In April 2026, more than $200 million in unused funds from the health care mandate fund will be transferred to the general fund to help patch a $1 billion city budget deficit. In 2022, the city’s Health Commission decided unused funds would be transferred to the city’s general fund instead of keeping dormant balances indefinitely. Insiders say Mayor Daniel Lurie and the San Francisco Board of Supervisors, who approved the current two‑year budget last June, intend to use $200-$240 million of those transferred funds to address the ballooning deficit.
The health care mandate fund was intended to cover health care insurance for hourly workers. The fee is charged to San Francisco employers citywide and often appears on restaurant bills as a health care surcharge. Most restaurant customers are unaware they can ask that the “S.F. Employee Mandate” be removed from their final bill. Restaurants have the discretion to list the health mandate fees on their bills as line items; it is not required under San Francisco law.
The Health Care Security Ordinance (HCSO), as it is officially known, requires San Francisco employers with more than 19 employees nationwide to spend a minimum amount per hour on employee health care if they are not already providing qualifying coverage. Many satisfy the requirement by paying into the San Francisco City Option (SFCO), which has grown steadily as hourly rates increased. In 2023–24, 2,003 employers paid $215 million for 79,227 workers, about $2,715 per employee, per year. For a 20‑person business, that’s roughly $4,520 every month, even when employees never use the benefit.
State law requires three full years of inactivity before these funds can be declared abandoned. The initial transfer is large because it captures more than a decade of accumulated balances becoming eligible at once. The contributions are mandated across industries, including dining, hospitality, retail, and service sectors.
The San Francisco Department of Public Health has undertaken a social media campaign and issued reminders since 2023 to urge employees to utilize SFCO funds. They responded to our request for comment; excerpts are below:
The San Francisco Department of Public Health encourages anyone who has worked for an employer who paid into SF City Option to check to see if they have unclaimed healthcare funds. People are able to access their funds even if they have left the Bay Area or no longer work for the company who made the contribution. Call (877) 772-0415, or email info@sfcityoption.org to verify their accounts, or set up their Medical Reimbursement Accounts (SF MRAs) at sfmra.org/enroll to ensure the availability of funds.
As of January 2026, there is approximately $240 million in the SF City Option pool fund or in SF MRAs that have been inactive for three consecutive years or more. People must take action by May 21, 2026. The City is encouraging individuals to use their program benefit by enrolling into and using their SF MRAs.
Unless action is taken by 5pm on May 21, 2026, any SF City Option account that has been inactive for three consecutive years will be permanently closed and those funds will no longer be available.
Once enrolled, the employees can be reimbursed for health and wellness expenses they incur for themselves and their family. Funds can be used for a wide range of health and wellness expenses, including health insurance premiums, lab tests, COVID-19 tests, dental care, feminine hygiene products, and baby formula. A list of eligible expenses can be found at: https://sfcityoption.org/sfmra/mra-eligible-expenses/.
The structure of the mandate helps explain why so much money sits unclaimed. Restaurant and service‑sector jobs are highly transient, and many employees leave positions without ever learning they have an account or how to access it. According to insurance consultants, the Department of Public Health estimates over 135,000 employees have yet to set up the San Francisco Medical Reimbursement Accounts and among those who have completed setup, funds are sitting unused.
The impending transfer has renewed criticism that a program created to support workers has evolved into a discrete revenue source for the city’s overspending. Many business owners in San Francisco feel the mandated health care fee is costly and want it repealed.
It’s theft and fraud! That money needs to be returned.
Matt Boschetto, a small business owner and former candidate for supervisor, shared that “it seems they’ve created an illegal tax from an already unpopular mandate. If the employees are not using the funds, it should go back to the employers, and the mandate should be reformed to be less costly for businesses. I wholeheartedly support any reforms that make San Francisco an easier environment to be successful in, including the HCSO.”
In 2025, Ben Bleiman, bar owner and head of the Entertainment Commission said bluntly, it’s so “offensively unfair and infuriating … it’s exactly why San Francisco has a reputation of being the most unfair to small businesses in America.”
Other hospitality insiders are livid that the city leadership is using the funds to plug the budget deficit, declaring “It’s theft and fraud! That money needs to be returned.”
The reimbursement model requires workers to pay upfront, save receipts, and wait for repayment, a process that is often cumbersome and costly for workers who can’t afford to pay upfront. After the Affordable Care Act expanded access to Medi‑Cal and Covered California plans, many workers already had insurance elsewhere, reducing the need to draw on the city accounts even further. Yet employer contributions continued at a fixed hourly rate regardless of a worker’s actual coverage, allowing unused balances to accumulate year after year.
For employers, the mandate has long functioned like a tax. Businesses pay it irrevocably, often amounting to hundreds of dollars per worker per month, regardless of whether employees ever use the benefit. Many restaurants, unable to absorb the cost, add surcharges to customer bills, which can inflate the pretax subtotal and raise the sales tax depending on where it’s line‑itemed on the bill. At the Beach Chalet, a 6 percent mandate fee is added before the subtotal or sales tax, while other restaurants, like Hard Knox Cafe, add the mandate fee after the subtotal and sales tax.
The layered burden has fueled frustration among diners and workers alike. Some customers reduce tips to offset the surcharge, and servers often feel the impact. Restaurant owners and small‑business advocates argue the mandate is outdated, pointing to the widespread availability of ACA‑compliant plans and employer‑sponsored insurance. They contend the system has become a de facto tax that distorts pricing, confuses diners, and now funnels unused funds into the city’s discretionary budget. To them, the upcoming transfer is the clearest example yet: money collected under the banner of worker health care will instead help balance the city’s books.
As April 2026 approaches, the sweep underscores a broader tension in San Francisco’s policy landscape. The city often relies on progressive mandates to achieve social goals, but the costs ripple outward in ways that are rarely acknowledged. Businesses pass fees to customers, customers adjust tipping behavior, workers feel the volatility, and when funds go unclaimed, the city quietly absorbs the surplus.