What Every Nanny Needs to Know about ObamaCare
ObamaCare. Also known as The Patient Protection and Affordable Care Act. Also known as The Healthcare Law. Also known as The Affordable Care Act. Also known as The Heath Care Reform Law. I'm confused already!!
We've heard the controversy over this new legislation in the news. We've seen our Facebook news feeds blow up as our friends and acquaintances discuss and debate whether it is doing more good or evil. Not to mention the ever-intimidating lingo and barrage of numbers we face anytime we try to look into ObamaCare for ourselves in hopes of learning the truth. It can be overwhelming. How is a nanny to figure out what is really going down with the new healthcare reform law? Many changes have already gone into effect, but some bigger changes are coming as of January 1, 2014. Let's go ahead and break some of these changes down and hopefully provide more answers than questions. Putting the political agenda aside, what does ObamaCare mean for us as nannies?
Terminology
Individual Mandate Excise Tax
The Individual Mandate Excise Tax states that most people who can afford it must have coverage by 2014, with open enrollment beginning on October 1, 2013. Kathleen Webb, president of Home Work Solutions, Inc., states, “It is important to understand that nanny employers almost universally are exempt from the requirement to provide the nanny with health insurance. The nanny, on the other hand, is required to either purchase an approved plan or to pay the Individual Mandate Excise Tax.”
This mandate came into existence because the new law prohibits health insurance companies from denying a person coverage because of pre-existing conditions and prevents them from charging sick people more for their policies. If this mandate weren't in place, people could simply wait until they became sick to apply for and receive full coverage. In addition, healthy people could just refuse to buy insurance at all. In other words, it's a tradeoff. These penalties are controversial; some consider them a solution in preventing a “death spiral” while others consider them an unconstitutional tax.
Some individuals, such as those who have conflicting religious beliefs, those living outside of the United States, American Indians, incarcerated people, and those who have fallen on extreme financial hardship, may be exempt from paying the penalty. If you are one of those people who should have insurance but do not and you do not qualify for exemption, Table 1 shows the breakdown of penalty fees you can expect to pay.
2014 Penalties
Individual Adult: $95 per uninsured person or 1% of household income (whichever is greater)Individual Child: $47.50 Family: $285 per family or 1% of household income (whichever is greater)
2015 Penalties
Individual Adult: $325 per uninsured person or 2% of household income (whichever is greater)Individual Child: $162.50 Family: $975 per family or 2% of household income (whichever is greater)
2016 Penalties
Individual Adult: $696 per uninsured person or 2.5% of household income (whichever is greater)Individual Child: $347.50 Family: $2085 per family or 2.5% of household income (whichever is greater)
Webb also mentions that “It is widely believed that at least for 2014, a healthy uninsured nanny will opt to pay the $95 Individual Mandate Excise Tax rather than pay the insurance premium, even after the adjustment for the Advance Premium Tax Credit. We would imagine this would be especially true for nannies whose employers will not help with insurance premium costs.”
Advance Premium Tax Credit
Some nannies may earn too much to qualify for Medicaid but not enough to afford healthcare on their own. Premium subsidies will be available based on a sliding scale for those earning between 133% and 400% of the FPL with out-of-pocket expenses being limited for anyone falling below 400% FPL. In other words, subsidies are available to nannies making between:
Individuals: $14,404 to $43,320 Families: $29,326 to $88,200 (family of 4)
Exchanges
The new state-based insurance marketplaces for private insurance are called “exchanges”. This is where people will go to purchase their ObamaCare-approved health plans. The purpose of these exchanges is to make it easier for those of the lower and middle classes to purchase affordable healthcare coverage.
Special Factors
Young Adults
The term “young adult” refers to those individuals who are 26 years of age and younger. Part of the ObamaCare policy already in effect allows for anyone 26 or younger to remain under their parents' health insurance coverage as long as they are not offered health insurance through work. This applies to most nannies in this age group because they are not receiving group coverage through work as a nanny. In addition to this change, young adults in their 20’s now have access to catastrophic coverage plans. This means higher deductibles but much lower premiums.
