New visions for fixing health care

On January 1, the cost of doing business in San Francisco rose for small businesses. As the city's minimum wage increased 43 cents to $9.79 an hour (the second-highest rate in the nation), San Francisco also hiked the amount that companies with more than 19 employees must pay for workers' health insurance, as mandated by the city's Health Care Security Ordinance.

"Last year, they mandated contributions of $1.17 per hour per employee - about $176 dollars a month per employee. This year they've moved it up to $1.23 an hour," says Leslie Swallow, co-founder of Mixt Greens, a San Francisco restaurant that employs about 50 workers. "It's been pretty detrimental to restaurants, most of which have a higher ratio of workers to revenue than say, a high-tech software company. People were pretty panic-stricken, not knowing how they were going to deal with it."

While Mixt Greens has always provided traditional health insurance for workers, in April it started issuing something new for individuals who choose not to enroll in a plan. It gave them Vita Cards: pre-paid MasterCards that workers can use for out-of-pocket health care expenses such as co-pays, prescriptions, and dental work.

"It's really flexible," says Swallow, who reloads the cards each quarter with the appropriate amount of money per employee to satisfy the city's mandate. "Not only does it give our workers more health care options, it helps offset their health care exemption."

The cards, which were launched over the summer by San Francisco startup WiredBenefits, can only be used on items that have been approved by WiredBenfits, such as co-payments for dental and doctor appointments, prescriptions, and over-the-counter supplements like cough medicine and contact lens solution. The tax-free cards are usually sold through third-party benefits providers and come bundled with other healthcare plans. But they can also be bought as a standalone product at prepaidhealthcare.com. In addition to a one-time setup fee of $80, employers pay $5 for each card and another $3 each time they want to reload it.

"What we've found is that most small companies can't afford to commit to $300 to $600 a month in health care expenses for each of their employees. Most buy benefits according to how business is going," says Charles Marshall, co-founder and CEO of WiredBenefits. "Our cards allow them to buy only as much as they can afford."

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