>> so, this is a chart that shows the common ways that employers complied with the healthcare security ordinance before the aca. and so if you look at the top box, the employer's spending requirement, and the employer spending requirement applies to entities, or non-profit for 50 or more employees and they make the expenditures on behave of the employees working 8 hours or more per week. and there are many ways that business cans comply but there are three primary ways that they tend to comply and the first one in the middle is through health insurance and most businesses purchase, health insurance on behalf of their employees to comply with the healthcare security ordinance. another way is the hra. hra stands for the health reimbursement account. and that is a stand alone account from which that is administered by the employer,

employees can draw down allowable expenses to draw down on that account and the employers can set the terms of what can be covered by that account. and then, unused funds, revert to the employer after 24 months of inactivity. and that one, i will highlight for you in the next slide is going to change with the implementation of the aca. and the third primary option, is the city option. and here there are really two options under that option. and the first is, if a person is eligible for healthy san francisco, and they go into healthy san francisco. and so again this is a program for uninsured individuals to be eligible you have to live in san francisco. and you have to be between the ages of 18 and 64. and you have to have been uninsured for a period of time and have an income limit, but if you are eligible and not be eligible for other publicly subsidized health insurance. and so, if all of those conditions applied and then the person is put into healthy san francisco. and if those conditions do not apply, if the person lives outside of san francisco, or if they have health insurance

through a spouse, for example, and then they are given a city medical reimburse amount account. the city medical reimbursement account works like the health reimbursement account and so they submit it after the fact and but the coverage services is what is covered under the city, mra is different than what is covered under the health reimbursement account. >> they decide what is covered and the funds revert to the employer after 24 months and the city, mra, if it is a wide variety and the city determines what is covered and it is a public benefit program and the city determines what is covered and while these funds technically revert to the city after 18 months, an individual has a right to react vait their account at any time and so technically they are available to an individual in perpetuity. >> maybe you just want to clarify the 18 months is after... >> after contribution? >> okay. i thought it was after no

activity. >> oh, i am sorry, you are right, it is after no activity. >> okay. >> so this is, and we have changes to how these common compliance methods after the aca and the only change that you will see here is the orange box on the right-hand side called accepted benefits, or integrated hra. and so health reform says because individuals have to have minimum essential coverage, these hras don't qualify as minimum essential coverage any more and they are no longer allowed. and what is allowed, though, is a different kind of hra and a hra that does not cover those minimum essential benefits, those things like vision and dental that are not part of everyone's normal health insurance plan and so if you have an accepted benefit, hra, or if you are an employer and you want to provide an hra to your employees and then you can do so through an accepted

benefit hra and there are limitations here, and the office of labor standards enforcement came out with guidance and i think that they may talk about later in the presentation, but, if an employer wants to provide an accepted benefit hra for an employee and they can do so for up to 24 hours, and they can do that in recognition of the fact that the vision and dental expenditures are less costly than the healthcare expenditure and the employees will not be able to use the full amount of the contribution of up to 40 hours that an individual works. and so maybe, it will be used up to 20 hours and the remainder of the employer requirement can be made with any of the other options. these two that are listed here or any other qualifying option. >> i thought that i would provide a little bit of data of

how it works in san francisco now. this slide shows that in 2012, 4,200 covered employers made expenditures on behalf of 264,000 covered employees. and 49 percent of covered employers have fewer than 99 employees. but, 81 percent of covered employees work for businesses of this size. and the next slide, shows that the vast majority of employers healthcare expenditures are made in health insurance. and so you can see here, that the first bar is health insurance, and 90 percent of the 1.88 billion dollars that san francisco businesses reported spending on healthcare expenditures were for health insurance. and you can see that to a lesser extent, less than 6 percent went to health reimbursement accounts, and three percent went to the city

option, and the smaller, one percent went to other health savings accounts. >> so, because hras and mras are kind of the key issue here, in the change from this, and how the aca impacts the healthcare security ordinance, i focused more on the hra issue and the accounts, that are no longer allowable under the health under the reform. and one quarter rely on the hras in 2012. and you can see here 996 employers used hr as in one way or another to comply entirely or in combination with something else. and while the smaller employers form the largest proportion of this group, all employers use the hras at an equal raise at 25 percent of all business sizes use hras but, of those, that have hras small businesses

