Lee benefits from vetoing health care reform

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Amendments would make it tough for restaurants to charge customers for employee health care that they aren't providing.

Downtown groups that pressured Mayor Ed Lee to veto legislation that would have prevented businesses from raiding their employees' health savings accounts have been funneling big bucks into independent expenditure campaigns formed to keep Lee in the Mayor's Office.

Meanwhile, the Board of Supervisors today strengthened a weak alternative to the vetoed legislation by Board President David Chiu, which it then continued for two weeks. The amendments by Sup. Malia Cohen were unanimously approved by the board, but her five allies in supporting the vetoed legislation – David Campos, John Avalos, Ross Mirkarimi, Jane Kim, and Eric Mar – preferred that the measure be returned to committee for more analysis, losing on a 6-5 vote.

“We need more time to understand the implications of the amendments. We're not sure if it actually closes the loophole,” Campos, the vetoed measure's sponsor, said of provisions in the Health Care Security Ordinance – the city's landmark measure that required employers to provide some health coverage to employees – that allowed businesses last year to pocket more than $50 million from health savings accounts they created for their employees.

One Cohen amendment specifically addressed one of the more egregious violations – restaurants that charge customers at 3-5 percent surcharge for employee health care and than pocket that money at the end of the year – which Chiu had addressed only by calling for more scrutiny of the tactic by the Office of Labor Standards. She also would require businesses to keep two years worth of contributions in the account, rather than the one year sought by Chiu to address the so-called “January problem” of businesses draining the account at the end of every year and leaving nothing for employees who get sick or injured at the start of the year.

It was perhaps a sign of the heat that Lee took from labor and consumer groups for his veto that he quickly issued a press release today praising the supervisors for addressing the issue. “I applaud President Chiu, Supervisor Cohen, organized labor, small business owners, and the Department of Public Health for finding the solutions to this important public policy that can strengthen our City’s landmark Health Care Security Ordinance. By closing the loophole through these proposed amendments, we can increase access to health care, protect jobs in our small businesses and protect consumers while growing our economy at the same time,” it read.

But Lee appears to have already benefited from heeding the demands of downtown – particularly the San Francisco Chamber of Commerce and Golden Gate Restaurant Association (GGRA) – who made defeating the Campos legislation a top priority, casting it as a new “fee” that would drain $50 million from the local economy.

The San Francisco Alliance for Jobs and Sustainable Growth PAC, created by notorious downtown bagman Jim Sutton, is the best-funded on the four independent expenditure groups that are supporting Lee, taking in $390,000 this fall, including $27,000 from the GGRA and $25,000 from the Chamber's SF Forward group. Both groups also support the Committee on Jobs, which kicked in $110,000 to the Alliance campaign. GGRA also gave another $10,000 to the pension reform campaign that Lee is pushing, support the Chamber had threatened to withhold if the Campos measure was approved.

GGRA Executive Director Rob Black denied this was pay-to-play politics, noting that the Alliance is also supporting DA George Gascon, Sheriff candidate Chris Cunnie and two ballot measures. “But absolutely, the mayor's name is on there and the organization voted to endorse him,” Black said.

GGRA voted in August to endorse Lee, Chiu, and Michela Alioto-Pier for mayor. Black said the organization is “generally supportive of Sup. Chiu's approach to reforming the Health Care Security Ordinance,” and Black specifically said it supports improving requirements that businesses notify employees about the health savings accounts and how to use them.

The GGRA led the original fight against the HCSO in 2006, which was sponsored by then-Sup. Tom Ammiano, who lined up a veto-proof majority on the progressive-dominated board and eventually persuaded then-Mayor Gavin Newsom to support it. The measure created the Healthy San Francisco program and required employers to spend a minimum amount per employee on health care, although federal ERISA law bars cities from prescribing how that money is spent.

GGRA challenged the employer mandate all the way to the U.S. Supreme Court on the grounds that it violated ERISA, losing the case. Many of its members restaurants then opted to use health savings accounts rather than paying into Healthy San Francisco or private health insurance, even though health experts say such accounts are the worst option.

Campos and his allies have maintained that money in these health savings accounts belongs to employees and that businesses that use and raid them gain an unfair competitive advantage at the expense of their employees, customers, and city taxpayers, who are often forced to foot the bill for the uninsured.

Campos and the coalition that supports him has said they may take this issue to voters if the Chiu/Lee legislative fix doesn't address their concerns.