S.F. Wins Round in Health Insurance Battle

A federal court has cleared the way for San Francisco to start charging employers for the health-care costs of uninsured employees. Restaurant owners have sued to block the ordinance, but for now, the court says the city has the right to begin collecting premiums.

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STEVE INSKEEP, host:

We'll take a look now at the labor market, as we do on Wednesday. We focus on the workplace, and that focus takes us to San Francisco, a city with some of the most worker-friendly employment rules in the nation. The city has high minimum wage laws, mandatory paid sick days, and now San Francisco wants nearly all companies to help pick up their workers' health care costs, which has prompted some businesses to stage a revolt.

NPR's Elaine Korry has more.

ELAINE KORRY: San Francisco has an estimated 82,000 uninsured city residents. A recent appeals court decision means many more of them will be eligible for health care, and city officials say that's cause for celebration.

Ms. JOANNIE CHANG (Office of Labor Standards Enforcement): The policy behind the ordinance is to address the health care crisis in the city, and so it is a huge relief that there will be health care available to folks working in San Francisco.

KORRY: Joannie Chang oversees compliance with San Francisco's landmark health access ordinance, which passed in 2006. Since the recent court ruling, Chang's phone hasn't stopped ringing with calls from concerned employers. The law requires employers with 20 or more employees to provide a certain level of private health insurance or pay a minimum of about $200 per month per worker into a city fund for medical services.

Mr. DAN SCHEROTTER (Restaurant Owner): We're at Palio d'Asti restaurant. I'm Dan Scherotter. I'm now the chef and owner. I started here as a line cook at, what, nine bucks an hour about 11, 12 years ago, and now I own the place.

KORRY: Scherotter has 49 employees, many of them part time, working for minimum wage plus tips. He already offers private health insurance with an employee co-pay, but according to the city, his plan doesn't cost enough. In order to comply with the ordinance, he'll have to spend more, $70 more per employee per month. Scherotter is unhappy about the extra cost and even more aggravated about the extra paperwork he faces.

Mr. SCHEROTTER: It creates a pretty amazing accounting nightmare, especially when you have all different types of employees, part-time employees, employees who don't live here. So it's incredibly difficult. And I think although it sounds good, in reality more people lose than win.

KORRY: Scherotter says he already operates on razor-thin margins, so if his labor costs go up, he may have to lay off employees, plus he'll have to raise prices, and he says so will his butcher, his fishmonger and produce supplier. He doubts that city officials understand how even small price increases can ripple through the local economy, hurting small businesses.

Mr. SCHEROTTER: You're ending up seeking the most vulnerable businesses with the biggest burden. It's at the point where it doesn't make any sense to be in business here anymore.

KORRY: Scherotter belongs to San Francisco's Golden Gate Restaurant Association, which has about 900 members. The association proposed an alternative to the city's employer health care mandate. Why not raise the local sales tax by a quarter penny? But that proposal was shot down, so restaurant owners sued, charging the city law violates federal laws governing employee benefits, and their lawsuit will proceed, even as Joannie Chang's office gears up to begin implementing the ordinance. She says it actually benefits employers like Dan Scherotter because it levels the playing field, requiring all businesses to do their part in tackling the city's health insurance crisis.

Elaine Korry, NPR News, San Francisco.

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