comprise a larger proportion. >> the city option is the option that includes healthy san francisco or the medical reimbursement account, and with the aca, fewer people will be eligible for healthy san francisco, and so that means for employers complying with the healthcare security ordinance through the city option, more employees will be eligible for medical reimbursement accounts, and the reason is that healthy san francisco is not health insurance and so in order to be eligible you need to not be eligible for other publicly subsidized health insurance, many people who are eligible for healthy san francisco today will be eligible for health insurance or are eligible for health insurance now. right now, we have about 60,000 people in healthy san francisco, and this includes people who were enrolled through the employer and the

people who enroll on their own outside of the employer arrangement and we have about 60,000 people that are in healthy san francisco and about two-thirds of them are going to be eligible for some other kind of health insurance, and then, a lesser percentage of that will actually apply. and because, just being eligible for health insurance does not get you enrolled and even today, we find that many people who are eligible for health insurance do not enroll in what they are eligible for. >> the health department wants to get as many enrolled that they qualified for. >> and so in the future, when an employer contributes to the city option on behave of an employee, if that employee is eligible for medical for the low income and then they will be required to enroll in that healthcare coverage instead a medical reimbursement account will be made for them. >> the good news is that allows an individual to buy health insurance, and use that money

to actually buy subsidized health insurance on coverage california. >> and so you can see here, that 20 percent of all employers contributed to the city option, in 2012. and 18 percent, had or were small businesses with fewer than 50 employees, and small businesses were less likely to rely on the city option than on other methods of compliance. and this is the comparison. and so the contributions are it is same and both by the employer and meant to show the key differences between the two and so the contributions are the same and the employer contributes on behave of the employee and it meets and it has met in the past, the employer's healthcare security

ordinance requirement. it rolls over and requires that the funds be made available to the employee for 24 sxhos after 24 months, the funding reverts back to the employer. and the average expenditure rate for the hras is about 25 percent and so what this means is particularly for small business and why small businesses may be disproportionately impacted, the small businesss that rely on and so budgeting for the expenditure and it may be costly for a small business in

particular. >> the city mra,plan. and they take it back from the account, and the funds are technically available to the individuals. and at termination of employment, that is different, also. and for employee, at the termination of the employment, the funds revert to the employers for the health reimbursement accounts and for the medical reimbursement, they remain available for the employees and they stay in an account with us, as long as the employee is able to and it can access it and as often as they like until it is exhausted. >> the types of there is only

one kind of city option mra and after the aca market reforms and this is also another area of key difference and i mentioned the area of the key difference on what happens to the funds and reverting to the employer and staying with the city is one key difference and so making the full expenditure verses making it on the utilization of the employee and that is different. but also s mra allows the individual to use those funds to purchase health insurance on the exchange. and hras may are may not be allowed to do that and the employers can determine how they want them them to be spend and going forward, it won't be and we will not be able to use those funds for purchasing health insurance, coverage, and only for purchasing vision or

dental coverage and so, the mra option, really gives the person another opportunity to buy health insurance on the exchange. >> so, this is my final slide, and this is really the impact of aca market reforms on the employers compliance choices. so, group health insurance is still by far, that the method that we expect most employers will use to comply with both the aca and the healthcare security ordinance. and it is the gold standard and it is what is best for the individuals as a person from the health department and the health insurance is better than uninsurance and it provides people with stable access to healthcare service and it protects them financially from catastrophic illness. and so this is really the gold standard and this is how the

employers are complying today and will continue to comply in the future. >> the health insurance, and it can no longer comply with the stand alone unless it is the benefits for the other benefits that are not covered by the health insurance. and, the city option, the city option will continue to remain but more people will be eligible for health insurance, but the medical reimburse accounts will be there for those who make contribution to them and so the employees can purchase the health insurance and have other healthcare services reimburse and so that is the conclusion of my presentation, and i can turn it over to the office of labor standard enforcement and i am happy to answer the questions from you now whichever you prefer. >> okay. >> and it is up to you. >> let's take some questions, first. mark, commissioner dwight?

