The San Francisco Health Care Security Ordinance (HCSO) is a healthcare spending mandate that requires employers to spend a certain amount per hour worked on health care expenses for their employees working in San Francisco. Unlike the ACA, the HCSO does not require employers to offer health insurance, it instead mandates that employers meet a minimum spending requirement on employee healthcare costs.
This applies to for-profit employers with 20 or more employees worldwide and non-profit employers with 50 or more employees worldwide, if they have at least one employee working at least 8 hours per week in San Francisco (including remote workers who work from home in SF).
Key Points for Health Insurance Brokers and Employers:
- Covered Employees: Employees are covered by the HCSO if…
- They work for a covered employer.
- Are entitled to be paid the minimum wage.
- Have been employed by their employer for at least 90 calendar days.
- Perform at least 8 hours of work per week within the geographic boundaries of San Francisco.
- Do not meet one of the five exemption criteria.
Part time employees are also covered under the HCSO even if they are not eligible for the traditional employer health plan. This also applies to employees who are eligible for the plan but choose to waive coverage.
- Health Care Expenditure Rates: Employers must spend a set dollar amount per hour paid (including sick time, vacation, and PTO) up to 172 hours per month for each covered employee.
- For 2025, the rates are:
- $2.56 per hour for employers with 20-99 employees.
- $3.85 per hour for employers with 100 or more employees.
- For 2025, the rates are:
- How Employers Can Meet the Requirement: The spending requirement can be satisfied through…
- Employer contributions toward group health insurance (medical, dental, vision).
- Contributions to an employee’s Health Savings Account (HSA) (if applicable).
- Payments to the San Francisco City Option program, which funds Medical Premium Reimbursement Arrangements (MPRAs) for employees.
Fully insured employers typically meet the requirement through employer contributions to a group health plan. However, self-funded employers must track actual health care spending per employee. If a self-funded employer has an employee in SF who does not incur healthcare claims in a given year, the employer may need to contribute to an HSA or make payments to the SF City Option program.
- Recordkeeping and Reporting: The HCSO imposes strict recordkeeping and reporting obligations. Employers must maintain accurate records of health care expenditures and submit an Annual Reporting Form to the San Francisco Office of Labor Standards Enforcement (OLSE) by April 30th each year. Failure to comply can result in penalties.
- Applicability to Remote Workers: Employers with remote employees who live and work in San Francisco must comply with the HCSO. Even if a business is based outside California, it is subject to the HCSO if it has employees working remotely in SF.
This is a spending mandate, not a coverage mandate, and there is no specific product solution to offer. For a detailed breakdown of the San Francisco Health Care Security Ordinance, including employer obligations, compliance requirements, and available options to meet the expenditure mandate, check out our full article here: Understanding San Francisco’s Health Care Security Ordinance