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Some San Francisco Restaurants Now Pay 67% More In Health Benefits For Employees

As you may have heard, the City of San Francisco has decided to provide access to healthcare for all its inhabitants, including about 82,000 uninsured and undocumented workers. How will they pay for this? Time magazine reports:

Annual funding for the $203 million program will come from re-routed city funds (including $104 million that now goes toward uninsured care via emergency rooms and clinics), business contributions and individual enrollment fees, which will be income-adjusted.

Businesses with more than 20 employees are required by law to pay for health coverage for employees. This has hit the restaurant industry hard, and the fallout is reported in a recent article in an AHIP newsletter:

Phan pays as much as half the cost of health insurance for about 100 full-time employees. Another 100 part-timers get no coverage. He estimates that his healthcare costs will jump by 67% to $500,000 this year with the new program.

Such “a constant assault” makes “every chef I talk to not want to open another restaurant in San Francisco,” he said.

And owners of smaller places, with fewer than 20 employees and exempt from the healthcare requirement, say that it’s become too costly to expand in the city, even when business is booming.

“We will always have 18 [employees] now,” vowed Anna Weinberg, a co-owner of South, a 50-seat restaurant featuring Australian cuisine that opened in October. Weinberg plans to open her next eatery on the Westside of Los Angeles.

In order to comply with the new ordinance (which is being appealed and may even go to the Supreme Court), employers may do any of the following:

There are essentially five ways to satisfy the health care expenditure requirement of the ordinance:  (1) make a contribution on behalf of the employee to a health savings account; (2) reimburse an employee directly for his or her out-of-pocket expenses; (3) purchase health care coverage for an employee through a third party; (4) directly provide health coverage to an employee by means of a self-insured program; or (5) make a payment to the City of San Francisco, which will then, in turn, use the payments to fund a program for all uninsured City residents.

While I sympathize with the concept of having healthcare for all, I wonder if San Francisco’s approach will backfire? When businesses can no longer afford to employ workers, unemployment skyrockets, industries leave town, and those who are left will have to pay even more to shoulder the burden. San Francisco is one of the wealthiest cities in the United States, and may survive longer than other cities with these new laws, but in the end I think we might see a mass exodus and the beginning of a local economic depression.

Are the restaurant owners a collective “canary in a coal mine,” or do you think the San Francisco healthcare solution is the lesser of the evils? Will the nation learn something important from this bold initiative?This post originally appeared on Dr. Val’s blog at

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3 Responses to “Some San Francisco Restaurants Now Pay 67% More In Health Benefits For Employees”

  1. tstitt says:

    I think we’ll just see higher menu prices from SF restaurants and other service businesses. I don’t think there is any likelihood of an exodus or recession in SF or the Bay Area. If we take a long view (the short view will seem expensive), the cost of establishing an insurance based approach to underwriting health care will be more efficient than the current system where either the state ends up reimbursing healthcare providers via state taxes for care to those who cannot afford to pay and/or in higher rates charged to private pay patients by healthcare providers to offset charitable care costs. The underlying issues are much harder to address in the political environment: lack of primary care physicians, funding to treat illness but not wellness, aging acute healthcare facilities that don’t meet seismic standards, resistance to online health record adoption and use and quiet, but intense, competition for elective private pay patients and procedures at every level of the healthcare provider food chain. If the payers were to change their core focus from “reimbursement” for illness treatment to address some of the central problems facing patients and providers, change might come at a more rapid pace. One PCP in Brooklyn NY is charging a flat rate of $1500/year to provide “concierge medicine” to a limited number of patients using in-person and online methods to deliver care. (The payers don’t like this btw.) Perhaps a combination of insurance and

    new approaches like concierge medicine can bring about meaningful change.

  2. RH Host Melissa says:

    I hadn’t heard/read about this yet.  I am interested to see how this works.  Thanks for the post.  I’ll be watching :)

  3. Dr. Scherger says:

    I think the SF program has real merit.  It is important to realize that real money is saved and waste is reduced.  When an uninsured patient goes to the ER, the care is very expensive.  Using San Diego numbers, the average cost to the hospital is over $400 for every ER visit. A community clinic does well seeing the same problem for $100.  In San Francisco, the City and County are the same and they pay for a large hospital (SF General) and have a city run community clinic system.  The infrastructure is planning (with positive excitement) the transfer of patients from the ER to the clinics.  This will improve care and save the City money.  We all pay for unfunded care through higher health insurance premiums.  Tade away the unfunded care, and the cost of care for the rest of us could go down.  We’ll see if SF can pull this off.  Reducing waste is the great potential for diverting funds to cover the uninsured.

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