IRS Employer Mandate Rule has a Home Care Focus
February 26, 2014 09:24 AM
The Internal Revenue service (IRS) recently released it Final Rule implementing the “Shared Responsibility for Employers Regarding Health Coverage” under the Affordable Care Act. NAHC previously reported on the rule – see NAHC Report, February 12, 2014 - which is most notable for its one-year postponement of the health insurance and penalty provisions for employers with 99 or fewer full-time and full-time equivalent employees. That final rule also modified the standards and penalty calculation for employers with 100 or more full-time and full-time equivalent employees, permitting an employer to offer insurance to 70 percent of its full-time employees in 2015 in contrast to the original 95 percent standard. The rule also provides a one-year, additional 50 exemptions in the calculation of any penalty for employers 100 or more beyond the original 30 exemption.
Among the 227 pages of the Final Rule is a home care-specific discussion. In response to requests from the home care community for an exception from the employer mandates, the IRS states that the law “applies to all applicable large employers and does not provide an exception, either for employers in a particular industry such as the home care industry, or for employers with more difficulty adjusting revenue streams.”
The IRS goes on to suggest that certain home care companies may not be subject to the mandates at all:
“…in some circumstances the service recipient rather than a home care agency may be the common law employer of the health care provider. For example, if the service recipient has the right to direct and control the home care provider as to how they perform the services, including the ability to choose the home care provider, select the services to be performed, and set the hours of the home care provider, these facts would indicate that the service recipient is the employer under the common law standard. In that case, the agency that placed the home care provider would not be subject to section 4980H with respect to that particular provider, and the service recipient employer generally would not be subject to section 4980H with respect to any employee because the service is unlikely to employ 50 full-time employees (including FTEs).”
NAHC cautions against an over-application of the IRS guidance. The standards for determining which party or parties is/are the employer of a home care worker are very complex and fact-dependent. It is virtually impossible for a Medicare participating home health agency or hospice to avoid the employer role unless the individual is the employee of an entity contracting with the provider. The Conditions of Participation put all caregivers under some entities supervision and control rather than the care recipient. Similarly, Medicaid provider standards almost uniformly put a home care agency in a position of controlling caregivers.
Even in a Medicaid consumer directed care program, a “fiscal agent” might operate in a manner that results in a joint-employer status. For example, the California Supreme Court recently affirmed a lower court ruling that counties in the state are the joint employers of caregivers providing consumer-directed care in its In Home Supportive Services Program.
Private pay personal care services agencies also should closely examine how it manages the provision of care to determine whether they would be considered the employer or joint-employer with the care recipient. In a pure “registry” model it may be possible to avoid the employer responsibilities provided there is not right to or actual supervision, oversight, or control of the worker. Each such company should carefully examine how it is operating and utilize competent legal counsel to evaluate employer status.
Home care companies should also recognize that the IRS provides no forgiveness for good-faith errors in classifying workers under the ACA employer mandates. While there is a general IRS law that can offer some safety for honest mistakes made in employee/employer classifications, the employer mandate rule issued by the IRS clearly states that the so-called Section 530 “applies solely for purposes of the employment tax provisions of the Code, and therefore does not apply to potential liabilities under section 4980H.”
NAHC continues to seek relief for home care and hospice companies from the burdensome and potentially insurmountable obligations under the ACA. For example, a pending reform proposal that has some bipartisan support would redefine “full-time” as workers with 40 or more hours worked in a week instead of the ACA standard of 30 hours.
There has been considerable recognition of the home care industry’s concerns with the employer mandate as well as positive action such as the initial one year delay and the recent transitional relief.