When asked if a nanny can receive money toward health insurance from the employer if under 26 years of age and covered under a parent's plan, Webb says that “Employers can still provide premium support to their nanny's health insurance tax free* if they make the payment directly to the insurance company. Tax-free payments to the nanny directly are much more problematic, as would be the case in ‘under 26 and covered under a parent's plan’ scenario, and generally this would not be possible.”
Also important to note, according to Barbara Wolfe, PhD, professor of economics, population health sciences, and public affairs at the University of Wisconsin-Madison, “Any individual who is 26 or younger and whose parents have private coverage is eligible to stay on that coverage. This is true even if they are eligible to enroll in their employer's plan. It is not mandatory to accept such coverage.” In other words, if your employer offers to pay for an individual health insurance policy but your parents’ policy is better, you can decline the offer and stay on your parents’ plan.
Seasoned Nannies
Most of the changes listed for nannies 65 years of age and older have to do with Medicare. The Medicare Part D prescription drug plan, also known as the “doughnut hole”, has already seen a reduction in the gap between the limit and the catastrophic coverage threshold in which seniors are expected to cover all of their prescription drug costs. This gap will continue to close until 2020 when it is completely eliminated and seniors will pay 25% of prescription drug costs. ObamaCare also expands Medicare's preventative services to seniors to cover, for instance, screenings for cancer. One place where cuts are being made is Medicare Advantage. Because of the decrease in funding, many beneficiaries aren't going to receive extra benefits such as free eyeglasses and hearing aids.
Nannies with Small Businesses
All over Facebook we see status updates and pages popping up with new businesses started by nannies. What does ObamaCare mean for nannies with small businesses? Whether you consider it good or bad news, ObamaCare will probably not have any effect on the majority of nannypreneurs. Any small business with fewer than 50 employees is not required to offer health insurance to full-time employees, which means no risk of penalties.
Possible Concerns
Disappearing full-time jobs?
There have been several questions raised about whether or not the new ObamaCare legislation is to be blamed for companies reducing the number of full-time employees to combat rising healthcare costs. Will nannies be affected by this too? Will we see a drop in the number of full-time positions offered? Not likely. Only businesses with more than 50 employees are required to provide health insurance to full-time employees. Nannies, as household employees, will most likely not be affected by this part of the legislation and should experience no backlash as far as weekly hours as our employers continue to have a choice in whether or not they offer benefits of any kind, including money toward health insurance. In fact, families and small businesses that offer their nanny health insurance can take advantage of some tax credits.
Webb weighs in. “Starting in 2014, small businesses (families) who provide health insurance to their employers through the SHOP (Small Business Health Options Program) Exchange can qualify for a tax credit of up to 50% of the employer-paid insurance premium if the employer pays 50% or more of the health insurance premium. There are lots of qualifiers, but a family with less than ten employees must pay their employees an average annual wage of less than $25,000 per year to fully participate. The credit is applied to the employer's premium payment, reducing the employer's cost to provide the benefit. While families who have household employees will qualify for the tax credits for small businesses, they are restricted to policies offered through the SHOP exchange."
Fewer Families Offering Health Insurance?
With all of these changes taking effect in the next few months, will there be an increase in the number or families offering nannies health insurance or will we see a decline when it comes to this ever-so-important benefit? Some say only time will tell. When asked if there is anticipation of fewer families offering health insurance under ObamaCare, Mimi Brady of Westside Nannies had this to offer. “Frankly, it's tough to say how ObamaCare will affect the nanny industry, or if fewer families will feel inclined to provide health insurance due to tax increases. As it stands, the majority of families do not offer health insurance to their nannies simply because it is not affordable. We have plenty of clients who truly wish they could offer it, but have not found a financially reasonable way to do so. Another common complaint we hear from families is how difficult and disorganized working with insurance companies is when adding a domestic employee onto a standing policy. So aside from the high cost of healthcare, it also requires a lot of time, paperwork, and headache for nanny employers, which certainly doesn't help the cause for getting more domestic employees covered by their employer. At a minimum, our hope is that ObamaCare will provide a more streamlined process for all individuals (including nanny employers) to locate affordable health insurance that they can offer household employees. Whether or not more families will be able to step up to the plate financially and offer it as a part of their compensation package, we just don't know yet.”
