The Vita Blog March 2025

The San Francisco Health Care Security Ordinance (HCSO) requires that employers submit the employer Annual Report Form by May 2, 2025. The report must be submitted to the Office of Labor Standards Enforcement (OLSE), the organization with oversight over the HCSO ordinance.

The purpose of the Annual Report Form is to provide OLSE with a snapshot of each employer’s compliance with this ordinance. The penalty for failing to submit the form by the deadline is $500 per quarter.
 

Reporting Details

The reporting requirement includes basic business data as well as data to clarify Covered Employer status. In addition, the following data points are requested:

• Number of individuals employed in each quarter of 2024
• Number of employees covered by HCSO in each quarter
• Employer’s total spending on healthcare
• Types of healthcare coverage the employer offered to employees.

The Annual Report Form (ARF) must be completed online. OLSE provides robust assistance material online, including instructions for completing the ARF, form previews, and a video guide to completing the ARF: ARF Instructions.

The deadline for filing the 2024 form is May 2, 2025.

The OLSE is hosting a live webinar on March 25 to review how to complete the ARF and best practices: OLSE Webinar Registration.


 

HCSO Primer

For those that might want a Refresher!

Covered Employers

An employer need not be physically located in San Francisco to be a covered employer. HCSO applies to the following employers: 

• Employers required to obtain a valid San Francisco business registration certificate. 

• Employs at least one employee within the geographic boundaries of the City and County of San Franciso. This includes remote/teleworking employees who live in San Francisco. 

• For Private Employers: Private employers who employ 20+ employees where any single employee works at least 8 hours per week in San Francisco 

• For Non-Profit Employers: Non-profit employers who employ 50+ employees where any single employee works at least 8 hours in San Francisco.    

Employer size counts are based on the average number of employees per week who perform work for compensation during an applicable quarter (not just those employees working in San Francisco). 
 

Covered Employees

A covered employee is any person who meets the following four criteria:

1. Works for a covered employer

2. Is entitled to be paid minimum wage

3. Has been employed by the employer for at least 90 days

4. Performs at least eight hours of work per week in San Francisco.

The definition of employee under the ordinance includes all  employees, even if they are temporary, part-time, commissioned or contracted.

Work performed by an employee who lives in San Francisco and works from home is considered work performed within San Francisco.

Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco; however, if an employee's job requires him or her to make stops in San Francisco (e.g., deliveries), the employee is considered to have performed work in San Francisco. For these employees, hours worked include travel within the geographic boundaries of San Francisco.
 

Employee Waivers

If an employee elects to waive the employer-provided coverage because they are covered under another employer, the employer may ask the employee to also sign the authorized HCSO voluntary waiver form.  

• If an employee voluntarily signs the waiver form, they waive the right to have their employer make Health Care Expenditures on their behalf.  

• If an employee with other coverage does not sign the voluntary waiver, the employer must still make the required health care expenditure on their behalf and may be liable for noncompliance penalties if expenditures are not made. 

The waiver form must be signed each year, cannot be retroactive, and is revocable at any time. 

In limited circumstances, employers do not need to obtain the HCSO voluntary waiver form from employees who waive coverage. If an employer provides a fully-insured medical plan that is free to the employee in at least one tier AND that coverage meets or exceeds the expenditure requirements (based on the medical premium only), then the HCSO voluntary waiver is not required, and expenditures do not need to be made. It is recommended that employees be informed that the employer-provided coverage meets or exceeds the HCSO expenditure rates, and thus, expenditures will not be made to the City Option if coverage is waived. The Annual Reporting Form must still be completed each year.
 

Expenditure Requirements for Prior Reporting Year

The ordinance requires covered employers to spend a minimum amount set by law on healthcare for each employee who works 8+ hours each week in San Francisco. The following are the required expenditure rates:
 

* Total hours for which a healthcare expenditure is required are capped at 172 per employee per month. 

There is an exemption for certain managerial, supervisory, and confidential employees who earn more than a stated threshold. For 2024, the threshold is $121,372 per year or $58.35 per hour. For 2025, the threshold is $125,405 or $60.29 per hour.  These employees are considered exempt and the HCSO expenditure requirements do not apply to them.  


 

* Total hours for which a healthcare expenditure is required are capped at 172 per employee per month. 

There is an exemption for certain managerial, supervisory, and confidential employees who earn more than a stated threshold. For 2025, the threshold is $125,405 or $60.29 per hour. These employees are considered exempt and the HCSO expenditure requirements do not apply to them.    

Upcoming Deadline: The first 2025 quarterly expenditure must be made to the City Option within 30 days of the close of the calendar quarter. 

For comprehensive information about HCSO, please review the full HCSO Administrative Guidance. 

