>> i am going to call this meeting to order good morning and welcome to the may 15, 2014 meeting of the board of supervisors neighborhood services and services committee my name is david campos and i am the chair and we are joined by supervisor norman yee. eric mar will be here shortly, the clerk is derek evans and i would like to thank sfgtv staff who are covering this meeting. we have one item on the agenda today. let's begin, mr. clerk,. >> please be sure to silence all cell phones and electronic devices completed speaker cards should be submitted to the clerk. >> thank you rkts, if you could

call our item. >> ordinance revising the healthcare security to require all healthcare,ordinance revising the health care security ordinance to require all health care expenditures to be made irrevocably; to establish a city public benefit program known as the health care access assistance program (hcaap); to describe the public benefits available under each of hcaap's three component programs, healthy san francisco, covered san francisco, and health care access accounts; to set certain eligibility requirements for program participants; and to set an operative date of october 1, 2014. >> thank you very much. and i like to like to begin by thanking all of the members of the audience who are here on this item. but i also want to acknowledge all of the work that has gone into this legislation and i specifically want to thank my staff, hillary ronan and my staff staff for all of the work that they shas been doing for many years and we want to thank the city attorney's office for their incredible work, and i know that it has been a long

time a lot of energy. so sherry and john thank you very much for your work. before i get into a description of what this ordinance does, i want to step back a little bit and talk about what the intended impact of this legislation is. there is now a fed mandate in this country that requires individuals to purchase health insurance. if someone is subject to this mandate and fails to purchase insurance, he or she will be required to pay a monetary penalty to the government that over time is quite a significant amount of money. san francisco as we know is an incredibly high cost of living city. we in fact have the highest rents in the country. and many, many people in san francisco live paycheck to paycheck, and do not have money left over to purchase health insurance at the end of the

month. the federal subsidies that we receive through coverage california are helpful. but the fact is that they do not go far enough in a high cost of living city like san francisco to make healthcare affordable for people who live in these cities. and so, i would like to at this point walk you through a few cases and i am going to ask hillary to please come and help me. we have some slides and by the way there are copies of the presentation to the side right as you answer. if you could please put up the first slide and make sure that we have a copy for our members of the committee.

okay, so let's walk through a little bit of how coverage california works. and as you can see, through this slide, there are three plans under coverage california. there is a bronze plan, which pays an average of 60 percent of the cost of services under the plan. the first $5,000 are actually paid by the individual, the first few doctor's visits and the cost of a flat fee of $60, and if you use this plan, the average household is projected to spend about $3437 a year out of pocket under the plan with if you are household that has the maximum rate of utilization you are talking about spending over $8,000 per year.

and so there is a reason why this plan is the bronze plan. very expensive. and also, requires a lot of the employee on the front end. the silver plan is pays on average, 70 percent of the cost of services. the first $2,000 is paid by the individual. doctor's visits and medications are not subject to the deductible. you pay $45 per doctor's visit and the average household is projected to spend $2456 out of pocket under the plan and those with the maximum utilization rate will spend more than $7,000. and then the goal plan which has no deductibles and you payed $30 per doctor's visit. and okay now we can go on the next slide. as was noted earlier we are in the living in a high cost of

living city, and let's take the example of 30-year-old who earns $15 an hour. and this individual which is pretty typical these days works two jobs with medium sized employers, and he or she works about 45 hours a week. their monthly income is about $2900. and there is actually a study that was done that looks at an individual who makes this kind of income and looks at what their balance sheet looks like at the end of the month. and it actually shows that if everything is taken into account including the high cost of rents, in places like san francisco, this individual will be left with a deficit in her budget of $114. if you look at the healthcare in the monthly premium that the individual would pay after the

affordable care act subsidis that we are talking about, under the bronze plan that we described earlier, this individual will pay from $152 to $197, the silver plan, $235 to $288 and if she wants to get the gold plan she would have to pay $327 to 362 that is on top of that deficit, of $114, that she already has. yes. and then under the 8 cso, this individual will pay $318, would actually, i am sorry, under the hcso, this individual will potentially get $318, so they will be nothing out of pocket for them. and so if we go to the second example, and a single, 48-year-old cook at a large

