The City Option
Deciding How To Comply –
AGU’s San Francisco Limited Medical Indemnity Plan
Vs. The City Option
The City Option offers two separate programs, both managed by the city government:
A) For employees who live and work in San Francisco – your contributions are used to help pay employees’ membership fees for Healthy San Francisco.
B) For employees who work in San Francisco but reside elsewhere (non-residents are not eligible for Healthy San Francisco) - medical reimbursement accounts will be established and funded by your contributions.
The city's programs and our compliance solution are similar in that they cost no more than the minimum prescribed by the law. The administrative effort on the part of the employer is also substantially the same. Why, then, should you choose AGU’s Limited Medical Indemnity Plan over the City Option?
1) Better Value For The Dollars You Are Required To Spend
Employees will appreciate AGU’s Limited Medical Indemnity Plan more than the City Option, (resulting in lower turnover) because:
a. It is a familiar group insurance policy -unlike the City Option which relies on managed care, a type of program perceived to restrict care, or reimbursement accounts, which are difficult to understand and can offer very few benefits until the funding builds up over time;
b. It provides broader geographic coverage –an insurance policy pays benefits regardless of where care is received – anywhere in the nation. Under Healthy San Francisco, all treatment must be obtained in San Francisco;
c. It offers a wider choice of doctors and hospitals –MultiPlan, one of the nation’s largest preferred provider organizations, opens the door to substantially more providers than the small, mandatory San Francisco-only network supporting the City Option;
d. No referrals are required to see specialists –under Healthy San Francisco, each member is assigned to a “Medical Home” by whom all care is coordinated. This can be a doctor or just a nurse practitioner;
e. There is an insurance “multiplier” effect that can provide higher benefits –claims on medical reimbursement accounts are restricted to the amount of money that has built up in the account. Insurance policies, on the other hand, can pay their full benefits from day one;
f. It offers extra features not available with the City Option -including Accidental Death & Dismemberment and Dental (large groups only) .
2) Private Sector Plan Management Versus Dealing With The City Bureaucracy
3) Certainty Of Favorable Tax Treatment
Group insurance policies have long enjoyed tax-advantaged status in two respects. First, premiums paid by an employer are deductible as a business expense and second, neither the value of the employer’s contribution nor the value of benefits received under the policy are taxable income to employees. Neither part of the City Option involves group insurance so the tax treatment may not necessarily be the same. Consult your tax advisor.
Please note that, with the implementation of ACA, there are additional tax considerations:
- individuals may be subject to penalties by the IRS for not having minimum essential coverage. While it is yet unclear whether the City Option will satisfy that requirement, AGU’s San Francisco Limited Medical Indemnity Plan does not.
- in 2015, employers with 50+ full-time employees may be subject to penalties of $2,000/employee for not providing coverage and/or $3,000/employee for not providing “affordable” coverage as defined by ACA.
- employers with 25 or fewer employees with average wages up to $50,000 may be eligible for a health insurance tax credit.