A health care expenditure (HCE) is any amount paid by a Covered Employer to its Covered Employees to ensure health care services are provided for or costs are reimbursed. Covered Employers are required to keep adequate HCSO records and documentation including (but not limited to):
SAN FRANCISCO HEALTH CARE SECURITY ORDINANCE (HCSO)
The San Francisco Health Care Security Ordinance (SF HCSO) is a law that requires qualifying businesses (Covered Employers) to satisfy a Spending Requirement by making health care expenditures for their employees, among other reporting and notice requirements. What this means is that it requires businesses to spend a minimum amount of money on health care benefits for their employees. Below we’ll cover which San Francisco employers are included, what their obligations are, and how this affects employees’ healthcare.
WHAT CONSTITUTES A COVERED EMPLOYER TO SF HCSO?
An employer does not need to be physically located in San Francisco to be deemed a Covered Employer by the Office of Labor Standards Enforcement (OLSE). The HCSO defines a covered employer as
- Any medium or large for-profit company engaging in business within the city and county of San Francisco; and
- Has employees who work in San Francisco.
- These companies are also required by law to obtain a valid San Francisco business registration certificate from the San Francisco Tax Collector’s office; or
- In the case of a nonprofit corporation, an employer for which an average of 50 or more persons per week perform work for compensation during a given quarter each year.
| Employee Size | Number of workers | 2021 Expenditure | 2022 Expenditure | 2023 Expenditure |
|---|---|---|---|---|
|
Large |
All employers w/100+ workers. |
$3.18 per hour payable |
$3.30 per hour payable
|
$3.40 per hour payable
|
|
Medium |
Businesses w/20-99 workers.
Non-Profits w/50-99 workers. |
$2.12 per hour payable |
$2.20 per hour payable
|
$2.27 per hour payable
|
|
Small |
Businesses w/0-19 workers.
Non-Profits w/0-49 workers. |
Exempt |
Exempt |
Exempt |
The table above shows us that as of January 1, 2023, employees who earn more than $114,141 per year (or $54.88 per hour) are exempt. For more information on historical expenditure rates from previous years, follow this link.
EXPENDITURE RATES
Each year expenditure rates are readjusted. Although, these rates do not apply to businesses who have fewer than 20 employees or to non profit organizations that employ 49 or fewer employees. To determine your employee size, all individuals receiving compensation for their work both inside and outside of San Francisco need to be counted. The employment status of these individuals is not taken into consideration, all are counted whether they are full-time, part-time, seasonal or temporary.
What if we use self funded health plans?
Employers who utilize a self funded health care plan with their employees, including medical, dental and/or vision, need to calculate the actual value of their plans. This can be done either by using their premium amounts or their claims paid. This value can be used to determine if the amount meets or exceeds the required expenditure rate. If the annual spending amount fell short of the HSCO expenditure rate, the employer must make payments to their employees that are enrolled in these plans that top-off the difference between the two. These payments must be made by the end of February of the following year.
Additionally employees are required to report annually their health care expenditures to the Office of Labor Standards Enforcement by the last day in April. If employers fail to do this in a timely manner they will be subject to penalties.
SF HCSO COVERED EMPLOYERS’ OBLIGATIONS
Employers are only obligated to make Health Care Expenditures on behalf of employees. However, merely labeling an employee as an “independent contractor”, or issuing a 1099 form does not make him or her so. A fact-specific inquiry issued by the OLSE will ultimately determine whether a person is an employee or an independent contractor.
Once an employee has been deemed as such by the OLSE, Covered Employers are obligated to:
- Make any required health care expenditures on a quarterly basis on behalf of all Covered Employees;
- Maintain records sufficient to establish compliance with the employer spending requirement;
- Post the 2023 HCSO Poster in all workplaces with covered employees; and
- Submit an Annual Reporting Form to the OLSE by April 30th of each year.
WHAT CONSTITUTES A COVERED EMPLOYEE TO SF HCSO?
With some exceptions, an Employee is covered by the HCSO if the Employee works for an Employer covered by the HCSO and:
- Is entitled to be paid the minimum wage;
- Has been employed by the Employer for at least 90 calendar days; and
- Works at least 8 hours per week in San Francisco.
What is important to understand with Covered Employees under SF HSCO is that any work performed by an employee who lives in San Francisco and works from home is still considered work performed within San Francisco. On the other hand, Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco. For a comprehensive overview of the Covered Employee exemption criteria, see the section on Covered Employees.
REQUIREMENT TO REPORT HEALTH CARE EXPENDITURES UNDER SF HCSO
- Itemized pay statements;
- Employee information;
- Records to support the employer has met the expenditure requirement;
- Proof that expenditures were made;
- Employee terminations;
- Employee voluntary waiver forms; and
- Copies of notices given to employees for a period of four (4) years.
Can Employers view past health coverage usage?
Employer perspective:
When applying for a job, both California law and the federal Fair Credit Reporting Act (FCRA) restrict any employer from receiving medical information without authorization being given. For example if a background check is run, the consumer reporting agency cannot include past medical bills.
Employee perspective:
If you are a person with disabilities, California’s disability discrimination laws and the Americans with Disabilities Act (ADA) protect you from employers inquiring about your condition in both mental and physical disabilities.
It is always a good idea to request a copy of a background check that is being completed. However it is important to remember that these laws do not necessarily stop employers from doing their own research and looking into information that is publicly available.
NEXT STEPS FOR COVERED EMPLOYERS
Covered Employers must carefully assess the new changes to health care expenditure reporting and compliance requirements under SF HSCO. Having a financial strategy in place that outlines the plan for how to itemize your Covered Employees’ contributions will save a plethora of time in the long term. Make sure that your organization knows when a new Annual Reporting Form is available by signing up for the HCSO Email List. It is also wise to review the complete 28 page SF HSCO rules implementing the Covered Employer spending requirement document to get a full spectrum understanding of the entire OLSE regulations contents.
Watch this video for a summary on Health Care Security Ordinance in San Francisco
- Last Modified
- September 14, 2023
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