.
Many states, including California, are exploring new ways to bolster their fraying health care systems, but San Francisco’s experiment is an unprecedented attempt to address the problem on the local level. And for that very reason, said Dr. Anthony Iton, health officer for Alameda County, it is being watched closely by other jurisdictions around the state and across the country.
“San Francisco is recognizing that what matters at the end of the day is access,” Iton said. “They’re taking their safety-net system, rationalizing it and spreading that access as far as it will go. It’s brilliant and a little risky. The risk is whether the capacity of the system is adequate to handle the increased demand and whether they can come up with the right financing mix.”
San Francisco currently spends just over $100 million a year on care for the uninsured. It is estimated that if all 82,000 uninsured residents were to enroll in Healthy San Francisco, the program would cost about $200 million annually at current spending levels, but enrollment in the plan is expected to be phased in over time.
In March, San Francisco received a significant boost when the California Department of Health Services announced that it would award the city $73 million in additional federal health care funds over three years. The funds are part of $540 million that the Bush administration promised California in 2005 as part of a renegotiated Medi-Cal hospital financing agreement. In the Bay Area, Santa Clara, Contra Costa, Alameda and San Mateo counties also are receiving significant awards, which the state has earmarked for innovative approaches to delivering health care.
Healthy San Francisco differs from health insurance in a number of critical ways, said Tangerine Brigham, the deputy health director who is overseeing the implementation of the program. First and foremost, it is a new approach for the city to meet its existing obligation under state law to care for the indigent, and it is therefore the city — rather than a health plan — that is the “payer of last resort,” she said.
Unlike health insurance, she added, participant fees are tied to income, and the plan provides no coverage or access outside the city. “If you happen to be in Alameda or Marin or Ypsilanti County, those services will not be paid for under this program,” she said.
The employer mandate is the most controversial part of the overall package. Originally scheduled for introduction this summer, it has been postponed until early next year. Starting Jan. 1, 2008, employers with 100 or more employees will be required to spend $1.76 per hour worked, and those with 50 to 99 employees must spend $1.17 per hour.
Starting April 1, 2008, employers with 20 to 49 workers also are required to comply at the $1.17 per hour rate, and the hourly contributions will increase somewhat in subsequent years. Businesses with fewer than 20 employees and not-for-profits with fewer than 50 are exempt from the requirement. Employers that currently spend that amount or more on standard insurance packages already are considered to be in compliance.
If employers fulfill the mandate by paying into the Healthy San Francisco plan, their employees will receive a significant discount on their monthly enrollment fees. Yet employers also can satisfy the requirement in a number of other ways, such as purchasing health insurance, setting up flexible spending accounts or paying directly for health care costs incurred by employees.
Because the program is open only to residents of San Francisco, nonresident workers whose employers choose the Healthy San Francisco option will receive flexible spending accounts to cover some of their own health care costs.
The lawsuit filed by the Golden Gate Restaurant Association is challenging solely the legality of the employer mandate, not the health access plan itself. The organization, as well as other business groups, argues that the requirement is pre-empted by a 1974 federal law known as the Employer Retirement Income Security Act, or ERISA, which regulates pension and health benefit plans.
Kevin Westlye, GGRA’s executive director, said an alternative funding mechanism favored by the group, a ¼-cent sales tax, would raise an estimated $35 million a year. Such a tax, he said, would spread the economic pain for supporting the health access plan more equitably, with half of the sales tax total expected to come from businesses and a quarter each from residents and tourists.
“The city said people wouldn’t support a sales tax, but it polled at 70%, and we think with the support of the mayor and Supervisor Ammiano it would have gotten 80%,” Westlye said.
The case is scheduled to be heard in federal district court on Sept. 14, and any decision could be appealed. Last year, a federal appeals court, citing ERISA pre-emption, ruled against a “pay or play” provision in health care legislation passed by the state of Maryland. If the Ninth Circuit Court of Appeal were to reach an opposite conclusion, the U.S. Supreme Court likely would take up the issue and resolve the differences.
Vince Chhabria, the deputy city attorney who is handling the case for San Francisco, said that the employer mandate legislation was carefully crafted with ERISA in mind so as to minimize the possibility that a court would toss out the provision.
“When Congress passed ERISA, I don’t think anybody there would have dreamed that it could be used to block universal health care reform on a local level,” Chhabria said. “If the court upholds our program, it will have a significant impact on the national debate by providing a roadmap for how to do comprehensive reform without running afoul of ERISA.”