whether an employer is deceiving the public or employees about that and it specifically says if the amount collected from the surcharge is greater tlan the amount spent on employee health care t employer must irrevocably pay or designate an amount equal to that difference for health care expenditures, in other words, if there's any discrepancy in the numbers, the employer has to kick in the amount that's the difference to cover health care and it states clearly, they may refer any potential cases of consumer fraud to appropriate authorities, we did think about how we ensure that if there are restaurant that is are engaged in practices that none of us support that we have a mechanism to require every employer to show us what those numbers are which can be immediately verifiable and we can take action and i support action being staked by lloc, by the district attorney's office, by any consumer fraud in california.

>> thank you very much, colleagues, any additional comments? with that, we will start with the civil grand jury to present its report. i'm not sure who's going be speaking for the civil grand jury. thank you. >> good afternoon, supervisors, thank you for holing this hearing on the 2011-2012 grand jury report health care security in san francisco, i am the person protemp of the [inaudible]. >> if you could speak up a little bit so that folks watching on tv can hear. >> sure. i will try my best. before i turn the podium over to my colleagues who will be presenting the report, i wanted to acknowledge the presence of members of my jury, also present here today are members of past grand juries as well as some members of the current sitting grand jury and going to

president chu's opening remarks, something that may be reviewed in a continuity report, i wanted to recognize absence of certain members of the 2011-2012 grand jury, they could not be here, that includes our foreperson, as well as mark buff fi, the chair of the committee that drafted and presented this report, as well as sharon you, a member of the investigative team, so i just wanted to echo the sentiments and the concerns that supervisor campos had regarding this matter of concern, you know, every day, people in san francisco, people go to these restaurants and pay a surcharge that's tacked on to bills that businesses call mandates or compliance, and it

was supposed to be meant to benefit those employees who did not otherwise have access to health care, however, based on the information, the jury acquired during its investigation, it's really unclear who's actually benefiting from healthy san francisco, and whether the policies and procedures in place adequately believe that situation and we actually believe not. just as an example, suspicious that's based on self-reported labor to the office of labor standards enforcement that some businesses collecting hundreds of thousands of dollars from customers to benefit their employees did not reimburse a single penny for health care, while san francisco's concerned one of the healthiest cities in the u.s. and ranked from business week as the best city in the united states, you know, it's hard to believe that none of these particular employees

had any health care expenses at all. >> that was in 2011, right? >> no, actually, two days ago, that's u.s. city -- >> no, no. >> that's every year, but in terms of data, 2011? >> yes. >> and this isn't criticism, you can't have data that doesn't exist yet in terms of the collection, but -- and maybe you want to go to one of your colleagues in terms of addressing given the change many the law, we know there was a problem before and we can sgraoe or disagree whether the legislation that was passed and signed was the best or not the best way that he we had a disagreement on the board, we can agree there was a change? >> we agree, and so based on your response then and based on what's going forward, i'd like

to turn the podium over to my colleagues, kay evans and matthew could cohen to address the issue. >> just one second, i think the reason i'm bringing this up is -- and i don't want to speak for president chu, we're coming from a similar place, i have great respect for the civil grand jury and i know a lot of people served on it and it's important work and people work an enormous amount of effort into this and as a result when reports get released, the press focuses on them, it gets a lot of attention as it should because it's important work and the civil grand jury's done good work over the years, and so, you know, as a result, i should think it's important always to know what the data

was and what the limitations are and so it's good that we're having this dialog but i just wanted it to be very clear what this is, with that said, thank you. >> good afternoon, supervisors, in 2008, the city and county of san francisco initiated its historical universal health care program for all rez dens of san francisco, the san francisco civil grand jury thinks our city should be commended for enacting this ambitious and inclusive legislation for the delivery of health care to the uninsured. while healthy workers are important in all businesses, healthy workers are vital in our city's restaurants to prevent the spread of communicable disease, none of us want to contemplate that the people cooking and serving our meals could be onerously ill and carrying a terrible disease.

