Mandated Healthcare: San Francisco Operators Are Hurtin For Certain

Bob Krummert

Sort through the healthcare proposals of the various presidential candidates and you’ll find plenty to think about. There’s one big difference among the Democrats. Sen. Hillary Clinton proposes mandating (i.e., legally requiring) that adults carry healthcare insurance. It’s not mandatory in the Sen. Barack Obama plan. His idea is that if you subsidize the cost of health insurance enough, everyone will buy insurance because everyone wants and needs it.

Republican frontrunner Sen. John McCain doesn’t like either of these approaches. "The Democrats offer their usual default position: If the government would only pay for insurance, everything would be fine. They promise universal coverage, whatever its cost, and the massive tax increases, mandates and government regulation that it imposes," McCain says. "I offer a genuinely conservative vision for healthcare reform, which preserves the most essential value of American lives -- freedom."

His notion is that tax credits ($2,500 for individuals, $5,000 for families) will incentivize people to buy their own health insurance.

Keep in mind that these candidates’ programs are ideas, not policy. And what one of these proposals might look like after making its way through Congress is anyone’s guess.

But the guesswork is over in San Francisco, where the policy is that restaurant operators and other small business owners must pay for government-mandated healthcare insurance reforms. The cost: $1.17 to $1.76 per hour per worker, depending on the size of the business. The date the first payment is due: April 30, 2008. If operators don’t offer healthcare insurance, they must cut a check to the city by that date.

Where did this mandate come from? The San Francisco Board of Supervisors passed what’s known as the Universal Worker Healthcare Security Ordinance in July, 2006. The city’s mayor, Gavin Newsom, has since made it a cornerstone of his administration.

“Universal healthcare has never happened in America,” Newsom said in his inaugural address. “It will happen here—first. We know there will be bumps in the road ahead. But we will not stop until every San Franciscan has access to quality, affordable comprehensive healthcare.”

An admirable goal, to be sure. Even the Golden Gate Restaurant Association (GGRA) embraces the idea, to a point. “Make healthcare affordable for everyone,” says executive director Kevin Westlye. “Unfortunately, the current ordinance is not affordable for the local restaurant community.”

Which is why the GGRA filed suit to block the new law. The lawsuit’s key issue addresses the Board of Supervisors’ power to impose this mandate. A 1974 federal law, the Employee Retirement Income and Security Act, specifically bars states from requiring employers to offer health insurance and from otherwise regulating the benefits they do offer.

It seemed clear to the federal judge Jeffrey White, who granted a summary judgment to the GGRA in late December. But the City of San Francisco appealed the next day to the 9^th Circuit Court of Appeals, gaining an emergency stay order from a three-judge panel. It requires business owners to pay the hourly fee for healthcare while the appeals process goes forward.

Early this month, the GGRA petitioned U.S. Supreme Court Justice Anthony Kennedy to reverse the emergency stay. He denied the motion, allowing San Francisco to start collecting the employer mandate fees during the appeals process. The case is scheduled for oral argument before the full nine-judge panel on April 17.

In the meantime, restaurant owners will have to come up with the cash and jump through an oppressive set of administrative hoops. Palio d’Asti chef/owner Dan Scherotter, incoming president of the GGRA, told USA Today that, to comply, “ I would have to hire a new accountant and fire a few cooks.”

Elsewhere, it’s state governments that are moving forward on universal health insurance mandates. None of them would be as expensive to restaurant owners as the San Francisco approach, but would still impose costly fees on restaurant owners who do not offer health insurance to their employees.

Massachusetts already has such a program in place—businesses pay $295 per employee per year if they do not provide health insurance. Bills working their way through state legislatures in California, Colorado, Minnesota and Michigan would also impose fees on employers that don’t offer insurance.

We have no recommendation about which presidential candidate you should prefer. But any candidate who can get a federal health insurance proposal through Congress and into law, as opposed to piecemeal mandates funded out of restaurant owners’ pockets, might be worth a look.