What is San Francisco’s Healthcare Accountability Ordinance?

Many have heard of San Francisco’s Healthcare Security Ordinance, which applies to employers based in the city/county of San Francisco, however, you may not be aware of San Francisco’s more costly Healthcare Accountability Ordinance (HCAO), which applies to employers located outside the city/county of San Francisco, but who contract with the city of San Francisco or one of its agencies (such as SF International Airport or the Port of SF).

The HCAO requires employers to offer one of the following to every covered employee (those that work 20 or more hours per week):

1. health plan benefits where the employer pays 100% of a typical silver level plan and fully-funds the deductible, or
2. make payments to the City for use by the Department of Public Health, or
3. under limited circumstances, make payments directly to the covered employee.

The payments in the latter two options are calculated as $4.95 per hour worked (capped at $198 per work week). Union workers are generally exempted as their plans typically meet all the requirements of the HCAO.

Comparing Costs of The Various Options

1. A typical Kaiser Silver plan meets all the requirements for option 1, except that it has a $2,000 deductible. The employer can fund the deductible through an HRA or select Kaiser’s $0 deductible Gold plan which meets all requirements. To keep the analysis simple, we’ll choose the latter option. The rate for a 35 year old in San Francisco for that Gold plan is about $445/month. If the employee averages 160 hours/month (40/week), the hourly cost is $2.78. If the employee works only 80 hours/month (20/week), the hourly cost is $5.56.
2. The cost of not offering a plan is $4.95 per hour regardless of how many hours the employee works, but with a cap of about $800 per month ($198/week times four).

Compare these choices with the required expenditure under the Healthcare Security Ordinance, which, for each hour worked is $1.89 (companies with 20-99 employees) or $2.83 (100 or more employees).

Conclusions – the HCAO is clearly more costly than the Healthcare Security Ordinance, however, if your client is subject to HCAO, they will have no choice but to comply with it. In that case, it is usually going to be less expensive for them to offer coverage than to pay the hourly rate to the Department of Health or to the employee.

Resources

The San Francisco Office of Labor Standards Enforcement has posted all relevant information on its Healthcare Accountability Ordinance website.