>> okay, so an affordable option, but the employee elects to be covered by a plan that a significant other has because it is favorable, and how is that situation dealt with, as the employer still have an obligation? they still have a healthcare obligation and will have to make a expenditure in a different way, is that true? >> yes. and i just don't get that, because the objectivity here, is not to penalize the employers it is to provide coverage and so what you are doing is double dipping, you are just saying, whether you can get insurance or not, we are coming to get money from you. >> and i don't understand that. >> as an employer myself. >> sure, with more than half of my employees. >> and the intention there is that the employee could have other expenditures reimbursed and suppose that it went to the city option, if he was an employer and contributed to the city option and that person has

health insurance and so they would be ineligible for healthy san francisco and that funding could instead go to the city, mra and the city could reimburse for the out of pocket expense and so if they have a high deductible and co-pay and those things could be reimbursed on behalf of the employee. >> so this employee is then going to not only take advantage of their spouse's insurance, but now, also be eligible take advantage of sub, and extra reimbursements from the city, is that what you are saying? >> the individual would have healthcare expenditures on their behalf and their significant other would have expenditures on their behave and they will have the total of the two, yes. >> and any other commissioner questions? >> i think that i probably want to hear from them. >> okay. >> and so to hear from the office of labor standards enforcement. questions?

>> i see, all right. good evening, commissioners, my name is ellen love and i am with the office of labor standards enforcement and thank you for having us here tonight and also, many thanks to coleen for a great overview of these complex policy area and fortunately she covered almost everything and so we don't have that much territory to cover and we did want to bring your attention to the guidance that we or our office of the office of labor standards has recently issued on the hcfo and related to the affordable care act and we also wanted to notify you about upcoming reporting deadlines, and a upcoming rule making process and so we will be conducting. >> so the office of the labor enforcement issued faqs on the

intersection, between the healthcare security ordinance and the affordable care act. and releases between october 21st of last year and december 20th and that covered three areas, one is general questions, about the affordable care act. and the hcso and coleen covered all that have pretty well and the second area is the area of accepted benefits, and which she discussed briefly when she talked on the accepted benefits, hras that are now an option. and the third area is the funds remaining in the stand alone medical hras at the end of 2013 and that is something that i am going to talk a little bit more about now. and the other thing to note is that the ofc may issue additional guidance on these issues as we move forward as you may have noted it is a

complex policy area and additional questions may arise. and we will be looking at those issues moving forward as well. and you have been provided with copies as well. >> and so, remaining hra balances and so if you have been using a health reimbursement account to compile them, what you do at the end of it, and at the end of 2013 and moving into 2014. and so, first of all, the hcso requires that funds contributed to a health reimbursement account be available to the covered employee for a minimum of 24 months and that does not change, and so what has changed is the federal rule is that governor these accounts and so

the affordable care act provides that new contribution to stand alone medical hra, are not permitted after january first, 2014. and so, that is one provision and the other new provision that is relevant and in this instance is having a stand alone, medical balance makes an employee ineligible for tax credits if they purchased health insurance, through coverage california and, through the exchange, and so that is going to effect employees, who are eligible for federal subsidies, on the exchange, which is employees whose household income is between 138 and 400 percent of the federal poverty line and to just give you a sense of what that means in real terms for a family of three, that is a household income between $26,951 and $78,921 and so the

people in that household income range could be affected by this policy. >> okay. so, we, our office, started getting questions, and about what the options are for employers. and who have these hras and 23e fung they still have money in these hras at the end of 2013 and what are the options for the employees in terms of using these accounts are regarding their eligibility for federal subsidies. and so, in this little chart, we have tempted to show, sort of what the options are. and so if you have a stand alone hra allocations that remain available to the employees for hours prior to january first of 2014, there are two options, the upper track is that the employee opt out of the hra. and that means that if they opt

out, there are two things to note first is that the employee immediately becomes eligible for federal subsidies on coverage california and so if they are in that pool between 138 percent and 400 percent of the federal poverty level, then once they opt out of the hra they become eligible for the federal subsidies and the second thing to note is that if an employee opts out of the hra, before those funds have been available for that full 24-month period that is required, the employer has to make equivalent healthcare expenditures on that employee's behave and the reason for that is that because they require that the funds be available able for 24 months if the employee opts out and then the funds were not available for that full 24-month period and so the employer needs to find a different way to make those healthcare expenditures and so

for example, if an employer made a contribution $1,000 contribution for an employee in july of 2013, and then, none of those funds were used and the employee opts out in january of 2014, then, the employer has to find a different way to make healthcare expenditures of $1,000 for that employee, for that remaining hra balance. okay and then the second option is that the employee would not opt out of the hra. the stand alone medical hra to be specific. and in that case, the employee is ineligible for the federal subsidis that we talked about, however, the employee may still purchase health insurance. if it allows to seek

