The San Francisco Health Care Accountability Ordinance (HCAO) requires certain employers, mostly San Francisco contractors, to comply with minimum health plan standards (or provide an alternative payment) for covered employees. Recently, the City and County of San Francisco released its annual updates to the required minimum health plan standards, effective January 1, 2023. In addition, rates for the alternative payment increased effective July 1, 2022.

Compliance Snapshot

  • Effective July 1, 2022, the alternative payment rate is $6.10 per hour worked (maximum of $244/week), an increase from the rate through June 30, 2022, of $5.85 per hour (maximum of $234/week).
  • Effective January 1, 2023, there are new health plan minimum standards which include changes to certain in-network requirements, among other items discussed further below.

HCAO Background

HCAO is similar to the San Francisco Health Care Security Ordinance (HCSO), which requires covered employers to spend minimum amounts on health care for their covered employees, among other requirements. For more on HCSO, see our blog San Francisco Health Care Security Ordinance 2023 Rates Released. Importantly, covered employers are either subject to HCSO or HCAO, but not both.

In contrast, HCAO:

  • Applies only to contractors with the City and County of San Francisco that have 20+ employees (50+ for nonprofits), including all employees worldwide and subcontractors, with a contract or lease of at least $25,000 annually ($50,000 for nonprofits); and
  • Requires employers to offer covered employees (those who work an average of 20 hours or more per week on a qualified San Francisco City contract or subcontract, regardless of where the work is performed) either:
    1. A health plan at no cost to the employee that meets the minimum standards;
    2. Pay $6.10 (effective July 1, 2022 and updated annually) per hour worked to the City and County of San Francisco; or
    3. Pay $6.10 (effective July 1, 2022 and updated annually) per hour worked to the employee if living or working outside of San Francisco.

In addition to the above requirements, HCAO covered employers must display a poster in a conspicuous place at each San Francisco worksite, collect signed HCAO Know Your Rights notices from covered employees annually, and collect an HCAO waiver form from employees who choose to waive their coverage rights.

Updates: Minimum Standards and Rate Increase

If a covered employer chooses to comply with the HCAO by offering a group health plan, such plan must meet all 16 minimum standards to be deemed compliant. Note that the standards apply to employee-only coverage and does not require dental or vision coverage. Highlights of the minimum standard changes effective January 1, 2023 include:

  • In-network out-of-pocket maximum for employee only is $8,750 and employers must cover out of pocket expenses up to 50% of the out-of-pocket maximum on a first-dollar basis;
  • Employers are no longer required to reimburse all expenses that count toward the in-network deductible;
  • Coinsurance for in-network coverage must be 60%/40% (down from 80%/20%); and
  • In-network copayment maximum is $60/visit (up from $50/visit).

Further, plans must cover all essential health benefits (EHBs) as listed in California’s current benchmark plan. For more information on the SF HCAO minimum standards, see the information provided by the San Francisco Department of Public Health.

Additionally, updated annually for inflation and effective each July 1st, the alternative rate that may be paid is currently $6.10 per hour worked on the contract (capped at a maximum of $244 per work week), an increase from $5.85 per hour (in effect through June 30, 2022). HCAO covered employers who do not offer benefits meeting the minimum standards must pay the City the applicable rate (per hour) for covered employees who live or work in San Francisco. If there are covered employees living or working outside of San Francisco, payment must be made to directly to such the employees. Monthly payments must be made by the 15th of the following month and are submitted along with the HCAO Payment Option Form.

Employer Action

In addition to maintaining compliance with the HCAO notice requirements and waiver collection as explained above, HCAO covered employers should:

  • Determine if they employ any HCAO covered employees;
  • Offer coverage meeting the minimums standards or provide the alternative payment; and
  • Implement plan design changes, as applicable, to meet the minimum standards effective January 1, 2023.

Employers are encouraged to call 415-554-7903 or email with questions regarding the SF HCAO.

Additional Resources

DISCLAIMER: This communication is intended for information purposes only and should not be construed as legal or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable to your situation. This information and any questions as to your specific circumstances should be reviewed with legal counsel and/or a tax professional.  

Diane Cross — Diane is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Diane enjoys spending time with her family, live music, and cycling.