restaurant earning the median income of $27660, you can see the monthly income $2300, you can see that their balance sheet at the end of the month is much worse and that they actually have a pretty hi-def deficit. and you can see that it would be impossible even with the subsidies for this individual to actually be able to pay for healthcare, and then even the $422 very costly. hillary, do you want to add something? >> so the payment due under that healthcare security ordinance is the money that the company has to pay on their behalf, if there were no loophole and the employee could actually use that monday where, he or she could purchase a gold plan under the affordable care act even though there is a big deficit. >> so if you go back to the

last slide, if you look at the 48-year-old, you are talking about with the money that the employer would have to pay under the health and security ordinance that employee could buy a gold plan. >> so let's go to the next slide which is a 39-year-old couple with a young child, one parent is a median income salesperson earning about $28,000, the other is an office clerk earning about $36,000 and the monthly income is $5400 and still have a deficit as calculated in a high cost of living place like san francisco, and you can see that if that family wants to pay or buy a gold insurance plan they would have to pay as much as $746. the employer, their employers would basically contribute $565, which would allow them to buy in this case a silver plan.

so, i wanted to just provide some context because i think that it is important to really get some information about the economic reality, that is out there, that is facing so many familis in san francisco that there was actually a report that showed that in high cost of living cities like san francisco, as many as 40 percent of the individuals who are qualified, to participate in the affordable care act. and will not be able to do so, simply because they cannot afford it even with the subsidies and the thing about the subsidies is that the subsidies are the same, regardless of where you live in the country and you can see that $200 in san francisco, is not going to go as far as $200 in other parts of the country, and not only that but the insurance costs are based on zip code, and so the cost in a zip code in san francisco would be much higher than in other places. luckily in san francisco, we

have the health and security ordinance, which is a brilliant law that was authored by tom amiano and with the help with so many people in this room that created an employer spending requirement that mandates that the businesses with 20 employees or more must spend the money toward employee healthcare, and the ordinance is helping thousands of san francisco workers gain meaningful access to health insurance, however in the reason that we are here is that there continues to be a loophole in this ordinance that has for the last number of years prevented more than 26,000 workers from using money that is required to be paid under the employers spending requirement, for the purpose of buying insurance. and these are the workers whose employers meet their spending requirement, through the use of what are called the health reimbursement accounts and while in the past, many of

these workers, 26,000-plus have used money and health reimbursement accounts to purchase the insurance, the affordable care act has made it impossible to them to use money in these accounts for these purchases, this loophole has always been a problem as far as i am concerned. and it has only gotten bigger because of that some businesses

will suffer, a financial impact once this loophole is closed the fact that they have been able to use tens of millions of dollars that they were not supposed to be using to begin with remains a problem. and the reality is that we are talking about over the last few years, tens of millions of dollars, that were never intended for the purpose of being pocketed back that were in fact pocketed back. you may hear from some businesses that we should not act right now, because they are

responsibilities are under the affordable care act are not clear yet and we should wait to see what happens that this ordinance is premature and i actually believe that once you delve into the specifics and you will see that this law, and currently under the office of labor standards of enforcement rules, the businesses are only credited for up to 20 hours if they use hras and they can take back unused funds after two years. and i have heard that these rules and i have spoken to businesses to make it difficult to administer the existing plans and in my law is simple, you have to spend the money that the ordinance requires you to spend and you you can't get the money back no matter what option you choose. and it is very simple. and it is very clear cut.

it is important to note that the controller decided in this case with respect to this law, not to issue an economic impact report on the legislation, and that is presumably because of the impact of the law in the economy would not be great and believe you me, if it were the other way they would have issued a report. and when we tried to close the loophole in 2011, the controller issue report showing a very small job loss impact here in the economy. and fundamental to their analysis at the time was the fact that the money would sit unused and help reimbursement accounts while this money will not sit unused this money is going to be used to purchase health insurance. and my ordinance is designed to use most of the healthcare dollars to purchase actual health insurance. and get more san franciscans insured and i want to thank supervisor mar for joining us. and therefore, even if it is

