Board amends Health Care Security Ordinance to close HRA loophole; three-year phase-in adopted

The San Francisco Board of Supervisors on June 10 adopted amendments to the Health Care Security Ordinance intended to close a longtime health reimbursement account (HRA) loophole and move more workers toward standard health coverage.

Supervisor Campos, who introduced the amendments with Supervisors Breed and Farrell, said the change was overdue. "[T]hese amendments ... finally lead to the closure of a loophole in the health care security ordinance that has essentially, for the last few years, left more than 26,000 workers in San Francisco without access to healthcare," Supervisor Campos said during the meeting.

Why it matters: sponsors and labor advocates said HRAs—employer-run accounts that pay limited medical expenses—have kept workers from enrolling in mainstream insurance under the Affordable Care Act. Supporters argued closing the loophole will expand access to comprehensive coverage; small-business advocates and the mayor sought a phased approach to reduce immediate financial disruption.

Key provisions and implementation details - Phase-in schedule: the Board adopted a multi-year phase-in the sponsors described in committee and on the floor. Under the schedule included in the amendments, employers must make irrevocable contributions to worker accounts at 60% beginning Jan. 1, 2015; 80% beginning Jan. 1, 2016; and 100% beginning Jan. 1, 2017. Supervisor Breed described that timeline on the floor. - Removal of a new local subsidy program: the package removes earlier language creating a new city-run "Cover San Francisco" subsidy program and instead directs the Department of Public Health (DPH) to develop a health-access program designed "to maximize the number of San Francisco workers that can purchase health insurance," and to present recommendations in time for the 2016 Covered California plan year. - Employer recapture and transitional relief: the amendments include provisions allowing employers under certain conditions to recapture existing HRA balances, a detail sponsors said reduces short-term impacts on small employers.

Numbers discussed in the meeting - Supervisor Campos said more than 26,000 workers lacked access under the HRA arrangement. Supervisor Breed cited a larger figure in debate: "By closing this HRA loophole, the legislation will provide better health care for almost 44,000 San Francisco workers." (Both figures were stated on the record during the floor discussion.) - Supervisor Breed cited 2013 data she said showed 962 businesses used HRAs, contributing about $120 million into HRAs that year; she said employers drew on roughly 25 percent of those funds and recaptured the remainder.

Debate and coalition building Supporters characterized the ordinance as the product of long negotiations among labor, community advocates, health providers and the mayor's office. Sponsor Campos thanked legislative staff and coalition partners and singled out longtime advocates who helped shape the measure. Several supervisors spoke in support while acknowledging the need to allow businesses time to adapt. Supervisor Farrell said the phase-in and recapture provisions "provide relief in the near term" and make the change practicable for small employers.

Formal action Supervisor Campos moved the amendments; the motion was seconded on the floor and taken "without objection." The Board passed the ordinance on first reading as amended. DPH is directed to report back with a plan timed for the 2016 Covered California plan year and to maximize worker enrollment in insurance programs.

What happens next The ordinance was passed on first reading on June 10, 2014. Further votes required for final adoption will appear on subsequent Board agendas. The DPH presentation required under the amendments will frame administrative implementation and outreach for the Covered California transition.

Ending Supporters said the measure balances a worker-protection goal—wider access to comprehensive insurance—with protections for small businesses through a phased schedule and limited recapture. The Board left the door open for future adjustments once DPH presents implementation options.