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One day in February, I reached into the dregs of my dusty mailbox and, among the real estate flyers and credit card offers, found a letter from the city of San Francisco. It informed me that I had a mysterious $349.88 sitting in a healthcare account I’d never heard of. “To keep your funds, take action now!” it said. I do not take exclamation points lightly.

After a few hours on the phone with city administrators, I learned that the balance was held in my San Francisco Medical Reimbursement Account (SF MRA), a fund born out of the Health Care Security Ordinance (opens in new tab), or HCSO, which requires employers of a certain size to pay a minimum amount on healthcare per employee. This money had been sitting there for more than a decade, paid on my behalf when I worked for the restaurant group Tacolicious.

Although the HCSO applies broadly across San Francisco industries, it’s fair to say that restaurants have felt its effects the most. Much of what they’ve paid into the program has piled up in employee healthcare accounts. The total unspent funds from all the city’s businesses now reach nearly $1 billion. So on May 21, when the city plans to pocket roughly $240 million of that, don’t be surprised if you hear a collective howl from San Francisco restaurant owners.

How the money will be used is still a question. Mayor Daniel Lurie has signaled that it may be put toward the city’s $643 million deficit or channeled to a reserve to backfill federal cuts. But hospitality industry leaders see the funds differently.

“It’s a form of robbery,” said Ben Bleiman, a seasoned bar owner and president of the city’s Entertainment Commission — a man who says out loud what everyone else is thinking. Many restaurateurs have long felt the city has been stealing from them. 

“The HCSO thing is incredibly hard to explain,” Laurie Thomas, executive director of the Golden Gate Restaurant Association, told me when I asked her to walk me through its history.

It all traces back to a 2006 law, passed years before the Affordable Care Act, when the city was trying to build its own version of universal healthcare. Whereas the federal mandate kicks in at 50 full-time workers and covers only employees who log 30-plus hours a week, HCSO applies to businesses with 20 employees and counts anyone working eight hours or more. For employers, the minute you hire your 20th worker, your overhead grows substantially. 

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Employers have three main choices for complying: provide an insurance program (and make up any cost difference with a check to the city), reimburse employees directly for their healthcare expenses, or pay into the SF City Option program. Many small restaurants end up in that third bucket. SF City Option drops the funds into reimbursement accounts that work a lot like a flexible spending account: Employees pony up for their medical expenses, submit the superbill, and wait to be paid back.

I’m just one of the many San Franciscans who have money being held in accounts we didn’t know existed. Very few people in the restaurant industry appear to use the healthcare accounts. Perhaps this because the industry is largely made up of young people who don’t often go to doctors and transient people who don’t stay for long. Reddit is full of posts (opens in new tab) by confused workers from all sectors who have stumbled onto fat balances — many in the thousands of dollars (opens in new tab). 

There’s a reason restaurants have felt the pain of the HCSO most acutely. Simply put, restaurants shoulder fat payrolls despite Ozempic-thin margins. A single neighborhood restaurant can easily have 25 or 30 people on payroll thanks to the patchwork of part-time shifts that keep a dining room open seven days a week. Under federal law, most of those workers wouldn’t require coverage at all. Under HCSO, every one of them counts.

“Restaurants are especially vulnerable to the impact of [HCSO] because we have so many employees relative to what can be pretty low revenue, right?” said the owner of a two-location counter-service food business who asked not to be named out of fear of retaliation from the city. “There are VCs and law firms that have 10 people that gross $50 million a year, and then there’s a restaurant that does $5 million and has 100-plus employees.” 

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His newest location has 13 employees, but because it shares ownership with his other shop, the city counts the two locations as one entity — putting him over the 20-employee threshold. At his larger location, with 23 employees, a single quarterly bill for the mandated healthcare came to nearly $13,000.

He’s quick to add that he’s not opposed to covering his staff; he was offering health insurance at his own expense before he hit the HCSO threshold. “I’m all for paying for healthcare for the people working for you. What I’m not for is putting money into a system that’s completely outdated and broken.”

Even smaller shops under the 20-employee threshold feel its weight. “Twenty is a number I am constantly aware of,” said Gillian Shaw Lundgren, the owner of Black Jet Baking Co. “It prevents you from having more part-timers on staff. It prevents you from hiring up when you need to. It would be awesome to get extra seasonal help, but if you’re not under that magic number, it’s not worth it.”

To make matters stickier, restaurants for years have tried to recoup HCSO costs by tacking on the “Healthy SF” surcharges that diners love to hate — those mystifying 4%, 5%, and 6% fees at the bottom of the check. Originally a kind of political protest by restaurateurs — a way to show customers what the city was making them do — now it is evidence that diners have been funding a sick city government rather than healthy restaurant workers all along.

While every restaurateur I interviewed is all for giving employees health insurance, what they object to is being forced to pay into a system that doesn’t serve workers, then watching the city scoop it up to balance its own books. “I like paying taxes. I’m proud of paying taxes,” said Bleiman. “But this is bullshit.”

One owner of a small local chain has tried to express his frustrations to City Hall, with little success. “Whenever I talk to a supervisor, whenever I talk to the mayor, whenever I talk to the treasurer, and I mention these issues, it’s just kind of hand-waved,” he said. “I’m told, ‘That’s the way the legislation is written.’”

Not wanting to let the money go to waste (or to the city), I put my $349.88 to use the other day. I went to see a physical therapist, paid out of pocket at the front desk, then spent an evening navigating the SF Medical Reimbursement Account website — a confusing portal that feels like it was built in the early 2000s — uploading my receipt and submitting the superbill. 

And this was for a service I could afford to pay for upfront. I had to imagine how that reimbursement model works for a line cook, a dishwasher, or a Sunday brunch server on minimum wage who has a significant health problem. How many of these workers have the savings to front a doctor’s bill and wait to be repaid by the city — or even to take on the financial risk to go to doctor’s in the first place? The inefficiency is palpable.

However, there is a shred of hope. Thomas said the Golden Gate Restaurant Association and other stakeholders have spent the past year working with the mayor’s office to come up with a new version of city healthcare that might work for everyone.

“I’m cautiously hopeful,” said Thomas, who’s been mired in this fight for years. “For the first time, everyone’s at the table.” But until then, a billion dollars collected in the name of worker healthcare could be used for something entirely else.