January 1, 2016 marks a big milestone for most of us in the home care industry. That’s when the Affordable Care Act Employer Mandate takes effect for all companies with more than 50 FTE employees. Many companies between 50 and 99 FTEs had a bye year to get prepared. Others of us with more than 100 FTEs are in action now.
At SeniorCorp, we made the decision to keep our caregivers working more than 30 hours per week, and to offer them a Bronze level insurance package that meets the requirements of the law. There were three factors that influenced our decision, and a combination of these factors may be best in influencing your choice.
Nearly everyone is looking at this decision from a financial perspective. How much will this cost me, and how will I pay for it? At some points, it may be cheaper to pay the fine, then there may be a tipping point at over 200 W2s where it is more viable to offer insurances. We certainly looked at a number of quotes from insurance brokers and picked a plan that was affordable. We then considered whether or not we would have to raise our rates to pay for it. We used it as an opportunity to reach out to our clients, explain the regulation, and then were able to pass on some increases. Most clients actually expected it when it became law. You need to take an objective look at the financial implications of this law and how it will affect your bottom line.
In addition to the financial cost, there is an administrative cost. You need to determine as a company what “look back” period ranging from 3 to 12 months. You also need to consider the three options for “safe harbors”to determine how much of the premium you can pass on to your employees. Once that is determined the fun will begin as you will need to track the payroll activities and report on the resultsto make accurate decisions and reporting to government agencies.
In considering the administrative burden of complying with the Act, you can do these tasks internally, or you can outsource them possibly to your payroll company if they provide a solution or your insurance broker if they are skilled in this manner or worse case hire from within. Either way put the administrative costs in your calculations.
The third consideration is culture. Which decision reflects the values of our companyas well as your actual service levels? For instance if you cap your hours at 30, it may avoid costs but what does it do to turnover and service levels? Does providing benefits send an important message to the caregivers, clients and the community? While cost is important, it’s also important to consider the type of company you want to be in the eyes of your employees, your clients, and your community. Deciding on how you will comply with the ACA can affect caregiver satisfaction, turnover, and recruiting. Since caregiver satisfaction is a mirror image of client satisfaction, the decision you make could also affect how your clients see you and your company.
How Are Others Deciding?
In making these decisions, we did our homework. We studied the law. We talked with insurance brokers, and we talked with other company owners. We looked at the industry data in the 2015 Private Duty Benchmarking Report from Home Care Pulse.
At the end of 2014, here’s how other companies in the industry were planning to deal with compliance:
- Provide Required Insurance – 35.7%
- Keep majority of employees under 30 hours – 22.9%
- Always operate with less than 50 FTEs – 14.7%
- Pay the penalty – 11.2%
- Partner with other companies to share caregivers – keep them under 30 hours – 5.6%
- Undecided – 31.2%
What are you planning for 2016?
Taking these three factors into consideration, what are you planning to do about the ACA in 2016? I’d like to know what others are doing, so I have partnered with Stephen Tweed and Leading Home Care to create an updated survey. Would you take 4 minutes to answer 8 questions to help us learn what other home care CEOs plan to do next year? I’d appreciate it.
In exchange for your answers, we will report the results in a future article, and I’ll be offering a live web conference to tell you more about our approach to the Affordable Care Act, and how you can make the best decision for your company.
About the Author: Tom Knox is the CEO of SeniorCorp in Virginia Beach VA, one of the top 5% of companies in the industry providing over 12,000 hours of care per week. Tom is a charter member of the $5 Million Mastermind Group at The Academy for Private Duty Home Care, and host of the Private Duty Field Trip in Virginia Beach. He can be reached at www.seniorcorp.com
Tom will be the opening keynote speaker at the 2015 Private Duty National Conference in Las Vegas on November 17, 2015.