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E. Making Health Care Expenditures

Health Care Security Ordinance
Administrative Guidance

 

A. HCSO Overview
B. Covered Employers
C. Covered Employees
D. Calculating Required Health Care Expenditures
E. Making Required Health Care Expenditures
F. Revocable & Irrevocable Health Care Expenditures
G. Contributing to the City Option
H. Employer Notice-Posting Requirement

I. Employer Recordkeeping Requirements
J. Employer Reporting Requirements
K. Health Surcharges
L. Retaliation Prohibited
M. Filing a Complaint
N. Penalties
O. HCSO and the Affordable Care Act
P. Expenditures and Enforcement Guidance for 2014

 

 

  1. Q: What is a Health Care Expenditure? 
  2. Q: What are some examples of Health Care Expenditures that meet the requirements of the HCSO? 
  3. Q: What qualifies as “Health Care Services”? 
  4. Q: As an employer, do I have to choose only one of the options listed above for making Health Care Expenditures? 
  5. Q: Does the HCSO require employers that already provide health insurance to their employees to spend more money on their employees? 
  6. Q: I currently provide benefits to all full-time employees, but only provide benefits to part-time employees who work more than 20 hours per week. Does the HCSO require me to do more? 
  7. Q: What if my employees have other insurance? Am I still required to make Health Care Expenditures for those employees? 
  8. Q: What if my employees choose not to participate in the health plan that I offer? 
  9. Q: If an employer makes payments to satisfy its obligations under the Employer Shared Responsibility provisions of the federal Affordable Care Act (ACA), do those payments also count toward the Employer Spending Requirement under the HCSO?
  10. Q: What should I do if a Covered Employee stops working for me before I’ve made the quarterly Health Care Expenditure? 

 

 

 

1. Q: What is a Health Care Expenditure?

A: The Ordinance defines a Health Care Expenditure as any amount paid by a Covered Employer to its Covered Employees or to a third party on behalf of its Covered Employees for the purpose of providing or reimbursing the cost of Health Care Services for Covered Employees and/or their spouses, domestic partners, children, or other dependents. Health Care Expenditure also means an amount paid by a Covered Employer to the City on behalf of a Covered Employee to establish his or her eligibility to participate in the City’s Health Access Program (the City Option).

Amounts paid by employees shall not count towards the Covered Employer’s minimum Health Care Expenditure.

 

2. Q: What are some examples of Health Care Expenditures that meet the requirements of the HCSO?

A: All of the following examples meet the requirements of the HCSO:

    • Payments to a third party to provide health care services for the Covered Employee, such as payments for medical, dental, or vision insurance, or payments to a health care provider; 
    • Payments on behalf of the Covered Employee to the City Option;
    • Contributions on behalf of the Covered Employee to a reimbursement program (subject to the limitations in Section F); 
    • Payments to the Covered Employee to reimburse the employee for costs incurred in the purchase of Health Care Services; and, 
    • Costs incurred by the employer in the direct delivery of health care services for the Covered Employee.

Payments made directly or indirectly for workers’ compensation or Medicare benefits do not qualify as health care expenditures.

3. Q: What qualifies as “Health Care Services”?

A: Health Care Services means medical care, services, or goods that may qualify as tax deductible medical care expenses under Section 213 of the Internal Revenue Code, or medical care, services, or goods having substantially the same purpose or effect as such deductible expenses.

Examples of qualifying expenditures include vision and dental coverage; nonprescription drugs, including, but not limited to, antacids, allergy medicines, pain relievers, and cold medicines; doctor’s fees; and necessary hospital services not paid for by insurance. Qualifying medical expenses include dental treatments and fees paid to dentists for x-rays, fillings, braces, extractions, dentures, and the like; eyeglasses and contact lenses needed for medical reasons; and fees for eye examinations and eye surgery to treat defective vision.

 

4. Q: As an employer, do I have to choose only one of the options listed above for making Health Care Expenditures?

A: No, an employer may choose more than one option to satisfy its obligations. An employer may, for example, pay for health coverage for its full-time employees while making contributions to the City Option for its part-time employees.

