The AGU San Francisco Limited Accident & Sickness Indemnity Plan

Frequently Asked Questions*


If you are a commercial business and employ a total of 20 people or more (regardless of where they work) and any of them work in San Francisco over 8 hours a week, it does apply to you. This means that if your company employs 21 or more employees nationwide, but only one works in San Francisco, you are subject to the ordinance. Moreover, the overall size of your workforce dictates what your hourly contribution will be. For example, if you have 80 employees in Oakland, and only 20 in San Francisco, you are considered a “Large” employer that must contribute $2.83 per hour per eligible employee working in San Francisco even though only 20% of your workforce is eligible.

Note: Not-for-profit organizations employing fewer than 50 people are exempt from this legislation.
You must pay a set amount per hour toward health care for all your eligible employees that work in San Francisco. These payments cannot be deducted from the employees’ pay checks; it is the business’ sole obligation. The amount you must pay depends on the size of your business: $1.89 an hour if you are a “Medium-Sized Employer” (20-99 employees) or $2.83 an hour if you are a "Large Employer” (100+ employees).

Note: Business size refers to the total number of employees not just those working in San Francisco.
All your employees that work over 8 hours a week in San Francisco and have worked for you over 90-days are considered “Covered Employees”. You are required to make at least the minimum contribution for each hour these employees work for you, not just for the hours that they work in San Francisco. However, if they earn over $97,722 a year ($46.98 per hour) they are exempt.
The Ordinance directs that a “Covered Employee” is one that “has been employed by his or her employer for 90 calendar days after his or her first day of work.
The Ordinance does not require you pay for true independent contractors. However, you do have to pay for employees paid off-payroll as though they were independent contractors, regardless of any contract you may have with these employees, and regardless of whether you issue a W-2 or 1099 form to them. The State of California has issued guidelines that establish whether a person is an independent contractor or an employee. These contain 11 separate criteria, and warn that “Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary.” Remember, there are significant penalties for mis-classifying employees as independent contractors.
Yes, unless the employee “opts-out” by submitting a waiver form stating that they are receiving health care coverage from another employer (this may be the spouse’s employer). Individual insurance coverage cannot be a basis for the waiver, it must be employer sponsored.
This does not exempt you from the ordinance. “Payment of the prevailing wage fringe benefit requirement in cash (as part of the covered employee’s paycheck or otherwise) shall not satisfy the Employer Spending Requirement of this Ordinance.” You must still make the hourly payments.
Yes, there is no prohibition against doing so, as the City of San Francisco cannot dictate what you pay your employees (provided you do not run afoul of the minimum wage laws). For example, a "large" employer may choose to reduce each eligible employee’s wage by $2.83 and use that savings to pay the mandatory contributions so long as this does not reduce the pay below the minimum wage.
The Ordinance says that employees waiving out must do so “without pressure or coercion from the employee’s coworkers or the employer, including, supervisor(s), manager(s), or their agents.”
No. "It is unlawful for any employer to reduce the number of employees in order to (1) avoid being considered a covered employer, or to (2) be subject to a lower health care expenditure rate."
The Office of Labor Standards Enforcement can penalize employers for not complying with the HCSO. There are several types of penalties; some are charged per employee, per calendar quarter or per occurrence.
Yes, and this is the most important part of the Ordinance. San Francisco is not dictating how the funds are used to provide health care benefits for your employees. You have these basic choices:

  1. Add a Limited Accident & Sickness Indemnity Plan for the affected employees – By spending the funds to provide a group limited accident & sickness indemnity insurance policy for your employees, you fully comply with the Ordinance. This way, all your employees have access to benefits, not just those that live in San Francisco and everyone may receive care anywhere, not just in the City. Plus, the tax status of employer-paid insurance premiums is favorable and clearly established by law. Any money you pay out for insurance premiums can be deducted as a business expense and will not be taxable income to your employees. Check with your tax advisor for the tax status of payments to the City.

  2. Add the affected employees to your current health care plan – Your expenditure for the additional premium for each employee must meet or exceed the minimum payment under the law.

  3. Establish and fund a medical reimbursement account for each affected employee – You may do this yourself or participate in the medical reimbursement accounts program that will be managed by the City. NOTE: as of December 31, 2016, "revocable" HRAs are no longer available.

  4. Send the money to San Francisco – These funds will be used to help pay your employees’ fees for participating in the City’s Healthy San Francisco program. Only your employees who live in San Francisco are eligible to participate in the program, however, and there is no reduction of your payments for those that do not qualify. For employees living outside San Francisco, the City will make the funds you pay in available (after deducting administration costs) to your employees to reimburse certain health care expenditures through a medical reimbursement account.
Although the cost is the same, there are several advantages to purchasing group limited accident & sickness indemnity insurance policy:

  • Choice of Providers - Anywhere In The USA: All your enrolled employees will receive health benefits regardless of where they live and can receive treatment from any provider, in or out of San Francisco. This is not true of enrollees in Healthy San Francisco who must live in San Francisco and must seek treatment within San Francisco from participating clinics and hospitals. Non-resident (commuter) employees are not permitted to enroll in “Healthy San Francisco.”

  • No Additional Cost To Employees: There is no cost to the employees for the insurance, while employees enrolling in Healthy San Francisco may have to pay to enroll depending upon their income (see below for their cost of enrolling).

  • Worker Retention: Employees understand and appreciate employer-sponsored insurance as a benefit of employment.
In such a situation, the employer must still make the hourly contribution for that employee:

“A covered employer that maintains a health care program that requires contributions by a covered employee shall not have satisfied its obligation to make the required health care expenditures merely by offering a covered employee the opportunity to participate in such a program. Should the employee decline to participate in such a program, the employer shall not have satisfied its obligation to make the required health care expenditures.”

Obviously, in this situation, the employer will have to pay the expenditure to the City of San Francisco for that employee – thus there is no benefit accruing to the employer for employees that choose not to take the offered insurance coverage, the money must either go to premium or to the City. This is not a problem with the AGU Limited Accident & Sickness Indemnity Plan because the employer’s contribution funds the entire cost.

You can see the City & County of San Francisco Office of Labor Standards Enforcement website for more information about compliance with the HCSO by clicking on this link:


Probably not, as only your employees who are permanent residents of San Francisco are permitted to enroll in Healthy San Francisco. Non-residents are not permitted to enroll, so even if you are making hourly contributions on their behalf, they are not eligible for medical services through Healthy San Francisco.

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. There are fines for failure to do so.
No. Healthy San Francisco is a health care access program designed to make health care services available and affordable to uninsured San Francisco residents. Participants access primary and preventive care through their “Medical Home”. For more information about Healthy San Francisco, including services covered and the provider network, visit
Even if you are making the hourly payments on their behalf, your employees may still be required to pay an additional amount to enroll in Healthy San Francisco.

The employee’s cost – called a Participant Fee – is dependent upon their income; the lower their income, the less they must pay.

In addition to the Participant Fee, some employees may pay Point of Service Fees for services received. Click here to review the income chart to determine any Participant Fees or Point of Service Fees applicable:

* These FAQs were compiled from the HCSO Administrative Guidance available on the OLSE website. For more details, go to the For Brokers page, click on Useful Links, and then click on Office of Labor Standards Enforcement.