In an effort to promote health coverage for the uninsured, San Francisco passed a law called the Health Care Security Ordinance (HCSO) that went into effect in 2008. HCSO requires employers, even those that are not based in San Francisco, to make minimum health care expenditures for their employees working in San Francisco. In 2012, HCSO added an “Official Notice” requirement. The dollar amounts and limits are adjusted every year for inflation. It is important for “covered employers” to review HCSO annually and make sure they are either currently in compliance or take the appropriate steps to comply.

Covered Employers and Employees under HCSO

Employers with 20 or more employees (50 or more employees if nonprofit) are considered covered employers subject to HCSO. For the purpose of determining employer size, all employees must be counted, regardless if they are working in San Francisco. Employer size is based on the weekly average number of persons performing work for compensation for that quarter.

Covered employees under the HCSO include:

  • those that work in the geographic boundaries of the city and county of San Francisco,
  • have been employed at least 90 calendar days, and
  • work at least 8 hours per week.

Employees that are exempt from the requirements of the HCSO are:

  • owners (although they are counted as employees for determining employer size if they earn compensation),
  • those who have coverage through another employer and waive their rights to coverage on the Voluntary Waiver Form,
  • managerial[1], supervisory[2], and confidential[3] employees earning more than $95,101 per year (or $45.72 per hour) in 2017 ($97,693 per year/$46.97 per hour in 2018)[4],
  • those eligible to receive benefits under Medicare or TRICARE/CHAMPUS,
  • those employed by a nonprofit for up to one year as trainees in a bona fide training program consistent with Federal law, or
  • those who receive health care benefits pursuant to the San Francisco Health Care Accountability Ordinance (HCAO).

Minimum Health Care Expenditures

The minimum health care expenditure depends on the size of the employer and is calculated by multiplying the “hours paid” to the covered employee by the applicable health care expenditure rate. “Hours paid” include hours for which an employee is paid for work, as well as hours not worked but entitled to pay (e.g., paid vacation, paid time off, and sick leave). “Hours paid” does not include time worked outside of San Francisco.

The published health care expenditure rates (per employee per hours paid) are:

  • 100 or more employees: $2.64/hour in 2017 ($2.83/hour in 2018)
  • 50-99 employees: $1.76/hour in 2017 ($1.89/hour in 2018)
  • 20-49 employees and not a nonprofit: $1.76/hour in 2017 ($1.89/hour in 2018)

For example, if you are a larger employer, you must spend at least $5,886.40 per year for a full-time employee working in San Francisco in 2018 (40 hours/week x 52 weeks x $2.83 per hour). Employers can make the minimum health care expenditure either through contributions towards medical/dental/vision insurance premiums, cash reimbursements for health care expenses, or contributions towards medical reimbursement accounts set up by either the employer or the city. However, a 2014 amendment requires that expenditures made on or after January 1, 2017 will only satisfy the requirement if they are irrevocable. The three-year phase-in of the amendment required 60% irrevocable expenditures in 2015, 80% in 2016, and 100% in 2017 forward.

“Official Notice” Requirement

In 2012, an “Official Notice” requirement went into effect for all covered employers. The notice must be conspicuously posted at each workplace or job site in San Francisco. Employers must use the notice provided by HCSO and display it in English, Spanish, and Chinese. If there is another language that is spoken by at least five percent of the employees at the workplace, the notice must be in that language as well. HCSO has published a notice in Tagalog, Russian, and Vietnamese; the employer is responsible for translating and posting in any other language.

Reporting Requirement

Employers are required to submit annual reports by April 30 of each year for the HCSO expenditures of the previous year. The annual reporting form is completed online using the employer’s Business Registration Certificate Number. There is a fine up to $500 for each quarter that an employer fails to report the required information.

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