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San Francisco board approves HRA restrictions


SAN FRANCISCO—San Francisco lawmakers have given final approval to a measure that would curb the appeal of health reimbursement arrangements, one way that employers can satisfy a law that requires them to spend a certain amount of money on employees' health care coverage.

Under the law, employers with 100 or more employees are required to spend $2.06 per covered employee on health care, while employers with 20 through 99 employees must spend at least $1.46 per hour. Employers with fewer than 20 employees are exempt from the requirement.

The overwhelming majority of employers satisfy the requirement by paying group health insurance premiums.

However, the law also offers an alternative in which employers contribute the required amounts to HRAs, which reimburse employees for health care expenses. Employers can design their HRAs so that unused funds revert back to them at the end of the year.

On Tuesday, the San Francisco Board of Supervisors gave final approval on a 6-5 vote to a proposal by Supervisor David Campos that would require funds remaining at the end of the year to be automatically rolled over to be used the next year. Terminating employees would have access to the funds for 18 months. The board previously had tentatively approved the measure, also on a 6-5 vote.

Mayor Edwin Lee, who has described the HRA approach in which unused funds are forfeited at year-end as a “loophole,” said he intends to work with business and labor groups to develop an alternative proposal.

“I am committed to continuing the collaborative effort to ensure health care access to workers while protecting jobs,” he previously said. Mayor Lee has 10 days to decide on whether he will sign or veto the Campos measure.

Rep. Campos' proposal was generated by a June report by the city's Office of Labor Standards Enforcement, which found that just 20% of the $62 million allocated to the plans last year actually was reimbursed to employees.

In all, about 13% of employers last year used the HRA approach to satisfy the spending requirement, according to the report.

The legality of the 2006 law, which went into effect in 2008, was affirmed by the 9th U.S. Circuit Court of Appeals. In 2010, the U.S. Supreme Court declined to review the appeals court ruling.

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