 

5. Q: Does the HCSO require employers that already provide health insurance to their employees to spend more money on their employees?

A: Not necessarily. The premiums that a Covered Employer pays for medical insurance for its Covered Employees count toward its Required Health Care Expenditures, so if that amount meets the minimum required under the HCSO, the Covered Employer will have no further obligations.

However, if the amount spent does not meet the minimum expenditure amount set by the HCSO, the Covered Employer must decide how it will spend the difference. The employer could choose a health insurance plan that provides more comprehensive benefits, such as dental and visions benefits, or increase its contribution towards the health care premiums while decreasing the portion paid by the employee. Another way to spend the remainder of the minimum spending requirement is to contribute to the City Option to create a Medical Reimbursement Account for the Covered Employees.

 

6. Q: I currently provide benefits to all full-time employees, but only provide benefits to part-time employees who work more than 20 hours per week. Does the HCSO require me to do more?

A: Probably. Employers are required to make minimum Health Care Expenditures for all Covered Employees working at least eight hours per week in San Francisco.

 

7. Q: What if my employees have other insurance? Am I still required to make Health Care Expenditures for those employees?

A: Possibly. Covered Employees who already have health care benefits through another employer may voluntarily waive their right to Health Care Expenditures under the HCSO by signing the OLSE’s Employee Voluntary Waiver Form. An employer will not be required to make Health Care Expenditures for employees that choose to sign this form. Keep in mind, however, that the waiver will not be valid unless the health care benefits are provided either by another employer of the Covered Employee or by the employer of that Covered Employee’s spouse, domestic partner, parent, or guardian. If a Covered Employee has health care benefits that are not provided by another employer, the employer is still required to make the minimum Health Care Expenditures for that employee.

8. Q: What if my employees choose not to participate in the health plan that I offer?

A: A Covered Employer that establishes or maintains a health insurance program that requires contributions by a Covered Employee must do more than offer the Covered Employee an opportunity to participate in such a program. If the employee declines to participate in such a program, the employer must satisfy its Employer Spending Requirement in some other manner.

 

9. If an employer makes payments to satisfy its obligations under the Employer Shared Responsibility provisions of the federal Affordable Care Act (ACA), do those payments also count toward the Employer Spending Requirement under the HCSO? 

 A: The answer depends on whether the employer’s payments also fall within the definition of Health Care Expenditures, which are generally amounts actually paid for Health Care Services for Covered Employees or their spouses or dependents. For example, if the employer satisfies its ACA obligations by offering health insurance, the premiums it pays for those employees who enroll in the insurance program are Health Care Expenditures that count toward the Employer Spending Requirement.

On the other hand, if the employer satisfies its ACA obligations by paying additional taxes (sometimes referred to as “penalties”), those payments do not count toward the Employer Spending Requirement because they are not Health Care Expenditures.

The amount paid for Health Care Expenditures that satisfy the ACA may not fully satisfy the Employer Spending Requirement of the HCSO. For example, if the amount actually spent on health insurance for a Covered Employee to satisfy the ACA is less than the Required Expenditures under the HCSO, the employer will have to make additional Health Care Expenditures to comply with the HCSO.

10. Q: What should I do if a Covered Employee stops working for me before I’ve made the quarterly Health Care Expenditure?

A: Covered Employers must comply with the Employer Spending Requirement for all Hours Payable to a Covered Employee, even if the employment relationship is terminated before the end of the quarter. Covered Employers that have not yet made the quarterly Health Care Expenditure for a Covered Employee may make the expenditure in the same manner as was done in the immediately preceding quarter. Where an employer has chosen to purchase health insurance for its Covered Employees, COBRA payments to continue health insurance coverage shall also qualify as valid Health Care Expenditures. The Covered Employer may also comply by making payments to the City Option, even if the employer had previously complied with the Employer Spending Requirement in some other manner.

If a Covered Employer mployer meets the Employer Spending Requirement by making “Revocable Expenditures,” as defined in Section F, there are additional rules that apply when a Covered Employee leaves the business. 
 

 

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Last updated: 10/22/2014 4:33:00 PM