But the powers that be sure are making it difficult for the home healthcare industry to thrive. This is particularly true in and around New York City, where the Living Wage Parity Act has put a significant squeeze on the balance sheets of home healthcare companies these last two years. In 2015, wage levels will rise again. Simultaneously, here comes the full implementation of the Affordable Care Act, which is placing a significant administrative and compliance burden on home health agency human resources departments that aren’t built to deal with a rulebook this thick.
Let’s take a closer look at the twin forces confronting home healthcare agencies.
The Living Wage Parity Act was created to give a larger percentage of federal funding to the professionals providing care in the home, most of whom were earning the New York state minimum wage before the law was enacted. There’s some logic to that, but it has created a cash squeeze for a lot of home healthcare agencies that typically run on slim margins. This past March, the law brought total compensation for home healthcare workers in New York City and surrounding counties to $14.09 an hour, considerably above the state minimum wage of $8.00 and the livable wage of $10.00.
And now along comes the incredibly complex compliance requirements of the ACA. Many home healthcare companies employ about 20 full-time people, but technically can have 50 or more full-time employees for purposes of the ACA when you count “full time equivalent” (FTE) employees under the ACA. These are workers who rarely go in to the office, reporting instead to clients’ homes to provide services. In essence, these companies operate day-to-day as small businesses of less than two dozen people; most have minimal HR departments that are not equipped to deal with the piles of paperwork that come with the ACA. Right now, many home healthcare agencies are putting their heads in the sand, afraid to look up at the mountain of work in front of them. This is a looming disaster, which can subject employers to large fines for compliance failure.
For home healthcare companies, the time is now to get things in order. Here are the 5 most important aspects of ACA compliance that must be addressed:
- Figure out what category your company falls into. If you have 100 or more full-time and full-time equivalent (FTE) employees, you’re considered an “applicable large employer” under the ACA and must be fully compliant by January 1, 2015, or, if you meet the requirements of certain transition rules, the month in which your plan year begins in 2015. Most companies with 50-99 employees–considered mid-sized employers–have a little more breathing room, and won’t be subjected to fines until 2016. Even so, that day will be here before you know it. Employers with fewer than 50 employees, who are considered small employers, are not subject to the ACA’s penalties for employers.
- But wait! How do you count your employees? An employee is considered full-time if expected to work 30 hours per week or more. Variable-hour employees, those who don’t work a set amount of hours each week (and for whom it cannot be determined whether they will work more or less than 30 hours per week), fall into a gray area. That is, they don’t need to be counted as full-time employees until and unless it becomes an established practice for them to work more than 30 hours per week (as determined in a “measurement period,” which is a time period permitted under the ACA within which their working hours can be reviewed without having to count them as full-time employees).
- Make sure your group employee benefits plan meets ACA requirements. To be compliant, coverage must be offered to full-time employees and their dependents. Under the ACA, dependents are defined as children under age 26. In addition, your plan must provide minimal essential coverage, must meet minimum value (which means generally that it pays for at least 60% of the cost of coverage), and it must be affordable.
- Determine if your benefits are affordable to your employees. There are 3 tests to determine affordability:
- The W-2 test, in which the cost of premiums cannot exceed 9.5% of the employee’s income as reported in Box 1 of the W-2 form.
- The cost of the premium cannot exceed 9.5% of the lowest hourly rate paid by employer, multiplied by 130 hours per month.
- The federal poverty line test, in which the cost of the premium cannot exceed 9.5% of federal poverty rate.
- Start collecting data. The ACA requires that employers report to both their employees and the federal government as part of its “information reporting” program. Information that is expected to be reported includes details of plan coverage and participation. Reports on 2015 data will need to be filed in 2016, meaning you need to have procedures in place now.
Overwhelmed? This is just the tip of the iceberg.
Most employers are struggling to get into compliance, and there is trepidation across many industries. We are at the beginning of what promises to be an era of increasing complexity in health insurance, and home healthcare providers figure to need as much as help as they can get.
For the typical home healthcare provider, it’s time to move past paralysis brought about by fear. It’s time for action.
©2016 Corporate Synergies Group, LLC. No part of this material may be republished or distributed without prior written consent.