some job loss, and again, we believe that speculative, and even if there is some job loss, however, there will always be gains by insuring that these 20,000 plus workers and their families have access to insurance. i would actually argue, therefore, that the job loss argument in my view is simply not sufficient to overcome the fact that for so many years thousands of san franciscans and their families have gone without access to insurance. and now, let me point out that in 2011, when mayor lee vetoed the legislation that we introduced to close this loophole, he stated in a letter to all of the department heads and i want to just note here that it is a letter dated november 22nd, 2011, and in that he talks about how it is important for us to address the

fact that the money in these health reimbursement accounts was not being used and at the time mayor lee, president chiu, supervisor cohen said that the watered down amended version of the legislation that they passed would close the loophole and we warned them that they would not and the facts so that in fact it has not and this is what the mayor said. if we do not experience these improvements, and again, the use of money, if we do not experience the improvements, however, i believe that we will need to strengthen our legislative approach, to increase healthcare access. so the mayor in 2011, is on record, saying that if we give what was passed an opportunity to see if it worked and that if it shows that it does not work, that he himself, acknowledged back in 2011, that we needed to

take action. well, it has not worked mr. mayor, and now, it is the time to take action. and the affordable care act was signed four years ago. and it is time for us to finally update our law and now let me go through some of the details of how this law works and first, let me say that the legislation, the first point to note is that it closes the loophole, if you can and this is slide five. it closes the loophole that has allows a limited amount of san francisco businesses to use the stand alone, so if you can look here, and the right now if you compare the numbers in 2012, which is the most recent data, by olac, 107 million dollars

was collected and put into hras and employers only reimbursed 26 million dollars. they only reimbursed 24.6 percent of the total amount of money that went into these accounts. the other 75 million was pocketed back by them. >> so that means that in 2012, more than 80 million dollars that was intended for worker healthcare, more than 80 million dollars was pocketed back by these employers. millions of dollars must of that money came in from consumers like you and i, and most of that money did not go to employer healthcare. now, there was some article today in the chronicle where the head of golden gate restaurant association said you know we don't know the laws is working because we need another year of data. well, i am going to take you

back to 2010, at the time that the same argument was made, you know we need another year and then in 2011 came out and where the data and they said that we need another year and then to have 2012 came out and now in 2014, i guess they need another year. and so let's look at another year. olac preliminary review of the data from 2013, which is the latest data available, shows that in fact there has been no change, no increase in the employer reimbursement rates of expenditure. and in 2013, employers collected 124 million dollars that went into hras but only reimbursed 30 million. so, the reimbursement rate is 24.5 percent. and it is actually 0.1 percent lower than it was the year before. so, once again, the data does

not point to the need for any more delay in this matter. now if we could go to slide number 6. so, while the affordable care act out law stand alone hras employees have now created a new mechanism that is actually called the accepted benefits hra. and that we will allow them to continue with the money back that has been used in the accounts and the difference between a stand alone hra which is what we have had until now and what we will have post, and we have had since january first, 2013 is pretty stark. with the stand alone hras, most employees were actually allowed to use that money to buy health insurance. and in fact, as bad as the situation was, 65 percent of

employers that had hra accounts, actually allowed the workers to use that money to buy insurance. but the accepted benefit. hra that we are talking about eliminates that and no longer allows employees to actually buy insurance with this money that is being put into these accounts. accepted benefit and hras describe certain kinds of health benefits that are accepted from some of the market reform requirements and they include vision, dental care, they could also include benefits covering medical insurance, and long term nursing, etc.. what this means is that essentially that there will be unless we close this loophole, there will be thousands and thousands of san franciscan and their families, who will have money sitting in these accounts, but will not be able to use this money to actually buy insurance, they will not be able to go to a primary care

physician, but they could actually end up buying some pretty nice glasses even if they are dying from pneumonia. that is the reality that many employers and employees would face. if we could now go to slide number seven. and this goes back to the piece of the legislation that bolsters the structure of the city option you were the healthcare and security ordinance, for the purpose of of getting as many san francisco workers insured as possible. and to that end, the legislation creates a new program called coverage san francisco. and when an employer chooses the city option to meet its expenditure requirements under the law, the department of public health will enter the worker into one of three programs and so you can see here on the left, how the law works right now. and then on the right, how it would work under the program we are proposing. for those that are eligible for insurance through coverage california, the department of

