that says they will move all of their back office space out of san francisco. they are going to look formecha- mechanization as ways to cut down on the labor. it will street journal report was comparing the increased mechanization to the increased use of labor over the past two years. it was significantly higher, the cost of labor, then mechanization. you are going to see more independent contractors. there are employers that are abusing this, but most of the employers are trying to play by the rules and operating on a very thin margin. they are looking for ways to grow and expand their business. president o'brien: thank you.

we have one more speaker before we go to the general public comment. mr. black? >> commissioners, rob black. thank you for the opportunity to speak today. you have heard from the proponents of this ordinance that businesses are not complying with the spirit of the law by allowing for unused moneys to return to the employer, that because only 20% of health reimbursement account expenditures are used that the employer must be violating the intent of the law, that employers are restricting benefit packages with the intent of making them difficult to use, the example primarily around reimbursement of insurance premiums. i want to talk about those three issues.

we believe the intent of the law was not to enforce employers to spend money on a. the intent was to reduce the number of people who received primary care from a emergency rooms and to provide low income people with health access. we believe that was the intent of help the san francisco. the expenditure requirement was to put the burden on employers to help make that process happened. we believe reimbursement accounts are at the proper way to allow that to happen. regarding the 20% to 80% split the supervisor raised, it is important to put this in a broader context, a national context. between the ages of 19 and 34, that age group accounts for 20% of health-care expenditures in the u.s..

for service employers, people working in retail and restaurants and parking garages, that is your age group. we are heading that number. to say there is not 100% take up this not reflect how people access health care nationally in the united states. another example of that -- if you take 50% of americans, the lower and that access health care, they only make up 3% of all health-care expenditures. you have a small group of people that make up the primary large expenditure area. but the vast majority are not using their health care or spending money on health care. to say that 20% is somehow an anomaly is not reflective of how we as americans access health care. regarding restricting reimbursement expenses to prohibit insurance premiums, it

is important to understand how a group insurance plans work. providers of these plants require 75% sun purpose of -- participation rate of eligible employees. if you as employer of providing a group plan, 75% of qualified employees have to participate. if you give some of them an hra that allows them to go out of your plan to pay for insurance premiums, that counts against her 75% threshold, which undermines your group plan. i am certainly not 25. you can tell by looking at me. if i was a 25-year-old employee, my group plan is more expensive than if i go out and buy it myself, because my group plan and my employer has has to cover the older workers, the people

who are sick. that premium is higher. it is better for me to go by my own insurance plan, because it is cheaper. that means my employer might not hit the 75% threshold. they lose their group insurance threshold and all those employees lose that insurance. that is a real aspect of whenever your employer provides group insurance. they are trying to incentivize people to participate in that program. otherwise it undermines their ability to have the group insurance plan. it is an important distinction that did not get brought out in the reports, why employers have to structure benefits that way. i also want to clarify issues around some of the numbers expressed today. there was the expenditure rate that was discussed.

87% of all health care expenditures, or 90% -- and they shifted a bit -- are for insurance. it gives the impression that very few businesses are using hra's. 860 employers, 29% of all employers regulated under help the san francisco -- healthy san francisco, use the reimbursement plan. the annual compliance costs is $50 million. that is $50 million on top of 860 employers, which runs about $58,000 additional per employer annually. 65% of those employers we are talking about have less than 100 employees.

65% of the people using reimbursement accounts in some way to comply are small businesses. it is hard to argue this is a small-business friendly piece of legislation. i also want to talk about health reimbursement accounts and health savings accounts. it is a very confusing part of the law. the same language has been used interchangeably, and they are not interchangeable terms. when you have a high deductible insurance plan, you compare that with the health savings account. an hsa can only be used with a high deductible insurance plans. there are then separate flexible spending accounts that provide for various -- i had one at my last employer that i used for

health care reimbursement. this was a flexible spending account. family costs -- my child's day care, i can get reimbursed, but i have to use it every year. ssa's are required to be use it or lose it. there is then an hra, which in many ways mirrors the hsa, but is a more flexible approach that does not have to be prepared with a high deductible plan. i just want to clarify that because the distinction got lost when people were talking about how to use hra's. an hra is more flexible than an hsa.

