San Francisco Updates Contractors’ Health Standards, Pay Rates 

San Francisco Updates Contractors’ Health Standards, Pay Rates
27 June 2019

Beginning Jan. 1, 2020, San Francisco contractors and lessees will have to comply with new health plan standards for covered employees under the Health Care Accountability Ordinance (HCAO). On July 1, 2019, a new poster and larger alternative payment takes effect for HCAO-covered employees, along with higher minimum compensation rates for contractors’ employees covered by the city’s Minimum Compensation Ordinance (MCO).

HCAO Requirements

San Francisco contractors and tenants (including those at the city’s international airport and port) must offer minimum health benefits at no cost to covered employees under the HCAO. The ordinance applies to employees who work at least 20 hours per week on a city contract or city property. Employees working on a San Francisco contract are covered, even if their contract work is done outside the city.

Minimum Standards
Effective Jan. 1, 2020, updated minimum standards from the Office of Standards and Labor Enforcement (OLSE) require plans to cover all services listed in California’s current essential health benefit (EHB) benchmark plan. The standards apply to employee-only coverage and don't include or require dental or vision benefits. The OLSE also has released an updated poster that employers must conspicuously display in each San Francisco worksite by July 1, 2019.

Employers must annually obtain covered employees’ signed acknowledgment of a HCAO statement of rights. Employees may waive their coverage rights by signing the appropriate form. All notices and posters must be available in English, Spanish, Chinese, and any other language spoken by at least 5% of the employees at the workplace or job site.

2020 Limits
Besides covering EHBs, a contractor's health plan must comply with the following standards:

  • Employers must pay for 100% of the coverage with no employee contributions.
  • The maximum in-network deductible of $2,000 ($200 for prescriptions drugs) must include 100% of actual expenditures that count toward the medical deductible, regardless of plan type and level.
  • The maximum in-network, out-of-pocket maximum (OOPM) expense of $7,850 for 2020 must include all types of cost sharing (deductible, copays, coinsurance, etc.).
  • Participants' cost sharing must be capped at 20% for in-network treatment and 50% for out-of-network care.
  • Primary care copayments can't exceed $45.

Employers may use any health savings/reimbursement product that complies with the minimum OOPM standard, and all gold- and platinum-level plans are deemed compliant, according to the Department of Public Health’s clarifications. Employers can offer other contributory options but must make at least one plan available at no cost to covered employees that meets minimum standards.

Alternative Payment
Effective July 1, 2019, HCAO-covered employers that don't provide minimum benefits must pay the city an additional $5.40 per hour for covered employees who live or work in San Francisco. For covered employees who live or work outside San Francisco, employers must make these payments directly to the employees. The payment is capped at $216 per workweek.

This rate is annually adjusted for inflation on July 1. Employers should remit these amounts along with the HCAO Payment Option Form

MCO Obligations

The MCO covers most city service contractors and tenants at the San Francisco International Airport. The law generally requires covered employers to provide to their covered employees:

  • At least the MCO hourly wage in effect
  • 12 paid days off per year (or cash equivalent)
  • 10 days off without pay per year

Increased Pay Rates
Effective July 1, 2019, the MCO minimum hourly compensation rates are:

  • For-profit -- $17.66
  • Nonprofit -- $16.50
  • Public entities -- $16.50 

Next Steps

Employers contracting with or leasing from San Francisco need to evaluate whether their workers are covered by the HCAO and MCO. Contractors and lessees need to determine who qualifies as an HCAO-covered employee and ensure appropriate coverage or payouts for 2020. Affected employers will need to evaluate their 2020 plan designs for any changes and estimate costs for the wage and/or alternate payment changes.

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