public health, will enroll the worker in coverage san francisco, where the worker will receive an additional subsidy to making insurance affordable and to allow the worker to purchase a more comprehensive plan and coverage san francisco is not a novel idea, the state of vermont and the state of new york and massachusetts also created a program to make insurance affordable for the residents. and so we are actually not leading the way any more in healthcare and there is actually other parts of a country that are ahead of san francisco. and if the worker however, is not eligible for the benefits under the affordable care act, and they are san francisco residents, that the department of public health will enroll the worker in healthy san francisco. and finally workers that do not fit any of the two aforementioned categories including medi cal or workers who have insurance or a partner through other means, the department of public health

will establish a account for that individual. finally, while the combination of the federal subsidies under the affordable care act and the spending requirement under the healthcare ordinance have the potential to make the health insurance affordable for most uninsured san franciscans, coverage will continue to remain unaffordable for a significant number of individuals beyond the group of undocumented immigrants who are now not eligible for the aca. therefore, the legislation directs the department of public health to continue healthy san francisco for any san francisco resident who is exempt from the individual mandate under the affordable care act, due to economic hardship, or the cost of employers, sponsored coverage or it does not have an affordable offer of health insurance, again we are not leaving anyone behind in san

francisco. so, i believe that as we talk about an affordability crisis, in san francisco, about the fact that hundreds and hundreds of san franciscans and including families are being pushed out that to address this affordability crisis that is not enough for us to talk about housing. healthcare is an important part of affordability. and one of the reasons that so many people are being pushed out is because they do not have access to health insurance. and i don't know about you, but to me, the fact that more than 26,000 workers and their families do not have access to insurance, is something that it is not acceptable in san francisco. and 2014. so, with that, i will like to ask, the department of public health, who is here, to provide a brief presentation and we have the deputy director of the department of public health, thank you very much.

>> good morning, supervisors, thank you for giving me an opportunity to talk about the proposed ordinance that is before you today as supervisor campos mentioned i am the deputy director of health and i just wanted to provide a little bit of context in addition to what supervisor described before about health reform and we agree that it is the most sweeping social reform that we have had, well, certainly in my professional career, and really represents significant change and opportunity for people to get access to health insurance. and aca enrollment as you know started on or in october of last year, and continued through march 2014 for coverage california. and state wide, the enrollment was better than expected and here in san francisco, as well. nearly 41,000 san franciscans have enrolled in coverage california. this represents nearly 3 percent of the state wide

enrollment. and although we represent about two percent. s and exceeded the department projections that developed by modeling development by ucberkeley that 36500 would enroll. at the same time, 40,000 san franciscos have enrolled in medical and this represents about 90 percent of our enrollment projections and it can continue through and does not have an open enrollment period and can continue at any time. so the universal healthcare council really was established to look at the intersection of the aca and the hcso and as a supervisor mentioned, there were several key principles that were defined under the council. and the key findings of the council were that both laws can co-exist, but that affordability concerns remained for some population and included a list of suggestions from the members of it is

council and the department of public health has been implementing some of the uhc suggestions, for example, healthy san francisco eligibility was extended to 2014 to be sure that no one was without services due to affordability or complications with applying for health insurance. we conducted out reach for city mra account holders during the coverage california open enrollment period to make sure that they could use the balances to purchase health insurance on coverage california and we really began looking at the issue of affordability that was identified in the universal healthcare council keeping in mind the populations that were identified by the council and specifically people who were between 250 percent of poverty and employees of small business and part time employees. we are working to quantify the potential populations and estimate the level of need and assessing the financial and problematic feesbility of the solutions we agree with the intent of supervisor campos's

legislation to increase the access to health insurance for the people that can qualify for it and address the issues of affordability and the barriers that may be in place for certain people and we are committed to addressing this issue. but we also feel that it is too early to create the parameters of the subsidy program that will prescribe the program design in statute. and we are at the beginning stages of implementation of the aca and we are just five months in and so we don't know what the market place is going to look like in the next year. and we need to understand that how the aca will effect all stake holders and employers and employees and insurancers and there is still many moving parts and the employer mandate which is partially in effect for 2015 for large employers and not small and medium until 2016 and employer behavior is difficult to predict and how the employer behavior regarding the hcso are