reimbursement for the healthcare premiums they could buy the health insurance on the exchange at an unsubsidized rate and seek the reimbursement for the health insurance premiums from the employer's hra and so that is an option and so it has to be available for a minimum of 24 months from the date of the contribution. >> so that is or covers the basic faqs there are more details on that issue remaining hra balances in the faq and we are happy to answer the questions, if you have questions about that. >> i also wanted to bring your attention to the fact that they will be conducting rule making, and fairly soon, and at this

point, to codify it and to clarify a few other out standing issues in the hso and in that process, we will be soliciting public comment and we hope to hear from all stake holders including those of you in this room and the interests that you represent and we hope that you will sign up for the hcso e-mail list which is available on our website. and we will also be in touch with richie about that process to make sure that you are all aware of that as we move forward. >> commissioner dwight? >> hi, yeah, do i have a question for you, doing back to the other slide with the chart because i am a little bit confused, if they choose not to opt out they can use their funds available to buy california coverage? i thought that once you sign up you are not eligible for those funds? it seems a little... did i miss

something? >> so if they don't opt out, they still have the hra, and they can get health insurance through coverage california, and what they are not eligible for is the federal subsidies. so they would have to pay about it. >> the full rate. >> the full rate, yeah. >> that is what i want to hear. >> okay. and then the next question was if they do opt out, and you say that they have funds available, and in their hra. and the employer must have that balance equivalent in some healthcare and how does the employer do that? >> and any valid healthcare expenditure is an option, so some of the options that i know i have heard the employers say that they are claiming to use. and include contributing to the state option, or paying for health insurance premiums, medical, dental or vision, or,

you know, any other valid healthcare expenditure. so, is the, under the california, so they are, what was it, the other benefits for vision, ben tal and they would have the access to that. >> i guess if they have their hr funds that were contributed to it, would they just be transferred over to use for dental, vision? >> if you are referring specifically to the issue of transferring from a medical stand alone medical hra for an accepted benefits. >> yeah. >> that is an issue that has not specifically been addressed >> okay, okay. >> so it is going to be a completely separate account going forward in 2014? but they can't use. >> i think that that is an outstanding question that we may be able to addressed. >> okay. in the future. >> okay. >> commissioner dwight? >> yeah, i am not going to... okay. >> do you want to take any more

questions before we take public comment? >> i do have one more slide,. >> okay. >> the rule making and then the last thing that i wanted to mention is just that the annual reporting requirement, which is relevant to the small business, remains in effect, and there is the annual reporting firm that is due by april 30th of this year and the osc will be posting the form in early march on the website and we will be notifying the businesses by mail and by e-mail. so, you can look out for that as well. >> okay. >> and it should be fairly similar to last year's report but we may ask a couple of additional questions about hras. >> okay, commissioner dooley? >> i wanted to ask when the city option website will be updated to reflect that a business can utilize the city's mra, for san francisco, employees.

>> i will let coline speak to that. >> we are in the process of doing that right now. so we are, and we contract with the san francisco health plan to do all of our administration of the city option, and we are working with them to update the website to reflect the accurate information. >> and commissioner dwight? >> okay. just want, and two quick questions, and yeah, just to make regards to the mra and in compliance with the affordable care act, and the mra did not change at all to comply and it was okay, exactly the way that it was. >> my understanding and i am going to get into the legal territory and i am not a lawyer, and the difference is that the city option is a public benefit program and so it funnels the person into the thing that they are eligible for and so, the city mra is a public benefit program, which is why it is treated differently than the stand alone health reimbursement account. >> all right.

and then i would just want to know, from that is there a quick, like a bullet point listed for the employ ears and because i feel like the small business committee is dark in this area about what to tell the employees and like your contributions stopped, you know, as of january first, 14 and you know, there was just something out there that is just, straight forward for employees, or employers to let the employees know what is going on >> that is a great question, but i think that there are many, resources about the affordable care act in general, that are fairly straight forward that maybe we can point or pass along to regina, we are actually working on something specifically about hras, and that we are working on with dph, that hopefully it will be fairly straight forward. that we can provide