The profit erosion threat of the NYC Wage Parity Act—and what employers can do about it

Nick Park

In and around New York City, there is a lot of talk about “wage parity” in the home healthcare industry. The Living Wage Parity Act of New Yorki was created to funnel a larger percentage of federal funding to home health workers, most of whom were earning the New York state minimum wage before the law was enacted.

The implication to employers is obvious—higher wages threaten to erode profits. And because the law mandates wage increases to employees working Medicaid contracts, home healthcare agencies will be squeezed even more because tracking and reporting income and contracts are subject to additional regulatory scrutiny due to the Affordable Care Act (ACA).

To add to the stress of agencies operating in New York City, Nassau, Suffolk and Westchester Counties, the living and supplemental wage increases are imminent. A 60% increase is set for March 1, 2014, and will therafter rise annually on that date. The additional wage will be $1.69 per hour, and the supplemental wage will be $2.40 per hour, bringing the total compensation required for home healthcare workers to $14.09 an hour. That’s considerably above the state minimum wage of $8.00 and the livable wage of $10.00.

While the wage hike is good news for workers, agency owners are scrambling for ways to offset the financial impact. The Living Wage Parity Act states that employers can provide health and welfare benefits in lieu of mandated wage increases. If agency owners spend the supplemental wage fee pretax on the value of insurance, they’re not actually spending the full amount that they would if they paid money directly to the worker. And because group employee benefits are pre-tax, FICA contributions and Workers’ Compensation liabilities are reduced. This relieves some of the increased wages’ financial impact while employees get much-needed healthcare benefits.

Many home healthcare agencies have offered health insurance. However, the so-called mini-med plans of the past are no longer compliant with ACA. Employers must now provide a qualified plan. This option may sound out of reach, but consider this hypothetical example: An agency employs 350 workers working on Medicaid contracts at an average of 25 hours per week. The supplemental wage of $2.40 per hour per employee equates to $21,000 per week, or $1,092,000 in total annual healthcare premium. This is huge purchasing power for a medical plan in the ACA world.

As for complying with the ACA, a quality insurance broker will  provide comprehensive employee benefits compliance services that monitor and update applicable changes to state and federal laws.  The broker should also have the ability to track and manage wage and contract data and report a monthly aggregate of benefit eligibility hours to third party administrators, and applicable carriers.

Home healthcare agencies who offer healthcare benefits should ask the benefits broker to also provide:

  • A strong employee advocacy support program. Many workers will need assistance navigating the healthcare system and will have needs specific to their situation.
  • Robust employee benefits administration services to ease the burden of daily and annual tasks, like enrollment, billing and interaction with carriers.
  • An employee education and communication program. Also consider ancillary services targeted to the worker population, such as language translation. Many home healthcare works use English as a second language. We all know that health insurance is confusing enough without a language barrier, so it’s smart to address this reality.

Home healthcare agencies deliver critical services to residents of metro New York. Now they can provide health insurance to their workers, protect their bottom line and manage their compliance risk while complying with the Wage Parity Act.

iHome Care Worker Wage Parity Frequently Asked Questions (FAQs) January 2014

 


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