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Update on Obamacare and the impact on Home Care

By Stephen Tweed

Last week I had the privilege of speaking for the annual convention of the National Association for Home Care and Hospice (NAHC) in Washington DC.  I’ve spoken at this conference every year for the past 20 years, and it’s always a pleasure to be there with leaders from home health care, hospice, and private duty home care from around the country.  When at the NAHC conference, I always plan my schedule to attend all of the general sessions and as many of the breakout sessions as possible.

One speaker I never want to miss is Bill Dombi, Vice President for Law for NAHC.  Bill is a terrific speaker, and he has more information, knowledge, and wisdom about what’s going on in Washington and how it will affect home care than anyone else on the planet.

At this conference, Bill gave us an update on the Affordable Care Act (Obamacare) and the Employer Mandate.  He gave us the latest information on how this law will affect home care companies across the country.

Bill began his presentation by tell the story of a large Medicaid provider in Texas that has 1200 caregivers working at $11.00 per hour, and generates over $28 million in revenue.  Based on the latest information, if this company decides not to provide

Bill Dombi, Esq.

insurance but to pay the penalty, it would cost them $2.4 million dollars just in the first year.  And you thought you were looking at a huge cost. This company has developed a strategy to keep their caregivers under 29 hours per week, which will cause a huge decrease in the availability of Medicaid Waiver home care services.

A little bit of good news is that there is a movement in Washington to amend the law to change the definition of “Full Time” from 30 hours to 40 hours.  The challenge is that the Obama administration is very reluctant to allow any amendments to the law because it will open the flood gates for other changes that are being requested by a variety of groups.

Here are some highlights of the law and how they may affect you:

Small Business Tax Credit

There is a small business tax credit in the law that provides money to help small employer pay for insurance.  It only applies to companies with fewer than 25 employees, and pays for 50% of the cost of insurance.  Average wages must be below $50,000.  While this looks like a nice subsidy on paper, very few companies will actually be able to use it.

Individual Mandate

The requirement that individuals purchase health insurance goes into effect on January 1, 2014.  Individuals who do not purchase insurance will pay a penalty.  The penalty is:

  • Year 1 – $95.00 or 1% of gross income
  • Year 2 – $325.00 or 2% of gross income
  • Year 3 – $695 or 2.5% of gross income, with a penalty of $2,085 for families

Since the individual penalty in much lower than the cost of insurance, many young healthy workers may opt to pay the penalty instead of buy insurance.  This creates a huge problem for the insurance companies who need lots of young healthy workers to buy insurance to subsidize the cost of insurance for older workers and those with pre-existing conditions.

Affordability of Insurance

One provision of the law is that when you make insurance available for your employees, the portion of the premium that the employee is required to pay cannot be more than 9.5% of adjusted gross income.  If you have a caregiver who earns $10.00 per hour and works 1800 hours per year, they would not be able to pay more than $1,710 per year or $142.50 per month.  The rest of the premium will need to be paid by the employer.

Measurement Period

One of the decisions you will make is about the “measurement period” when you determine how many FTEs you have, and how many full time employees you have.  It will be important to understand the difference between FTEs and Full Time Employees.

  • FTE – Full Time Equivalent – take the total hours paid per week and divide by 30 to get FTEs.
  • Full Time Employees – the number of individuals who are working 30 hours a week or more.

There will be a measurement period to determine how many FTEs you have.  It will be based on the previous year – called a “look-back measurement period”.  The number of Full Time Employees can very from pay period to pay period, which means it may be difficult to calculate the people to whom you must offer insurance and how to calculate the penalties.

What about 1099 Companies?

What about companies that operate as a “Registry” and pay their caregivers as 1099 independent contractors?  The Department of Labor is looking into this issue, and Registries will be at risk unless they are truly operating as a pure registry.

The Penalty is NOT Tax Deductible

According to Bill, any penalty you pay for not providing insurance is not a tax deductible as a business expense on your tax return.  That means you’ll have to pay the penalty out of profits.

There’s a lot more where this came from, but that’s probably enough to think about for now.  Stay tuned to future issues of Caregiver Quality Today and Private Duty Today for more updates on the implementation of the Affordable Care Act and how it will affect you.

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