Read This If You Have At Least One Employee Working in San Francisco

Last week the annual reporting tied to the San Francisco Health Care Security Ordinance (HCSO) was cancelled due to the COVID-19 pandemic. The required healthcare expenditure that must be paid for each employee working an average of eight hours or more per week in San Francisco was not.

Businesses with one or more employees working in San Francisco are likely a covered employer and must comply with the HCSO by making required expenditures, including any payments via the City Option due April 30 for Q1 2020. (Note that self-insured employers were required to make their 2019 payments by the end of February 2020.) If you’re unsure what this means for your organization, I’ve included answers to the most frequently asked questions I receive.

Who must comply with the HCSO? An employer must comply for any calendar quarter if it meets the following three conditions:

  • Employs one or more workers within the geographic boundaries of the city and county of San Francisco;
  • Is required to obtain a valid San Francisco business registration certificate; and
  • Is a for-profit business with 20 or more employees or a nonprofit organization with 50 or more employees. This includes all employees worldwide, regardless of whether they are located in San Francisco. It does not matter if a company’s headquarters are not in San Francisco.

What constitutes a healthcare expenditure? Employers must make a health care expenditure for each employee working an average of eight hours per week or more in San Francisco by one or more of the following:

  • Paying medical, dental, and/or vision insurance premiums to an insurer
  • Actual claims spending in self-insured medical, dental, and/or vision plans
  • Making HSA contributions
  • Making payments to medical reimbursement accounts or Healthy San Francisco through the San Francisco City Option Program. The rate for large employers in 2020 is $3.08 per hour worked in San Francisco.

Does an offer of health insurance meet the spending requirement? No. Employers cannot meet the spending requirement by simply offering health insurance. Employers need to make the applicable health care expenditure for each San Francisco employee, based on their individual hours worked, even if they are not benefits eligible and even if they decline coverage under the plan because they have other insurance coverage. An employee can only waive their rights under the HCSO by signing an HCSO waiver form.

How is the healthcare expenditure calculated? Many specific rules apply which make it complicated. For self-insured health plans, the average hourly health care expenditure for employees is calculated by taking the total claims spending for employees in each plan option, subtracting out employee contributions, and then dividing by the total hours payable to each of the employees in the plan.

To learn more about the HCSO and next steps you should be taking, read our GRIST and contact your Mercer consultant or:

Andrea Alarcon

Andrea Alarcon
by Andrea Alarcon

Senior Associate, Mercer

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