unfortunately, there is a compelling financial incentive for many businesses to overlook or turn a blind eye to these unsettling issues. it is for this reason that the 2011-12 san francisco civil grand jury decided to look into this and how this came to be. we wanted to know what happens to the surcharge for healthy san francisco that is added to the customer's bill? where does the money go? health reimbursement account guidelines, we want them to be uniform among employers, are they? how much of the employee spending requirement is actually spent on employee health care? is profiting from h*ement care surcharge a form of consumer fraud? the san francisco legislature mandates that most san francisco employers spend a minimum dollar amount per

employee on health care. this program provides direct health care to the uninsured by utilizing existing health clinics, government hospitals, partnerships with local health care providers, there are several options as to the method of compliance with the employee spending requirement, in hra, health reimbursement account where employers earmark the funds and pay out only when actual medical costs are incurred by their employee, furthermore, after two years or 90 days after the employee's termination, employers can retain any unused funds for their own use. the city option where the city contracts with a third party specializing in health care spending accounts to administer the employee's medical reimbursement account and the funds remain available to the employee for life unless there has been a period of inactivity for 18 months, in that case, the city reclaims the unused

funds. the last option is privately paid insurance plans, the office of labor standards enforcement reported in 2010 that 860 out of 4 thousand employers used the hra option. the total amount allocated to the employees were 62.5 million dollars. only 12.4 million dollars, however, was actually spent on employee medical care allowing their employers to reclaim or retain up to 50.1 million dollars or 80% of their required expenditures. this discrepancy is disturbing and clearly indicates to the jury that employees are not receiving the full benefit of health care funds intended by the health care security ordinance. our investigation found that a

small but definitely growing segment of employers primarily in the restaurant industry but not exclusive to it are profiting from the practice of adding a surcharge to the bill of every customer. by using private reimbursement plans instead of the city's medical reimbursement account, these same employers are legally able to reclaim the ma jart amount of funds intended for employee health care, thus, increasing their profits even more. the jury feels that the blatant capture of funds is at the expense of employees who are not receiving money earmarked for health care, nor are the customer who is are paying the surcharge for what they honestly believe is for employee health care. in reviewing the armorial intent of the health care program, we reminded ourselves repeatedly that this program is about providing health care for employees, not creating

additional profits for businessess, the jury has no issue with restaurant eurs raising their surcharge, a significant number of restaurant owners are benefiting from the addition of surcharges which are represented to their customers as being for employee health care. this is a clear violation of public trust, despite the koe and chew legislation passed in 2011 which did not close the loophole ins the security ordinance but merely requires employers to wait two years instead of one to retain hra funds. it goes on to say that any excess must be for the benefit of the employees. well, this is extremely vague and ambiguous and we weren't

sure what that meant. does that mean a hawaiian vacation for the owners in which they bring back little gifts for the employees? just think about the cost of implementation and enforcement to say nothing of the unbelievably complicated auditing process, so as a result, the jury recommends the city totally eliminate hra's in favor of the city option. the jury strongly recommends the city bring an end to the gratuitous practice of allowing business owners to add surcharges for employee mandates to their customer's bills and the jury recommends the district attorney follow through with an investigation to review our survey findings for possible consumer fraud. the promise of the health care security ordinance is to provide health care for workers in san francisco that is easily

accessible. health reimbursement accounts do not fulfill this promise. when businesses use the health care surcharge to earn large profits, i must repeat, the public trust is violated. hra's may be technically legal, but are they ethical? we really don't think so. thank you. we'll take any of your questions. >> thank you very much. could you respond to the question that i raised earlier about the fact that this is 2011 data, 2012 data will presumably come out whenever -- you know, next year, and to just respond to the concern that that data is from before the change of law took effect that places restrictions on the ability to give us the health

surcharge when we're not spending the money on health care, etc.. >> i'm matthew cohen. i'm glad to be before the supervisors, for one thing, this is the information we had, and when we saw this information, we found that even though we knew more information was going to come out subsequent to that, this is really indicative of a process which we felt was not something that you can merely look away from even with the amendment that was passed, and for one thing, i am kind of concerned that even though money is supposed to be set aside for workers and if you're using the hra's, if the private employers and a considerable amount of them employ their own accounts, this discourages employees from coming in and basically you're telling their employers what you need the medical expenses for, it's an invasion of privacy, i would rather, it's

nothing we saw in the revised legislation that actually standardized guidelines, as far as we know, employers can still insist on whatever they can restrict their guidelines to whatever extent they want, and i think that this, in essence, limits the ability, limits the access of workers regardless of the amendment to the benefits that they're entitled to. >> frankly, supervisor wiener, if i might say, just to be more clear to your point, what you ask, i'm sorry, it could be more clear, we didn't see enough changes to warrant change our findings. >> just to be clear, i think it's perfectly appropriate to have a policy debate about the issue which we had and which is ongoing and that's fine, i'm not critiquing that in any way, when you draw conclusions based