 

Resources

Administrative Guidance for SF HCSO

San Francisco Business Registration Certificate

HCSO Voluntary Waiver Form

2025 HCSO Poster

SF City Option Program

HCSO Annual Report Form Resource Guide

HCSO Self-Funded Premium Calculations

The Consolidated Appropriations Act, 2021 (CAA) includes an annual reporting requirement for group health plans and health insurance issuers. The rules require plans to submit an informational report on prescription drug and health care spending to the HHS, the Secretary of Labor, and the Secretary of the Treasury.

The reported information will be aggregated by the departments and published on the internet, with the intention of offering plan sponsors and individuals insight into where their healthcare dollars are spent.

The CMS has issued detailed reporting instructions that clarify important information about the reporting process for employers.
 

Employer Action

Employers should keep an eye out for information requests from carriers and other plan partners. Fully insured employers will want to attend to information requests and note the deadline for providing necessary data. Most carriers have set deadlines between March 19^th and April 19th. 

If you are a Vita Benefits client, your account management team will reach out to you to assist with understanding carrier-imposed deadlines and submission of required information.
 

Which plans are subject?

Essentially all health plans (group and individual) are subject to the reporting requirements. This includes small and large plans, self-funded and fully insured plans, and both grandfathered and non-grandfathered plans. Essentially, no plans escape this requirement. 

Fortunately, the lion’s share of reporting requirements falls on the shoulders of carriers, PBMs, and ASO providers. That said, all employers will be required to file some basic plan data elements.
 

Which plans are not subject?

The reporting requirement does not apply to health reimbursement accounts (HRAs) and other account-based group health plans (such as FSAs). In addition, coverage consisting solely of excepted benefits, such as dental or vision plans, is also exempted.
 

What data must be included in the reports?

Data required to be included in the reports fall into two categories:

• Data that is unique to each plan/employer

• Data that can be aggregated between all plans by a carrier, ASO provider or TPA.

Employer-Specific Data (Non-Aggregated Data)

• General plan and reporting entity identifying information

• Market segment (large group, small group, etc.)

• Average number of members covered

• State in which the plan is offered

• Average contributions paid by member

• Average premium paid by employer

• Total annual premium (or equivalent for self-funded plans)

Plan-specific information, such as average contribution, payments by the employer, and total premium, can be reported by plan or combined for all plans. We believe most employers will find it easier to report the information by health plan.
 

Aggregated Data

• 50 Most Frequently Dispensed Rx: The 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan or coverage and the total number of paid claims for each such drug.

• 50 Most Costly Rx: The 50 most costly prescription drugs with respect to the plan or coverage by total annual spending and the annual amount spent by the plan for each such drug.

• 50 Rx with Greatest Cost Increase: The 50 prescription drugs with the greatest increase in plan expenditures over the plan year preceding the plan year that is the subject of the report and, for each such drug, the change in amounts expended by the plan or coverage in each such plan year.

• Total Plan Spending: Total spending on healthcare services by the plan, broken down by the types of costs, including hospital, primary provider/clinic, specialty provider/clinic, drugs covered by pharmacy benefit, drugs covered by medical benefit, and other costs (such as wellness services).

• Rx Spend by Spender: Spending on prescription drugs is broken down by the health plan spend and the participant spend (copays and coinsurance).

• Premium Information: Average monthly premium, including total premium amount, amount paid by plan sponsor, and amount paid by participants. This category applies to total plan premiums, not just the Rx portion.

• Rebate Information: Prescription drug rebates, fees, and other compensation paid by drug manufacturers to the plan or its administrators or service providers, including the amounts paid for each therapeutic class of drugs, the amounts paid for each of the 25 drugs that yielded the highest amount of rebates, and any reduction in premiums and out-of-pocket costs associated with rebates, fees, or other compensation.
   

Required Data Elements and Structure

A full report consists of three different elements:

• 1 Plan File: There are 3 types of Plan files, P1, P2, and P3. The P2 file applies to group health plans. The others don’t apply to employers.

• 8 Data Files: There are 8 required Data files D1, D2, etc. A description of the details for each is outlined below.

• 1 Narrative Response: The Narrative Response must be a pdf or Word file. There are six required elements to address. Carriers, PBMs, and ASO providers will generally handle this. 

The following diagram illustrates what we expect to be a typical division of reporting between employers and plan partners.




 

Costs for RxDC Reporting

Carriers, TPAs, and PBMs are adopting differing strategies for the RxDC reporting. These entities have and will incur substantial data gathering and reporting costs to comply with the RxDC requirements. As a rule, fully insured carriers have included the cost in overall administration costs and are not charging a direct fee to employers. Some ASO providers, TPAs, and PBMs are passing through a direct fee to employers.
 

Deadlines for Annual Reports

Reporting runs on a calendar year basis. This law introduced a new term, the “reference year.” The Reference Year is the prior calendar year for which the report is submitted.

Annual reports are due on June 1st, following the reference year. June 1, 2025 marks the deadline for the 2024 calendar year.