San Francisco's annual Health Care Expenditure report due May 2
Employers with San Francisco employees must submit annual Health Care Security Ordinance (HCSO) reports on their 2021 HCSO compliance by May 2, 2022. The annual reporting requirement is back after being waived for the 2019 and 2020 reporting years due to the pandemic. The Office of Labor Standards Enforcement (OLSE) has posted the form, related instructions and a webinar. The online form will not be available after May 2; employers failing to file by that date can face penalties up to $500 per quarter.
Health Care Expenditure mandate
The Health Care Expenditure (HCE) is the minimum amount employers must spend on healthcare for each hour worked by a covered employee — one employed for more than 90 days who regularly works at least eight hours a week in San Francisco. Minimum HCE amounts are adjusted annually and vary by employer size. To determine workforce size, employers must count all employees, no matter where they live or work. However, the expenditure applies only for hours worked in San Francisco. The annual reports are due at the end of each April, or the next business day if April 30 is on a holiday or weekend.
Covered expenditures
The HCSO regulations limit HCE-qualifying expenses to “irrevocable” expenditures, such as insurance premiums. Employers whose expenditures fall short of the required HCE must remit the difference to the City Option program. For employees who are enrolled in fully insured plans or have waived coverage, these payments are due 30 days after the end of the calendar quarter. For employees enrolled in self-funded plan options, payments must be made by Feb. 28 for the prior year. These payments are allocated to a medical reimbursement account (MRA). Despite waiver of the annual reporting requirement for the past two years, employers still had to comply with the minimum expenditure rate the entire time.
Excluded employees
Covered employees exclude managers, supervisors and confidential employees who earned at least $107,991 or $51.92 per hour in 2021. Employees covered by Medicare or TRICARE may also be excluded if the employer can document employee enrollment. In addition, the ordinance excludes employees who receive benefits required by the Health Care Accountability Ordinance that applies to most city contracts and leases.
Employee waivers
Employers can also exclude from HCE contributions any employees who voluntarily signed a revocable HCSO Employee Voluntary Waiver Form. Employees use this form to certify that they receive health benefits through another employer (either as an employee or as the spouse, domestic partner or child of another person). The form is effective for one year from the date signed, unless revoked sooner. Employees who waive employer coverage but haven’t completed and signed the city’s form aren’t exempt from the HCE. The form cannot be signed retroactively. Failure to use the proper waiver form could result in noncompliance penalties and payment of the HCE for those employees.
Exempt employers
Certain employers don’t have to submit the 2021 Employer Annual Reporting Form if they either:
- Employed fewer than 20 individuals (including those employed outside of San Francisco) in each of the four 2021 calendar quarters and do not have a contract with the city and county of San Francisco
- Had no employees within the geographic boundaries of San Francisco (including employees working from home in San Francisco) in any 2021 quarter
Exempt employers don’t need to notify the city that they are exempt. No action is required, even if the employer received notice that it might be subject to the filing requirement.
Health expenditure report data
Employers generally must use the online form for annual reporting, providing their seven-digit Business Account Number from the San Francisco Treasurer and Tax Collector.
Required information
The OLSE has simplified reporting form for the 2021 reporting year, although the analysis and recordkeeping requirements remain the same. The required information includes:
- Total number of persons performing work for compensation (including those outside of San Francisco)
- Total qualified HCEs made per quarter
- A listing of the types of HCEs made including:
- Payments for health, dental and vision insurance
- Contributions to the City Option
- Contributions to health savings accounts
- Surcharges collected from customers to cover any HCSO compliance costs
Uniform health plan
A covered employer may comply with the HCSO by providing some or all of its covered employees a uniform health plan that has the same benefit design — including cost sharing, coverage tiers and eligibility criteria — for all covered employees. The average hourly HCE for employees in a uniform health plan is calculated by dividing the total required HCEs for employees in the plan by the total number of hours payable to each of the employees in the plan during that quarter.
Self-funded health plans
Expenditures for self-insured health plans are calculated on an annual basis. Since 2017, HCEs must reflect amounts irrevocably paid to third parties. As a result, employers cannot use a COBRA-equivalent rate to determine their quarterly expenditures for employees enrolled in self-funded plans. Employers may instead determine a self-insured plan’s annual expenditures using fixed expenditures and paid healthcare claims. Employee contributions are not included in the calculation.
In the past, self-funded plans typically had to complete a separate addendum to the annual online report. This requirement no longer applies for 2021 reporting.
Related resources
Non-Mercer resources
- HCSO self-funded plan calculation instructions (San Francisco OLSE, Jan. 25, 2022)
- HCSO reporting instructions (San Francisco OLSE)
- 2021 Employer Annual Reporting Form (San Francisco OLSE)
- Health Care Security Ordinance resources (San Francisco OLSE)
- Health Care Accountability Ordinance resources (San Francisco OLSE)