By: HUB’s EB Compliance Team
Since July 1, 2020, certain hotels operating in Seattle have had to meet minimum health insurance expenditure requirements for covered employees. Beginning July 1, 2025, those coverage requirements will extend to a new employer category referred to in the Ordinance as “Ancillary Hotel Businesses,” which means that more employers will be subject to Ordinance requirements at that time.
The Basics of the Ordinance
Since July 1, 2020, the Ordinance has required ‘covered employers’ to make minimum expenditure rates (based on monthly amounts) to “covered employees.”
Under the Ordinance, a covered employer is defined as an employer in any location that owns, controls, or operates a hotel or motel with at least 100 guest rooms located within the City of Seattle.
A covered employee is an hourly-paid employee who works at least 80 hours per month at the subject hotel or motel (or ancillary hotel business) for a covered employer. Note that managers, supervisors, employees who work less than 80 hours per month at a covered employer, and employees not otherwise subject to the Seattle Minimum Wage Ordinance are exempt from this Ordinance.
Last, the Ordinance defines an Ancillary Hotel Business as a business with at least 50 employees worldwide with one of the following relationships with a covered hotel or motel:
- Routinely contracts with a hotel to provide services in conjunction with the hotel’s purpose (Note: Seattle’s Office of Labor standards has informally stated that organizations that routinely provide services or products directly to the hotel’s guests – such as external laundry services and event planning agencies that regularly book events at that hotel – will likely be classified as Ancillary Hotel Businesses. Conversely, organizations that provide ad-hoc services or products that mainly affecting the hotel’s operations – such as telecom vendors, plumbing, maintenance, or landscape services – will likely not be considered Ancillary Hotel Businesses);
- Leases or subleases space at the site of the hotel to provide services in conjunction with the hotel’s purpose; and/or
- Provides food and beverages to hotel guests and the public and has an entrance within the hotel (for example: on-site coffee shops and restaurants).
We strongly encourage any organization that believes it may be considered an Ancillary Hotel Business under the Ordinance to consult with its licensed legal counsel as soon as possible.
Ancillary Hotel Businesses that were exempted from the Ordinance spending requirements since 2020 will need to begin complying with those requirements as of the plan year that renews on or after July 1, 2025.
The Minimum Health Insurance Expenditure Rates
The amount a covered employer must spend on health coverage for employees is calculated monthly and increases every year on January 1, regardless of the employer’s plan renewal date.
Covered entities can meet the Ordinance’s spending requirement in three ways:
- Employer contributions made to a major medical plan for which the employee is eligible to enroll (NOTE: dental and vision plan amounts are not factored into the Ordinance’s spending requirement, unlike the Health Care Security Ordinance (“HCSO”) in San Francisco);
- Employer contributions towards a Health Savings Account (for employees covered by HSA-qualified High Deductible Health Plans), Flexible Spending Accounts, or Health Reimbursement Accounts; or,
- Direct income payments (additional compensation) paid directly to affected employees.
Note that a covered employer must meet expenditure rates based on the potential coverage level for each covered employee (please see the 2025 rates posted below). Therefore, covered employers are required to ascertain the employee's coverage rate from one of the four coverage tiers listed below.
For the 2025 calendar year, the required employee expenditure rates are:
- $561 per month for an employee with no spouse, domestic partner, or dependents (i.e., single-only coverage level);
- $955 per month for an employee with only dependents;
- $1,124 per month for an employee with only a spouse or domestic partner; and,
- $1,686 per month for an employee with a spouse or domestic partner and one or more dependents.
Waivers
The City of Seattle has developed a Waiver Form that covered employers can use for employees who wish to waive the employer’s medical insurance plan. Once executed, the covered employer does not have to make the otherwise required monthly expenditures for that employee. As with the San Francisco HCSO, the Ordinance waiver must be entirely voluntary (i.e., the employer cannot, in any way, threaten or coerce a covered employee into waiving off).
The Ordinance provides an exemption to the Waiver Form requirement if a covered employer:
- Offers major medical coverage or a base compensation increase to covered employees that meets that employee’s coverage tier (i.e., the employer would be compliant if the employee actually enrolled, and the employer was meeting the expenditure threshold);
- Actually provides the Waiver Form to the employee to execute; and,
- Accepts and records an executed carrier waiver form/declination of enrollment from the employee.
Similar to the San Francisco HCSO, signed waivers of coverage under the Ordinance are effective for 12 months; they are not evergreen or perpetual. An employee can also revoke a waiver mid-year, provided he or she submits the proper Cancellation Form to the employer.
Take Aways
Hotels and motels operating within the Seattle city limits since 2020 should already be aware of this Ordinance (and complying with its annually increasing expenditure rates since that time).
Groups that fall under the Ordinance's Ancillary Hotel Business definition should be aware of and prepared to meet the healthcare spending requirements when the Ordinance becomes effective for their organization.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
NOTICE OF DISCLAIMER
Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.