an employee can take advantage of this money and it is not reflected as income. if i want to go in need to go to the doctor, i can see the doctor and get reimbursed $100. that $100 does not reflect as income to me. that is a tax advantage and benefit for that employee. i have to admit, the testimony today, especially from the employees, was carried challenging and difficult. it was hard to hear those stories. as supervisor, said, i agree that must be a minority of employers behaving in that way. but i would like to be able to find out if that is the case. all we are relying on now is anecdotal education -- information. we do not know what is being

provided and what is not. that is something we could investigate. i also believe it is important that employees know what their legal rights are and what their benefits are. other than when you first sign up with an employer and you have to fill out the form regarding healthy san francisco, i do not believe there is any other point in the ordinance that requires notice. i believe that can be addressed so that when there are employers who are not educating employees about their legal rights -- that is incorrect. that is wrong. we should be letting our employees know. i think there are ways to address policy concerns. do people know about this? what are they providing in their benefits packages? there are ways that do not require $50 million annually to small businesses in san

francisco. this will kill jobs without a doubt. you cannot take $50 million out of the economy without it having an impact. i would finish with the idea that nationally we are talking about health care and people accessing this at 20% of the expenditure levels from 1944. from 1944 to 1930, it is about 9%. if employees are not using their benefits when i am providing it and they know about it -- if they do not take advantage of it and i can bring it back into my business and hire more people, isn't that a more efficient use of the money and then letting it go away from the business for a benefit employees are not using? if they do not know about it, that can be addressed. if they know about it and are

not accessing it, why is that an efficient way to reallocate money that could go to hiring in the city? president o'brien: thank you. thank you to all the presenters. thank you supervisor campos. at this stage, we will go to general public comment. clearly, there are a lot of us here this evening. >> mr. president, a point of clarification generally. do commissioners asked their questions of the presenting supervisor or any of the panel? president o'brien: before we go to public comment. thank you for that. i apologize.

commissioner yee riley: you mentioned that your department determines whether employers should be on the healthy san francisco. how'd you decide that? >> employers fill out a form. we ask the employer for the address of the employee, the name of the employee, telephone number, their date of birth, and if that employer has health insurance. we ask that information because help the san francisco -- healthy san francisco is designed for individuals who are uninsured, who lived in san francisco, and who are between 18 and 64. there are many individuals who

work in san francisco who do not live in san francisco. many of those employers would not be eligible. in addition, because healthy san francisco is for individuals who are not insured, there are employers who use it to make supplemental expenditures above and beyond what they may choose for their employees. that individual would be ineligible for healthy san francisco. they would get an mra. finally, because it is for individuals between 18 and 64, if that employer was making contributions on behalf of someone under the age of 18 or over the age of 64, irrespective of their county of residents,

they would also get an mra. those are the principal factors we would use to decide whether they would get healthy san francisco. commissioner yee riley: are their standards in terms of access? >> we use the guidelines that are set out by the internal revenue service, the tax code. we use that guideline in reference for the range of expenditures that are held related that are eligible for reimbursement. we provide a listing of that two employees.

they also get a listing of the types of health care expenditures they can use those dollars for. commissioner yee riley: what about the money in the account? >> if the request is for more than the account, the individual will begin to use up to the amount in that account and would argue anything above that could not be reimbursed by that account. they could submit a new request. commissioner yee riley: this would be provided to all the employees as well? >> this is provided to the

employees in three languages -- english, chinese, and spanish. you did not ask this question, but the payout rate for the mra year to date is 55%. commissioner kasselman: that was a good segue to my question. what happens to the remaining 45%? after seven years of inactivity, you said that account closes. what happens to this fund? >> those funds are deposited in to help the san francisco. the account is closed after 18

months. that employee goes back. we reinstate that account. the funds would come out of that help the san francisco department account. we would transfer them back into the mra. we maintain information on inactive accounts seven years from the date they were enacted. if that individual were to come back three years after the account was closed. we would be able to give the information about what was in the account at the time it was closed. the department of public health would authorize what could be used for those expenditures. >> how much money is

redistributed back to help the san francisco -- healthy san francisco annually? >> we have not done it annually. we have only done it once. i think that figure is in the range of $3 million over the course of a 34-month period. vice president adams: this is for supervisor campos. my question to you is that since the majority of businesses are complying, wouldn't it be better to strengthen the employee noticing requirements? supervisor campos: thank you for that question. i have a lot of respect for my

