SF restaurants cheat on health care


For years, I've wondered about those "health-care surcharges" that pop up on menus at local restaurants. The owners say they have to charge extra to pay for the city's health-care ordinance, which always struck me as odd: You don't see "avocado price hike surcharge" or "rent-went-up" surcharge or "PG&E rate hike" surcharge -- restaurants, like other businesses, typically roll those factors into their normal prices.

This is political: A lot of restaurants opposed the law, which requires employers to pay for health insurance, and they're sticking that little sign out there to make San Franciscans think the government is driving up the price of a meal.

Now: I would actually be willing to pay an extra 3 percent or even 5 percent for a nice dinner if I thought that money was going to make sure the cooks and waiters and bus staff could go to the doctor when they get sick. But it turns out, according to the Wall Street Journal, that we're getting scammed -- the surcharges often don't go for health care at all. The restaurants just pocket the money.

In an investigation of 40 local restaurants -- most of them high-end places where dinner for two can cost $100 or more -- the Journal found that the vast majority of the money collected for health care never goes to the employees:

One Market, which says its annual revenue exceeds $5 million, is one of at least 40 San Francisco restaurants identified by The Wall Street Journal that tell customers they are charging extra in the name of health-care benefits, but which end up spending less than a third of what they allocate. The data come from forms that restaurants filed with the city, which the Journal obtained under California's public records law. No restaurant mentioned in this article disputed the data.

Wayfare Tavern, the downtown restaurant owned by celebrity chef Tyler Florence, says on its menu that it adds 3.5% to every bill to cover health-care costs. Last year, it earmarked $63,724 for health care but only spent $6,013, the city data show. Café Flore, which adds 35 cents to every bill in the name of health care, spent nothing on health expenses for its employees last year. Trademark, which has a 3.5% surcharge, also spent nothing on employee health expenses last year, the data show.

Worse, this appears to be an intentional way to skirt the law:

In most cases, the plans are administered by a third party. Some of these companies tout how HRAs are a loophole around the San Francisco Heath Care Ordinance. "If the funds are not needed (And many are not!!!) the employer wins because the unused funds stay with them…not the City," says a brochure from BeneFlex HR Resources Inc.

BeneFlex ensures restaurants inform workers about the HRA to "make sure it's handled the way it's supposed to," says Mark Schmersahl, the firm's vice president. Still, he says, "There are going to be times when the employer comes out ahead."

I recognize that the city puts a lot of demands on small business, and a lot of them are expensive -- and again, if a restaurant owner has to raise prices a few percentage points to pay for health insurance, I'll pay -- that's the price of eating out in San Francisco.

But this isn't how the health-care law was supposed to work -- and it's the reason Sup. David Campos is trying to change it. Campos has a bill that would stop employers from keeping money that was supposed to go for health care. "It's also a consumer-protection law," Campos told me. "People are being defrauded here."

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