Employer Health Insurance Requirements in San Francisco

Recently, I've gotten a lot of questions on the San Francisco Health Care Security Ordinance (HCSO) and how it relates to exempt employees. The HCSO requires covered employers to spend a minimum amount of money each quarter on their covered employees’ health care depending on the amount of hours that the employee works. If the employees are standard full-time exempt employees, an employer in California may assume that the employee works 40 hours a week for purposes of compliance. However, what if you’re dealing with exempt employees who work part-time? What if their hours vary? In that case, you need some evidence about how many hours a week the employees work.

Evidence will affect employers' spending requirements on health insurance coverage in San Francisco

I asked Ellen Love at the SF Office of Labor Standards Enforcement (OLSE) about what “evidence” an employer would need, and she wrote, “We do not have specific recommendations about what evidence is necessary to show that these employees don’t generally work 40 hours per week. Do they have a job description stating that their work is a half-time position?… Or even the payroll records showing [part-time hours] should be sufficient evidence.”

With respect to paying in some time periods and not others, the employer should keep in mind that even if an employee works less than 8 hours per week in one pay period, she still may be eligible for health care expenditures under the HCSO — the employee is only ineligible if she averages less than 8 hours per week over an entire quarter.

How much should employers pay for exempt employees' health coverage?

Generally, there are a few other important things to consider in determining what to pay for your exempt employees:

a) The employees may be exempt from the ordinance entirely:

There are five categories of exempt employees.

(1) Covered employees may waive the right to have their employers make health care expenditures for their (2) managers, supervisors, and confidential employees earning at or above an annual salary of $84,051 (or $40.41/hour) in 2012 are exempt from coverage under the HCSO. (The 2011 annual salary figure is $81,450, or $39.16/hour.) Review regulation 3.2(A)(1) for a detailed definition of a manager, supervisor, or confidential employee. (3) employees who are covered by Medicare or TRICARE/CHAMPUS, (4) employees who are employed by a non-profit corporation for up to one year as trainees in a bona fide training program consistent with federal law, or (5) employees who receive health care benefits pursuant to the San Francisco Health Care Accountability Ordinance are not covered by the Ordinance.

b) It is really, really, really important that the “exempt” employees are absolutely, unequivocally exempt under the law. The HCSO will make auditing of these classifications frequent, and the burden is on the employer to get it right. Stiff fines and fees will accrue on employers who get it wrong, not to mention that they face the possibility of a lawsuit.

c) Tracking exempt employees' hours is probably a good idea anyway for purposes of accountability and also because some of these employees might be exempt. However, the OLSE is clearly not requiring that per se. I’ll write more on this topic for my next blog post. Stay tuned!