on data when there's been a change when maybe in a year, it will come out, it will be similar, maybe it won't but i think that there's a question about whether the civil grand jury should have waited for that data to come out, but supervisor compos? >> thank you. well, we really couldn't. we could only access the data that was available, and i noted also that in response to some of our -- in the responses to the report that some departments provided that actually, i don't believe the forms for 2011 were sent out until march of 2012, so there was no way we could have access to this. furthermore, i think we found information, developed information on the surcharges that the olsc didn't have and wasn't pursuing, so if we opened the door that subsequently may be closed, still i think we have to look at the chance that is it won't

be and again also the cost of seeing that it's closed and that's why we really felt the best way to address surcharges which are deliberately intended which are seined to benefit health of the employees should not be allowed, we can't stop employers from surcharging for other things, for platters, for bread, for whatever, there's no reason why they have to use the surcharge based on -- there are all kinds of euphemisms they can use, we're not sure we can determine whether a surcharge is designated, whether it falls under the designation of a legislation, so, you know, we did what we could, we found a practice that we found was pretty onerous, and since there's money at stake, we didn't feel the amendment closed the loophole the way it should have. >> did the civil grand jury

consider simply waiting to do its report until the 2012 data was available? obviously now you could btbacker nltbackern't predict that data. >> we couldn't, our mandate goes to june 30th. >> but the civil grand jury is perpetual. >> we were in there for a year, so we compile information, we have to do our report before june 30th and i don't believe this information would have been available to us in any way. >> and then new jurors would take over at this point. okay, supervisor compos? >> well, i want to thank the civil grand jury for their service, you know, the thing about civil grand juries is that over the years here in san francisco, they have played their important role and the point of civil grand juries is for them, these private citizens who are volunteering their time to take on issues that in their view are of critical importance to the city and quite frankly issue that is many times they feel city hall

is not dealing with, the latest example prior to this that i can think of is the issue of pension reform, the fact is that pension reform and i'll say that as xhn who was part of the elected family, i was guilty of that, i think all of us was guilty of that, not a lot was happening around pension reform until the civil grand jury issued its report, so i know there are times where there's going to be many of us at city hall to say to the grand jury, you should have waited to take on this issue, i'm glad you're taking on this issue, it continue tos bring in the fore mont something that remains unresolved. there are differences of opinion and i know there are some people in the audience whose opinions i respect that have a different approach, different perspective on whether or not this loophole is closed. we believe it hasn't been closed but one thing i do worry about and i'm wondering if you

could talk about that is the trend in terms of the usage of hra's that you saw, i'm wondering if you can taug about that because i think that a lot of health experts will say that the hra is the worse kind of health care in terms of what -- how it protects an employee and so i want to know a little bit more about the trend that you see in terms of businesses using hra. >> well, i believe that we found that they're increasing because this is to the employer's advantage if they can recapture this money , and the other thing, one of the questions i had was if you're designating money to an hra and let us say an employee doesn't come in or is discouraged from coming in to cover medical costs and i assume there are a lot of employees who are reluctant to go to their employee and i know some of

them are third parties, but what happens to that money? why isn't that money designated anyway to go to health care if not for that specific employee or for employees in general. the way we see the schemes that are set up with hra's is that it does tend to discourage the use and there are a number of reasons, the lack of standard guidelines, there are other employees who don't want to approach their employer and is say they need coverage and don't want to disclose what they need it for and no matter how many private employers actually administer their own accounts and we don't really know specifically, i know one of the reports, it was 15%, but certainly that's 15% too many. this would tend to increase the amount of money that can revert back to the employer after two years, and what happens, you know, you talk about surcharges have to be paid -- what does

designate mean? what does it mean to designate funds that were intended for the health care of employees? designate, was that identify? well, what happens to it? what is the resolution -- how does the city respond if these monies are not paid for health care and what do you mean by the benefit of employees, there's terms in there that discuss, well, it has to go to the benefit of employees, it doesn't say medical benefit of employees which is one of the points we brought up, so those were the things we felt were -- there's also another issue and that is there are part time workers that work for more than one employer and this also is a confusing and complicated issue that could be resolved, this is what we mean by eliminating the hra's and requiring the money to be deposited directly with the city under the sf option which we feel would be a better

