Restaurants and businesses in San Francisco collected nearly $14 million dollars in extra fees last year from their patrons in compliance with the city’s universal health-care ordinance, but 40 percent of that money hasn’t been spent on health care.
According to the Boston Globe, the fees for San Francisco’s five-year-old health care program — unrelated to Obamacare — were collected by assessing surcharges that ranged from 3 to 5 percent and appeared in fine print on receipts.
The health-care ordinance applies to more than 4,000 businesses with as few as 20 part-time workers, requiring them to set aside extra money for health care.
A new law took effect this year requiring businesses to use the surcharge money for its intended purpose, or face a consumer fraud investigation, but in 2011, no law required businesses to spend all the health surcharge money they collected.
The law doesn’t outline how money should be spent on health care, and critics argue many businesses set up accounts to reimburse medical expenses that disallow many types of them.
A San Francisco Civil Grand Jury concluded many businesses were misleading customers into believing that every dollar was going to the health and well-being of workers.
‘‘Most residents are socially conscious and embrace social changes, and paying a surcharge for employee health care is something we would readily agree to,’’ said Mark Busse, a retired real estate agent who led the investigation.
‘‘But to discover they would make profits off surcharges really turned our stomachs.’’
Celebrity chef Michael Mina, a business partner of Andre Agassi, owns high-end restaurants that include RN74 and an eatery that was declared Esquire’s 2011 Restaurant of the Year.
“Both spots reported collecting about $540,000 in health surcharges from customers last year while paying out about $211,000 in health-care money.”
San Francisco’s eatery The Blue Plate, which opened in 1999, suspended the surcharge altogether. The restaurant raised $40,000 with the fee but only spent $500 in 2011.
Co-owner Jeff Trenam said he noticed many of his young, healthy employees didn’t have many medical expenses, so he stopped charging his customers for them. The company plans to use the extra money for future health care needs.
The Globe notes that Squat and Gobble, a chain of five local restaurants, reported collecting more than $160,000 from its customers in surcharges but spending nothing from a reimbursement account for more than 80 employees in 2011.
“The company reported workers could not be reimbursed for services such as health insurance premiums and over-the-counter drugs.”
Greed and corruption by restaurant owners also extends to the implementation of Obamacare.
Analysts recently commented that companies may use the federal health care law that takes effect in 2014 as an excuse to raise prices, even if the added costs don’t warrant the increase.
Peter Saleh, a restaurant analyst at Telsey Advisory Group, expects sit-down diners at restaurants like The Olive Garden, owned by Darden Restaurants, and The Cheesecake Factory, which own a greater proportion of their locations than some fast food chains, to eventually pay at least 2% more to eat there.
And Nicholas Oleson, a financial planner with the Philadelphia Group, says his large corporate clients have suggested raising prices up to 3 percent while their employees pay up to 7 percent more in insurance premiums.