July 2006 -The San Francisco Health Care Security Ordinance (HCSO) was passed unanimously by the Board of Supervisors creating a new Health Access Program (HAP) to provide comprehensive health care services to the estimated 73,000 uninsured San Franciscans.
July 2007 - HAP, subsequently renamed Healthy San Francisco, began enrolling people. The legislation also included a minimum spending requirement mandating employers to help fund health care for all employees working in San Francisco.
November 2006 - The Golden Gate Restaurant Association (GGRA) filed a lawsuit against the City and County of San Francisco seeking to overturn the employer spending requirement. Both parties filed Motions for Summary Judgment.
December 2007 - The United States District Court For The Northern District of California ruled that the spending requirement was invalid because it violated the preemption clause of ERISA (The Employee Retirement Security Act of 1974).
January 2008 The City filed an appeal and an Emergency Motion For A Stay Pending Appeal, asking the Court of Appeals to permit the spending requirement to be enforced beginning on January 2, 2008. The Court of Appeals granted the City's motion and allowed the Ordinance to go into effect on January 9, 2008 pending the City's appeal of the District Court's decision.
February 2008, The United States Supreme Court denied a GGRA request to overrule the Court of Appeals permitting the City to continue enforcing the Ordinance while the District Court’s ruling was being reviewed.
April 2008 - Oral arguments in the appeal were heard.
September 2008 - A decision overruling the District Court and upholding the spending requirement was handed down.
Subsequently the Golden Gate Restaurant Association appealed the decision to the U.S. Supreme Court.
June 28, 2010 - The United States Supreme Court refused to hear the case. The legal challenge to the HCSO was over and the law continues in effect.
July 2014 - The HCSO was amended to phase out "revocable" health care expenditures used by some HRAs. In 2015, 60% of the expenditure was required to be irrevocable. In 2016, 80% of the expenditure was required to be irrevocable. In 2017 and after, 100% of expenditures must be irrevocable.
Much like an HMO, the focus of Healthy San Francisco is on preventive care. Participants in the program are assigned a primary care doctor or nurse through the city's public or non-profit clinics. Hospital care is provided through a network that includes San Francisco General Hospital and the city's non-profit hospitals. Healthy San Francisco also pays for prescription drugs and home health care. It is important to note, though, that services cannot be received from non-participating providers or outside San Francisco.
Healthy San Francisco is not a single-payer government insurance program, is not mandatory and does not require residents or employers to buy insurance privately. By expanding access to health care, rather than creating an insurance program, the city believes it can maximize the funds it receives from state and federal programs, including Medicare, and provide a more efficient and cost-effective way to address the problem of the uninsured.
The uninsured can be enrolled in one of two ways: 1) individual enrollees can sign up and pay a monthly membership fee subsidized according to an income-based scale, or 2) employers can enroll their employees as a group by paying their membership fees. Membership fees for low-income individuals are subsidized by the City.
The Department of Public Health is charged with developing rules governing enrollment, including ways to discourage employers who currently provide health insurance from dumping their employees into Healthy San Francisco.
Of particular importance to employers are the employer spending mandate provisions of the Ordinance that establish a minimum “Health Care Expenditure” requirement for businesses with 20 or more employees. Commercial businesses with fewer than 20 employees and non-profit organizations with fewer than 50 are exempted. For the purpose of determining employer size, all employees, whether they work in San Francisco or elsewhere must be counted. The 2019 rates are:
HCSO Health Care Expenditure Rates |
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| Employer Size | Number of Employees | 2018 Expenditure Rate | 2019 Expenditure Rate |
| Large | All employers w/100+ employees | $2.83 per hour payable | $2.93 per hour payable |
| Medium | Businesses w/20-99 employees Nonprofits w/50-99 employees |
$1.89 per hour payable | $1.95 per hour payable |
| Small | Businesses w/0-19 employees Nonprofits w/0-49 employees |
Exempt | Exempt |
An indexed formula based on average employer health care contributions in a ten-county area will be used to set the required health care expenditure rate each year.
Employers must meet the spending requirement for anyone who has been employed by the employer for at least ninety calendar days and performs at least eight hours of work per week within the geographic boundaries of the City and County of San Francisco.
The spending requirement applies to all employees working more than the statutory minimum number of hours per week whether they are seasonal, permanent or temporary or full or part time. It also applies to contracted (1099) workers and those employed indirectly (for example, by a temporary staffing agency or professional employer organization). Managerial, supervisory and confidential employees (all defined terms in the legislation) who earn over $100,796 a year ($48.46 per hour) and employees who are eligible for Medicare and/or CHAMPUS/TRICARE (military benefits) are exempted. There is a cap of 172 hours per month worked per employee to be used in calculating the spending requirement.
Employees who verify that they receive equivalent health services or insurance through another employer (whether as an employee, a spouse, a domestic partner, or a child) and who sign a voluntary waiver can be exempted. This “opt-out” can be revoked by the worker at any time. The approved standard form of the waiver must be used. Being covered under an individual health policy or a student accident & sickness plan is not grounds for waiving out. The insurance must be through an employer group plan.
There are a variety of ways for an employer to make the qualifying health care expenditures. Paying premiums for an accident & health insurance policy, operating a self-funded health plan, contributing to an employee’s Healthy San Francisco membership fees, funding a medical reimbursement account or paying medical expenses directly have all been identified as possible ways to comply. Any combination that meets the Health Care Expenditure requirement will suffice.
Payments for Workers’ Compensation, State Disability Insurance, Social Security, Medicare or prevailing wage fringe benefits paid in cash do not qualify as valid health care expenditures.
The Office of Labor Standards Enforcement is responsible for ensuring that employers meet the spending requirements. Violation of the HCSO can result in various fines – some that are charged per employee, per calendar quarter or per occurrence.