way of providing these services and delivering these services to employees in the city. i don't know to what extent that -- >> thank you, president chu. >> i have one comment, first of all, i want to echo what supervisor compos said, i want to thank you, you have a big job and a number of reports coming from this past year that we'll be considering and i appreciate the work that you have done on that, from my perspective and i think this is probably no surprise, we heard a lot of testimony last year that echoes what you have laid out in your report, it was the fact that hra's seem to be on the rise, the fact that there did seem to be restaurant that is were abusing surcharges with regards to employees and consumers, that caused me to spend quite a bit of time after last year's vito to craft the legislation that as we all know just went to in effect this year, so from my perspective, i didn't hear necessarily any new data different pr the testimony

that we heard last year, it really confirmed the problem that we heard about which is why we moved forward with the legislation at the end of last year and certainly if this data, if we hear data like this a year from now or two years from now as i stated before, i will have great concern and i will be working to think about how to continue to refine the law in this area, but because the data which i hear again is simply to me appears to be a bit of a rehash of the data we heard last year, that's why i really have some questions about how this old information is trying to be used in a new way to criticize legislation that just went into effect. >> there's a report that just came out, is that what we're talking about, doesn't that follow the same, you know, follow the same reasoning we have? >> i think the olsc report which came out which is 2011 data is a great base line for

us to compare, but it doesn't suggest that the law that went into effect on january 1, 2012 isn't going to have its impact, its positive impact. >> the only response that i would have to you, supervisor, is that we'll know more in april when the new data comes out, but we continue -- we've been so invested in this for a year, so naturally we still when we go into restaurants, we ask questions despite your well intended amendment, we still hear the exact same stories, there doesn't seem to be a change that we have noticed so that's all i can say. we're more interested than i think most people, so we ask the questions when we go into restaurants and there are people that still don't know that despite needing signs now and it's -- i think your

intention was -- your amendment was very well intentioned, i just don't think it went far enough with the jury. >> which i appreciate and i have asked this of the business community and we have leaders of the small business community here to engage in that education effort and they have been engaged in that effort and we will see nr the coming months and years if it does have the impact that it does, i hope that it does but that will be seen. >> we do too. >> our position is to raise issues, we look at various things that are going on, there are programs and processes, and when we see something we think needs to be addressed, we address it. we don't always have the ability to get all the information we need on a timely basis, but we do the best we can and we try to stay as up to date as much as possible, so regardless of how that works out, if we bring this to the attention of the bore, of the city, of the public, then at

least we know it's getting addressed to some extent. >> absolutely. and we appreciate that, absolutely, and supervisor chiu, you have a question? >> i don't have a question, i want to thank you for your comment and is your presentation. i wanted to address a separate issue, supervisor compos talked about the value of the civil grand jury, i think we agree with that and i don't think it's a question about any one of us value the civil grand jury more or less, but i think it helps to highlight some of the issues we do face, with regards to the pension, there were a lot of people thinking about the pension fund and how we would deal with it moving forward, i think what really critically happened was the civil grand jury report, but in 2008 when we had the major crash in the stock market, we saw the pension fund drop drastically, which really

served to highlight the need to implement reforms immediately, and so i absolutely value the civil grand jury's work, i think the different events that happened highlighted to bring it to the forefront. there were a lot of things happening around pension. >> colleagues, any additional comments before we go to the departments? >> no. >> so, we have -- i'm going to call up, we have a number of departments, first we'll start with olsc given that it was both the respondent to the civil grand jury as well as the creator of the report at issue and wanted the hearing request, and then after olsc and if the departments want to go in different order, na's fine, we have the department of public health, the district attorney, the treasurer tax collector, the city attorney, the mayor, and then after the city departments, we do have someone

from the board of equalize sashes that will address us around the tax issue and is the golden gate association which voluntarily responded to the civil grand jury. so, we'll start with olsc. and olsc is office labor standards enforcement. >> good afternoon, members of the committee, i appreciate your time and the opportunity to be here. i'm going to try to do a couple of things in quick succession, i will recap our responses to the civil grand jury report and then i was going take a moment to summarize the report that we issued in august on the 2011 data that was submitted to us, much of that has been discussed already so i'll try to get through that quickly and high lying a few things that haven't been addressed so far. with that, we were asked to respond to just six of the 13 findings from the c