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San Francisco Health Care Security Ordinance
San Francisco requires employers over a certain size to make quarterly health expenditures for employees working in San Francisco.
The Employer Spending Requirement of the Healthcare Security Ordinance went into effect January 9, 2008, and was upheld on September 20, 2008 by the Ninth Circuit Court. Read about the GGRA lawsuit here.
For small employers who cannot afford a benefits plan, and those with part-time employees who don't qualify for benefits, we recommend setting up a Health Reimbursement Arrangement. Contact us for a consultation and see the HRA sections below.
We've summarized some key information about the ESR and HCSO for your convenience on this page. This information is not to be construed as legal advice.
For the official language and documents, please visit the City's HCSO website.
Covered employers
The HCSO affects businesses that engage in business in San Francisco and are required to have a valid SF business registration certificate.
Additionally, covered employer status is based on the number of employees you have working for compensation per week in all locations as follows:
| Size / Type | <20 employees | 20-49 employees | 50-99 employees | 100+ employees |
|---|---|---|---|---|
| for profit | not covered | covered, medium | covered, medium | covered, large |
| not for profit | not covered | not covered | covered, medium | covered, large |
Covered employees
To be covered under the HCSO, and employee must meet the following criteria:
- is entitled to payment of (at least) minimum wage
- has been employed by you for 90 calendar days after his or her first day of work
- performs work within the geographic city and county of San Francisco of at least 8 hours per week (2009) including telecommuting and deliveries/pick-ups
There are five exemption categories. Employees falling into one of these categories are not covered employees:
- managerial, supervisory or confidential employee* earning at minimum $80,397 annually or $38.65/hour in 2009
- eligible for Medicare or TRICARE/CHAMPUS benefits
- is a covered employee under the San Francisco Health Care Accountability Ordinance
- is participating in a non-profit trainee program consistent with federal law
- receives health care services through another employer and voluntarily waives the expenditure
Rates for expenditures
Rates for expenditures are based on employer size (total number of employees, including seasonal, permanent, temporary, full-time, part-time, contracted, and commissioned).
Rates beginning January 2009:
- medium covered employers: $1.23 per hour paid
- large covered employers: $1.85 per hour paid
Rates beginning January 2010:
- medium covered employers: $1.31 per hour paid
- large covered employers: $1.96 per hour paid
NOTE: employee covered status is based on average weekly hours worked within San Francisco; expenditures are based on hours paid for work within San Francisco, including paid time off, sick time, vacation, etc.
Types of allowed expenditures
There are many options for making the required expenditure. Some will work better for you:
- payments for health care services made to a third party (e.g. insurance premiums)
- expenditures for self-insured or self-funded programs
- contributions to a healthcare flexible spending account, health savings account, health reimbursement account, medical spending account or similar account
- payments to the City of San Francisco for the City Option (Healthy San Francisco or a Medical Reimbursement Account
- direct reimbursement to employee for health care service expenses
- costs for direct delivery of health care services
If insurance isn't an option, try an HRA
Many employers have fluctuating workforces with variable hours. This makes is difficult to provide health insurance. One way to provide a direct benefit to employees is through a Health Reimbursement Arrangement or Account. HRAs are more flexible than other accounts due to tax regulations.
HRA plans and our partner Wired Benefits
Shargel & Co. has partnered with Wired Benefits, a local provider of an online HRA for small business, to offer a solution customized to businesses with fewer than 100 employees subject to the ordinance. It's low cost, with an affordable one time set up fee, and easy to administer online. Learn more about the PrepaidHealthcare MasterCard HRA.
Other options for meeting the spending requirement
Shargel & Co. can also help find the best way to meet the spending requirement, whether it's insurance, the city option, or a medical reimbursement account. Contact us for a consultation.