New taxes?
ObamaCare will introduce some new taxes, such as the Medicare Part A Tax and the Medicare Tax on Investment Income. These taxes, however, will only be applied to individuals making $200,000 or more a year and families making $250,000 or more a year. While there are some nannies making this kind of bank, many of us fall short and will not be directly affected by these tax increases.
Easier to get coverage?
It does appear that it will be easier for many nannies to get healthcare coverage, especially those who were being denied coverage in the past because of pre-existing conditions. In fact, according to the Kaiser Family Foundation, the only four factors an insurance company can consider when determining prices are age, geography, tobacco use, and whether or not the policy is for an individual or a family. Also, policies will be standardized so the plans should be easy to compare.
Same quality of coverage?
The general quality of coverage is also expected to improve due to the fact that insurance companies will now be banned from discriminating against not only sick people, but women and the elderly as well. This is in addition to insurance companies being required to cover preventative care costs for not just children but all citizens. Wolfe supports this expectation for nannies, stating that “They should expect better coverage at lower prices.”
Higher premiums?
Whether or not premiums will increase and by how much is a topic of much debate. Because insurance companies are not allowed to charge sick people more, it may be the case that sick people find themselves paying lower premiums but healthy people find themselves paying higher premiums than in the past. The elderly may still find themselves paying a bit more than younger folks but not more than 3 times as much. This is definitely one area we will have to wait and see what happens as the exchanges open up.
Other Notable Changes
The following bullet points are handy to remember. Under ObamaCare, nannies will experience:
- No annual spending caps. People can get as much healthcare coverage as they need.
- No lifetime limits. People can not be denied coverage because they use their insurance too often.
- No gender discrimination. Women will have access to same pricing and plan coverage.
- Maternity coverage. As part of “Minimum Essential Coverage”, healthcare insurers are now required to offer maternity coverage and other basic healthcare services as part of all insurance plans.
- New limit on contributions to FSA. The new flexible spending account limit is $2500; any money in excess of $2500 will be treated as taxable income.
- Health savings account withdrawal increase. Money withdrawn early from a health savings account used on nonmedical expenses will now be taxed at 20% instead of 10%.
- Medical itemized deduction increase. The percentage of income at which an individual or family may receive tax deductions for medical expenses will increase from 7.5% to 10%.
Looking Ahead
The Next 7 Years
2014 is certainly going to be a year of changes, but there are more on the way. In 2015, a doctor's reimbursement will be reflected by his/her quality of care rather than the number of patients he/she treats. In 2017, states will be allowed to request permission to implement their own health insurance plans rather than the PPACAonly if their plan gives citizens the same level of care at the same cost. A heads up to any nannies in Vermont, as this state has already expressed interest. In 2018, all plans will be required to cover preventative care and there will be a new tax imposed on “Cadillac” healthcare plans, a term given to the more expensive plans with fancier coverage options. Finally, in 2020, we will see the end of the “Medicare Gap”, which is a term used to describe the area between the initial coverage limit and the catastrophic coverage threshold for Medicare Part D prescription drug coverage.
Quick Recap
Numbers to Remember
10/01/2013 – Open Enrollment Begins 1% - Individual Mandate Penalty for 2014 133% - Medicaid Cutoff 400% - Premium Subsidy Cutoff 50 – Number of full-time employees a small business must employ to be penalized $200,000 – Yearly income needed to be directly affected by majority of tax increases $2,500 – Limit for how much money can be put in FSA (Flexible Spending Account) 20% - New tax on HSA funds used early and for non medical purposes 10% - New tax rate for medical itemized deductions
Did this help? I sure hope so! Please check out the sources listed below for additional information!
Best of health insurance luck to you all!
Kaiser Family Foundation: kff.org/health-reform Federal Government Site: healthcare.gov ObamaCare Facts: obamacarefacts.com Breedlove & Associates: breedlove.com Homework Solutions: 4nannytaxes.com
* Tax freemeans that the employer does not report their premium support payment as income to the nanny, no employment taxes are due on the employer contribution, and the nanny does not pay income taxes on the contribution.