an individual will call our dedicated employee call line and indicate that, you know, they had mistakenly forgotten to contact us before they received the closure notice. we can reinstate that account for that individual. we maintain records of all closed accounts for a seven-year period. so if that individual should, for example, forget or misplace their information and come back three years later after an account has been closed, it can be immediately reinstated with the amount of money that was in the account at the time of closure. to date, we have closed 5,000 accounts. we have only closed accounts once in the over three-year history that we have hassd m.r.a. accounts under the healthy san francisco option

plan and that was actually in march of this year. we do not close accounts frequently as i indicated. we just close accounts with a per sentence three years into the practice. the average number -- the range in terms of the number of months in terms of inactivity for those accounts were accounts that were anywhere from 19 months inactive to 34 months inactive. almost from the time the account has been established, the individual has not elected to withdraw funds. but as i indicated, if that individual should come back to us at a later date, we can certainly reinstate those funds. those are the -- the technical framework. let me say the department takes seriously the notion that individuals need to have access to the funds that are available to them. the m.r.a. was specifically set up to ensure that employees who

are not eligible for healthy san francisco still have an option to get access to care and to have that care paid for by their employer as opposed to them entirely bearing the cost. we have over 31,000 m.r.a. accounts. the vast majority of our employees who have accounts use those accounts, use them regularly, use them for valid expenditures to really ensure that they keep themselves healthy so that they can continue to work for their employers. we believe that we have managed the m.r.a. accounts in a way that provides flexibility for the employees in addition to providing them with ongoing information on how to access those dollars in a timely manner. if you have any questions, i'll be happy to answer them. >> thank you very much.

what i would really like to do, commissioner kasselman has requested to ask a question. i'm going to let her do it. for the record, in the future, i would like to ask the commissioners to allow the presentations to finish before we interrupt them. everybody has questions that they would like to ask. i think it is better that we let them finish their presentation without interruption. i don't believe this is the most efficient way to do it but since i started it that way it is only fair to keep it that way. >> i can wait. >> i don't want to be labeled discriminating against my own commissioners here, especially not sexual discrimination, which is even worse. commissioner kasselman has withdrawn her request to speak. we will get back to the schedule

here. mr. scott -- if he is here? welcome. >> i didn't know i was spodse to be -- is this just -- supposed to be -- is this normal? >> i'm sorry. there must have been a miscommunication between chris and i. i think we'll have you speak to -- and then as an insurance -- from the insurance industry at all in terms of how some of these accounts are set up, the health reimbursement accounts. >> well, the health reimbursement, the h.r.a.'s are the subject. that is very, very clear. what the h.r.a.'s say over what the laws say is that the

employers sets up the terms of the h.r.a. it is my belief that the city in effect is setting the terms of what they can do in their h.r. sambings a violation and i have talked to a couple of attorneys. that is -- basically as i said an h.r. sambings the subject and it is just determined -- the makeup of it is determined by the employer. that's what way it is described to me. as far as the second question was what are employers doing in setting these up? i'm sure that there are employers that are trying to beat the system and have set up

very restrictive h.r.a.'s and probably -- well, not probably -- have not given proper notice. i'm sure that is the case. i have said i have worked with employers that have set up h.r.a.'s. we encourage them to let their employees know, we encourage them not to make overly restrictive programs. try to make them work within the confines of the city retirement. having said that, though, it is -- i'm not saying that an employer shouldn't set up the best plans so they can -- but there is a an economic reality out there and there are situations where businesses are complying with the law but their profit margins are so low that

without having some of that money come back, and it is not with the intent of eliminating it. they recognize a lot of their employees may not use it, especially in the immortal age, people don't get sick. they recognize they may not use the benefits there but they are facing the situation -- you're looking at somewhere between 10%-15% increased cost on labor for labor intensive businesses, that is very significant. i think it is $1.37 between 20-99 employees and 100 employees you're looking at a $2.07. that is a significant increase cost in labor and for some businesses, not so much applicable to restaurants, but where you have retail businesses or businesses that are -- not

only are they -- not only is this a 10% cost on labor, but they are selling their product and they are at a 9% to 10% disadvantage with amazon, overstock because they have got to collect the sales tax. so you can have a business looking at 20% higher cost because they are competing against the out of state internets. they have got to pay an additional 10% to 15% onlabor. it can be very difficult. now one of the things that the business community has talked about and wund -- one of the things we would like to get is information from businesses that are really -- have a situation where their profit margins are so low that they would actually lose money or make very, very little money if they had to pay out the full 100%.

that having been said, there also are businesses, and you're going to hear from some tonight, that, again, have set up the h.r.a. by the rules, have notified people but this is access to capital is a real problem for small businesses. it is not a secret that it is hard to get loans from banks and giving access to money. and they are using in some cases, they are using this money -- again, they have set up the h.r.a. they are using this money to hire people. and to hear people talk about this tonight, i know at least one employer to talk about, this is the only way he can expand his business and create jobs. the other aspect is, you know, if a business is -- is at a low margin area, they are going to have to take steps to try to address these additional costs. they are going to have to look

-- i know one business that says it is a well-known restaurant 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: