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Archives for San Francisco Politics

Busboys On The Street

Jan
18
2006

Everybody’s a critic but some critics – particularly those with real-world experience – shouldn’t be ignored. My last pair of columns discussing the uninsured and San Francisco Supervisor Tom Ammiano’s proposal to get city employers to cover their employees health care costs caused a moderate amount of fuss. One San Francisco restaurateur told me in a series of emails that the new law would put essentially him out of business. I think he’s actually wrong, but he does point out why, politically, pay-or-play is so tough, and also why it’s bad public policy. So let’s talk about the Incanto problem, and then we’ll hint at some solutions.

What’s the Incanto problem? Incanto is a fine restaurant in San Francisco’s Noe valley neighborhood. By San Francisco standards it’s not particularly expensive, but it’s not cheap eats. Furthermore, restaurants like this are one of the main reasons why San Francisco is such a great place to live, and we don’t all sell up and move to (insert name of podunk town here) instead. Incanto’s owner Mark Pastore took issue with my remark that pay-or-play wouldn’t be that disastrous because many of the businesses that would be forced to pay for their employees health insurance couldn’t move, and would stick their prices up instead. Here’s Mark’s experience:

There are limits (in economics the concept is known as price elasticity) to increasing revenues by raising prices. In my own restaurant, which is considered one of the better restaurants in the Bay Area, our prices increased slightly in 2005 (3-4%), however our total revenues declined slightly versus the prior year.

In other words the consumer wouldn’t deal with the price increase, costs went up and profits went down. Now the marginal dollar that was no longer being spent at Incanto got spent somewhere, presumably not on dining out, or, if so, at a cheaper restaurant. Now, that may not matter to economists or health care consultants too much, it matters like heck to Mark and his fellow owners. So even though I can cite evidence that these forced wage increases on a city or national level don’t impact unemployment overall, they may cause an adjustment in employment. This will necessarily be exacerbated in the San Francisco proposal where employers with fewer than 20 employees won’t have to pay into the insurance fund, and therefore will have a big cost advantage over those that do. So you can expect an enormous amount of opposition to this from people directly affected, who will make their feelings very well known, whereas it’s hard to identify businesses that will gain (even if some do).

The ordinance may avoid his Gavness’ veto — don’t forget that Newsom ran a group of restaurants but is also responsible for the city budget — much of which goes on the spending on the uninsured at SF General hospital. If it does, you can expect that lots of restaurants that were 40 tables and 25 employees suddenly lose 20% of both. Lots of other small businesses will get smaller and split into two, delivering a mini-boom for creative lawyers and accountants.

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Posted by Matt Holt at 2:27 PM | Permalink

A Tale of the (Insurance) City

Jan
10
2006

So far the proposal by gay comedian turned San Francisco Supervisor, Tom Ammiano, to force San Francisco employers with more than 20 employees to pay for their employees’ insurance is getting the kind of response that you’d expect. The headlines read that Merchants blast plan to require health care, and why wouldn’t they?

It is, of course, not going to work. The ordinace might not get vetoed by his Gavness, but it’ll end up in court, and even if it does pass, the one comparable example, Hawaii, which has had mandatory employer-funded health insurance for three decades, still has lots of uninsured people — even if it’s tough to move most local businesses over the state line! But this issue is a microcosm for the crisis in American health insurance, and it gives an excuse for a little more explanation about the various attempts like Ammiano’s to get to fewer uninsured by attacking the problem in the workplace.

More than 80% of the uninsured are in families with either a full-time or part-time worker. That’s why getting employers to cover their workers is such an attractive way of getting at the uninsured. (By the way, this type of policy approach is called, in health care policy wonk vernacular, “pay-or-play”). Ammiano’s actual proposal is a little vague but he has been explicit about this being an attempt to reduce the amount that San Francisco spends on uninsured people at its General Hospital by up to $20 million a year.

As it’s now written – and Ammiano has signaled that he’s willing to negotiate – the proposal calls for a payment of $345 a month per employee working more than 80 hours a month to be put into a fund to be used for care. The $345 number is designed to stop employers buying a “lite” insurance product which leaves employees under-insured.

Now, business groups in the city will have no trouble finding a restaurant that’s bound to go under, sending a platoon of bus-boys onto the bread line. But Chamber of Commerce rhetoric aside, there are some sensible objections to a city-wide pay-or-play policy. The first is geographic: Half those employed in city businesses don’t live in San Francisco and many of those who live in the city work outside it. On top of that, many of the employees who do not get insurance at their businesses get it elsewhere as part of the employment package of a family member.

But the first objection is why a local solution for health care uninsurance can’t work. Try as it might – and it tries hard – San Francisco city government can’t force businesses outside the city to provide insurance for their employees who live in it.

So why are we having this debate in San Francisco? Well a couple of years back the Democrats in the California state assembly got a state-wide pay-or-play bill onto Gray Davis’ desk moments before the voters tossed him out. He signed it. But the state’s business interests put the law on the ballot, Proposition 72, the next year, and you can guess what happened. Just as we’re about to see in San Francisco, Californianis saw a plethora of articles saying that workers would be put on the street as poor employers couldn’t afford to keep them on with the huge added burden of health care added to wage costs.

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Posted by Matt Holt at 11:43 PM | Permalink

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