When Mandates Work: Raising Labor Standards at the Local Level

Chapter 5. Health Spending Requirements in San Francisco

125 1 . i n t r o d u c t i o n In 2006, San Francisco adopted a major health care reform and became the first city in the United States to implement a pay-or-play employer health-spending mandate. It also created Healthy San Francisco, a “public option” to promote affordable universal access to care. In this chapter, F I V E Health Spending Requirements in San Francisco Carrie H. Colla, William H. Dow, and Arindrajit Dube *Portions of this chapter are based on or appeared in the following articles: Carrie H. Colla, William H. Dow, et al., “How Do Employers React to a Pay-or-Play Mandate? Early Evidence from San Francisco,” Forum for Health Economics & Policy 14, 2 (2011): 1–43, www. degruyter.com/view/j/fhep; Carrie H. Colla, William H. Dow, et al., “The Labor Market Impact of Employer Health Benefit Mandates: Evidence from San Francisco’s Health Care Security Ordinance” (2011), www.nber.org/papers/w17198; Carrie H. Colla, William H. Dow, et al., “San Francisco’s ‘Pay or Play’ Employer Mandate Expanded Private Coverage by Local Firms and a Public Care Program,” Health Affairs 32, 1 (2013): 169–77. 126 t h e b e n e f i t m a n d a t e s we examine the effects of this mandate on employers, costs, earnings, and employees. To examine the effects of the Health Care Security Ordinance (HCSO) on health care benefits we use the Bay Area Employer Health Benefits Survey; and to investigate the effect of the HCSO on jobs and wages, we use the Quarterly Census of Employment and Wages (QCEW). We find that most employers (76 percent) had to increase health spending to comply with the law, yet most (61 percent) are supportive of the law. There is substantial employer demand for the public option, with 18 percent of firms using Healthy San Francisco for at least some employees, yet there is little evidence of firms dropping existing insurance offerings in the first year after implementation. To date, the healthspending requirement has had little discernible impact on employment or earnings in affected sectors. We do find, however, that part of the increased cost was passed on to consumers through surcharges. Our chapter proceeds as follows. We start with a description of the law itself and its place in the context of broader health care reform. Next we lay out the conceptual framework that informs our research. Following this, we describe our data and methods and report our results. In the conclusion we discuss lessons for other jurisdictions. On July 18, 2006, San Francisco substantially expanded efforts to achieve universal health care coverage in the city by passing the Health Care Security Ordinance into law. Part of this reform was a pay-or-play type of minimum employer health spending requirement. This requirement , which became effective in 2008, covers all private sector employers hiring twenty or more workers. Employers can meet their spending requirement by providing insurance to workers, by paying into Health Savings Accounts (HSAs) or Health Reimbursement Accounts (HRAs), or by paying into the public Healthy San Francisco program. Operated by the San Francisco Department of Public Health, Healthy San Francisco was launched in July 2007 and offers affordable access at select public and private facilities within the city of San Francisco for uninsured San Francisco residents. It constitutes a low-cost health access plan that strengthens the safety net and provides a public “pay” option for employers to fulfill their health spending requirement. Although this public option is not formally considered insurance, it is tantamount to a h e a l t h s p e n d i n g r e q u i r e m e n t s 127 generous public insurance policy, with the significant caveat that it is restricted to a network of providers located only within San Francisco (Katz 2008; Katz and Brigham 2011). The HCSO is similar to pay-or-play mandates that have been widely discussed in the context of national- and state-level health reform debates. In 2013, the employer spending requirement in San Francisco amounts to about $4,846 annually for a full-time employee in a large firm, up from $3,633 in 2008. This is a relatively stringent requirement; according to the 2012 Kaiser/HRET Employer Health Benefit Survey...