Employer Services Advisory: State and Local Mandates After ACA - San Francisco

November 25, 2013 - McKenna Long & Aldridge LLP

With all of the focus on the federal Affordable Care Act (“ACA”), many employers are wondering if they still need to comply with state and local health plan mandates. There is nothing in ACA that repealed state or local mandates. The fate of those mandates is up to the applicable state or local government. Below is an update on the San Francisco mandates.

San Francisco’s Health Care Security Ordinance (“SFHCSO”) continues to require medium and large-sized employers to spend a minimum amount of money on health care for their employees who work in San Francisco. If you have San Francisco employees, the SFHCSO provides that you may elect to satisfy this obligation by purchasing health insurance coverage, making payments to San Francisco for the benefit of your covered employees, reimbursing your employees for their health care expenditures, or providing a medical spending account for your employees that meets certain requirements. Recent guidance under ACA, however, suggests that some of these methods for satisfying the SFHCSO, such as reimbursement or direct payment of employee individual health insurance coverage and stand-alone health reimbursement accounts (“HRAs”), will violate ACA in 2014 and later years. (See ACA guidance here and here). San Francisco has issued an FAQ acknowledging that the use of stand-alone HRAs may violate ACA and promising future guidance on the interplay between ACA and SFHCSO. (See FAQ here). If you are currently using a reimbursement arrangement or directly paying for individual policies, you should consult with legal counsel to make sure your arrangement does not violate ACA.

In addition, you should note the following changes to the minimum amount you must spend to satisfy the SFHCSO during 2014:

• Employers with more than 100 employees must spend at least $2.44 per hour on health care for their employees (an increase from $2.33 per hour in 2013). 
• Employers with 20 to 99 employees must spend $1.63 per hour on health care for their employees (an increase from $1.55 per hour in 2013). 
• Small employers with less than 20 employees and non-profit organizations with less than 50 employees remain exempt from this requirement. 

In determining your employer size and expenditure rates, you must count all employees, regardless of where they live, where they work, or how they are classified (i.e., part-time, seasonal, permanent, etc.). Employees covered by the SFHCSO generally include any employee (independent contractors are not covered) who is entitled to payment from you of a minimum wage under ordinances of San Francisco, has been employed by you for 90 calendar days after first beginning work (including periods of leave), and performs at least 8 hours of work per week for you within the geographic boundaries of San Francisco. 

If you are subject to the SFHSCO, you must report your health care expenditures to San Francisco on an annual basis on the SFHCSO Mandatory Annual Reporting Form. This form continues to be due by April 30th following the end of each calendar year.

With a team of attorneys who are highly experienced in the employee benefits field, MLA can provide answers to questions and assistance in complying with these federal, state and local law requirements.