friend rob black, but i will respectfully disagree with that. i do not think this is what he said. i think this is about notice. it is not just about the fact that notice is about how these accounts are being used -- as was noted before, the way the rules of the ira's work, it is up to the employer to set these restrictions, including the comments provided. we as a city do not have the ability to dictate the specifics of how the account worked. we were careful in how we drafted this piece of legislation. this was drafted in close consultation with the city attorney's office, knowing the

restaurant association had sued the city to try to stop the implementation of healthy san francisco. we have drafted this carefully to make sure we follow the clear guidelines the ninth circuit court has faced. while we do not have the right to dictate the specifics of these accounts, we do have the right to define an expenditure. we are simply saying that when we mean expenditure we mean the lemon's definition of that. expenditure -- the lame man fifth definition of that. the use of these -- the layman's definition of that. i would like to see expansion of these accounts, but i am against expansion on the back of the workers or other businesses, their competitors, that are

following the rules. i am also against expansion on the backs of consumers, who are making these statements when they go to a restaurant in san francisco. thank you. commissioner kasselman: i guess i just, to follow up on that, 7% of businesses are using the hra's. we have 4000 businesses resurveyed. -- we surveyed. who is using those? , many of those businesses would even know if they are not -- how many of those businesses would even know if they are not complying? if we are taking away so much money from businesses based on substantial statistical information, that is a hard thing to justify it. supervisor campos: the interesting thing about this tete-a-tete is that it is coming directly from the businesses.

we have 80% of the businesses who are meeting their obligations under help the san francisco not doing it using these accounts. we are talking about only 13% of the businesses using the services we are talking about. >> let me try tore- summarize -- let me try to summarize. the details i gave earlier --

president o'brien: let me stop you. the 90% is not a problem at all, right? and the 3% and 7% -- does the problem manifest through both of those, or just one of them? >> i believe supervisor campos's legislation has not tended to have an impact on the money allocated to healthy san francisco. those who meet the spending requirements through that would not be impacted. the only thing it would impact is the 7% of the money allocated to reimbursement plans. president o'brien: go ahead. thank you. >> the second way we have been trying to talk about this --

that would be the number of employers who the majority of their expenditures go to reimbursement -- 29% of employers use a reimbursement account in some way, shape, or form. one related point is to say that it is absolutely right that there are a number of variations and varieties of irs-recognized accounts. there are flexible spending accounts, health savings accounts, health reimbursement

accounts, and medical savings accounts. that provides a veneer of confusion here. but the percentage of these dollars are toward health and savings accounts. supervisor campos's legislation would not have an impact on that subset that goes to health and savings accounts. by law in definition, they have precisely the features that the legislation is imposing upon or requiring with respect to the health reimbursement accounts. in some respects, that is a way to look at defining the expenditures in a way of changing these accounts that are already in place. flexible spending is another variation. in our enforcement experience, there are no employers who use those to meet the requirement of the ordinance. many of us have these accounts

to our employers. while the irs permits an employer to contribute to them, 99% are employee contributions only. there are essentially a health care reimbursements and accounts. supervisor campos: i wanted to add something, through the chair. one of the points i think is really important is to put this in the context of employees who are under health insurance. . even if you look at the businesses that are anywhere from 20 to 99 employees -- let's

say the employee works full time the whole year. at the most, they can accumulate $2,850 in that account. you can imagine that will not even pay for one night at the hospital, let alone some procedures that have to be covered. that gives you some context of what that means for the employees. commissioner clyde: thank you for being here. michael tonight is not to penalize the high road employers. there are employers who use health reimbursement accounts who i believe use them properly, who do not have expirations. who provide benefits statements regularly, who allow the

broadest possible use of the account, and whose employees may elect to use their benefit to be part of healthy san francisco, to be part of a spouse's health plan, to meet a copayment, or to drop it down any way they choose. we have such a diverse employment base that we have people who work five hours a week. but in cases i know they get $1.37 per hour, and when the have a package of receipts for clarity and, -- claritin, aspirin, contact lens solution -- they submitted. my concern is our small employers and our hig