The 2023 rates for the San Francisco Health Care Security Ordinance (HCSO) were recently released by the San Francisco Office of Labor Standards Enforcement (OLSE).
Refer to the table below for the 2023 updated HCSO expenditure rates based on size and type of employer along with the 2022 rates:
|
Employer Size
|
Number of Workers
|
2023 Expenditure Rate
|
2022 Expenditure Rate
|
|
Large
|
All employers w/ 100+ workers
|
$3.40 per hour payable
|
$3.30 per hour payable
|
|
Medium
|
Businesses w/ 20-99 workers
Nonprofits w/ 50-99 workers
|
$2.27 per hour payable
|
$2.20 per hour payable
|
|
Small
|
Businesses w/ 0-19 workers
Nonprofits w/ 0-49 workers
|
Exempt
|
Exempt
|
HCSO Background
The HCSO is a San Francisco law that established several employer health-care-related obligations enforced by the OLSE and has been in place since 2008. The HCSO requires all covered employers in San Francisco to spend a minimum amount of money, called an expenditure, on a quarterly basis toward their covered employees’ healthcare costs.
Under the HCSO, covered employers are those for-profit businesses with 20 or more employees and non-profit businesses with 50 or more employees who have employees working within the geographic boundaries of the City and County of San Francisco. Employers must count all employees, regardless of where they live or work, to determine if they are covered under the HCSO. Covered employees are those employees who have been employed for more than 90 days and who regularly work at least 8 hours per week in San Francisco.
The minimum heath care expenditure for each covered employee is determined quarterly by multiplying the total number of hours payable to the employee in the quarter (capped at 172 hours per month) by the applicable expenditure rate.
Covered employers can comply with the HCSO by making health care expenditures for their covered employees under the following options:
-
Payments for medical, prescription, dental, and/or vision insurance.
-
Payment into health savings accounts (HSAs) or other irrevocable reimbursement accounts.
-
Payments to the San Francisco City Option (common option for those covered employees who waive employer-sponsored health plan coverage). Employers who make payments to the City Option program on behalf of a covered employee are required to provide the employee with a one-time Health Care Payment Confirmation notice and are encouraged to post the City Option poster, both of which can be accessed here.
-
Payments to covered employees to reimburse them for out-of-pocket health care costs.
Exempt Employees
The HCSO exempts the following employees:
-
Employees who voluntarily waive their right to have their employers make health care expenditure for their benefit by completing the waiver form, certifying that they are receiving health benefits through another employer, including an employer of their spouse, domestic partner or parent. The waiver form is voluntary and may be revoked by employees at any time.
-
Employees who qualify as managers, supervisors, or confidential employees and earn more than the applicable salary exemption amount ($114,141 annually, or $54.88 per hour, in 2023).
-
Employees who are eligible for Medicare or TRICARE.
-
Employees who are employed by a non-profit corporation for up to one year as trainees in a bona fide training program consistent with federal law.
-
Employees who receive health care benefits under the San Francisco Health Care Accountability Ordinance.
Remote Employees
In light of the San Francisco City public health order on June 11, 2021, which removed the remote work recommendation for employers, employees working remotely outside of San Francisco are not subject to HCSO requirements.
HCSO Recordkeeping, Notice & Annual Reporting Requirements
Covered employers are required to maintain sufficient records for four years from each covered employee’s employment dates, including itemized pay statements and records of health care expenditures for each covered employee.
Covered employers must post the 2022 HCSO poster in a conspicuous place at all workplaces with covered employees in English, Spanish, Chinese and other applicable languages spoken by covered employees.
Covered employers are also required to submit an annual reporting form to the OLSE by April 30th of each year, including information on total health care spending and any applicable surcharges that a covered employer imposes on customers to offset HCSO costs. Click here for more information regarding the annual reporting form requirements.
Penalties
Refer to the table below outlining the administrative penalties for failing to comply with HCSO requirements:
|
HCSO Violation
|
Maximum Administrative Penalty
|
|
Failure to make the required minimum Health Care Expenditures within five business days of the quarterly due date (30 days after the conclusion of each quarter)
|
$100.00 for each employee for each quarter that the violation occurred.
|
|
Failure to submit the Annual Reporting Form
|
$500.00 for each quarter that the violation occurs
|
|
Retaliation against employees
|
$100.00 for each person who is the target of the prohibited action for each day the violation occurs
|
|
Refusing to allow OLSE access to employer records
|
$25.00 for each worker whose records are not provided for each day the violation occurs
|
|
Failure to maintain or retain accurate and complete records
|
$500.00 for each quarter that the violation occurs
|
|
Failure to post the Official HCSO Notice
|
$25 per day for each workplace or job site where the Notice is not posted
|
|
Failure to make the required minimum Health Care Expenditures within five business days of the quarterly due date (30 days after the conclusion of each quarter)
|
$100.00 for each employee for each quarter that the violation occurred.
|
Next Steps for Employers
Covered employers are advised to note the increased HCSO expenditure rates for 2023 as they continue to comply with HCSO requirements.
Risk Strategies’ team of experienced professionals can help covered employers navigate the complex HCSO requirements. Contact your Risk Strategies account representative for assistance or contact us at benefits@risk-strategies.com.
