San Francisco Increases Health Care Contribution Requirement

 

Ordinance requires employers with at least one employee who works within the city limits to either pay at least a specific amount per hour worked within the city and county limits (or for paid time off) towards the cost of health coverage for any such employee, or pay a surcharge over to the city…………

San Francisco Increases Health Care Contribution Requirement

December 11, 2017

Employers with employees in the City by the Bay are likely familiar with the San Francisco Health Care Security Ordinance. This ordinance requires employers with at least one employee who works within the city limits to either pay at least a specific amount per hour worked within the city and county limits (or for paid time off) towards the cost of health coverage for any such employee, or pay a surcharge over to the city. This ordinance only applies to employees who work an average of eight hours per week within the city and county limits during any calendar quarter, with certain exceptions.

Effective January 1, 2018, the employer contribution amounts increased:

2017 Amount 2018 Amount
Employer has at least 100 workers $2.64 $2.83
For-profit employer has 20-99 workers

OR

Nonprofit employer has 50-99 workers

$1.76 $1.89
For-profit employer has under 20 workers

OR

Nonprofit employer has under 50 workers

‘Exempt’ ‘Exempt’

 

Even though contributions are only owed for employees doing work within the city and county of San Francisco, the level of employer contribution is based on the number of workers (whether or not they are employees) the employer has worldwide.

This employer contribution is typically satisfied by paying premiums to an insurer or by paying claims and administrative expenses to third parties under a self-funded plan. If the required amount is not paid each quarter, it must be paid within 30 days after the end of the quarter. However, self-funded plans are permitted to average payments over an entire year (rather than on a quarterly basis).

Alternatively, subject-employers can make payments towards the ‘City Option,’ which functions as an alternative form of medical-funding and coverage for subject-employees. More information on this option can be found here.

Importantly, based on rules released late this year, self-funded plans can no longer use the notional or facsimile premium (calculated using the COBRA method) to determine if they are spending enough. Instead, they must spend the required amount in actual claims or administrative expenses paid to third parties. While perhaps unlikely, and somewhat ironic, this could mean that employers with low claims experience may find themselves having to provide additional benefits to employees in San Francisco who arguably might not need them due to good health.

Employers with employees performing services in the city should mind the increased contribution requirement and these new rules under the San Francisco Health Care Security Ordinance. HUB will continue to monitor these developments. Reach out to your HUB Account Team with any questions.

View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.

 

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