Does the health care reform law require me to get insurance for my nanny?

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Question:

My spouse and I both work, and we have recently hired a nanny to take care of our kids. (Our youngest is not yet one year old, so we anticipate we will have a nanny for five years at least.) We try to do things by the book: We withhold taxes, and we pay a competitive rate. But I'm concerned that the health care reform law might price us out of the market. Technically, we are our nanny's employers: Does this mean we have to provide health insurance or pay a penalty?

Answer:

This is a common concern, not just among families who have hired nannies, home healthcare aides, and housekeepers, but among many smaller employers. This is also one of the major compromises that made passage of the health care reform law possible: Only employers with at least 50 full-time or full-time equivalent employees have to provide health insurance coverage. Smaller employees are not subject to the employer mandate and face no penalty under the law for failing to provide insurance. 

Obamacare or no, you have no obligation to provide insurance. But should you? Certainly, your nanny would thank you for it. Industry groups say that health insurance coverage is a very highly coveted benefit for nannies. And, the health care reform law offers you a couple of incentives to consider providing it:

  • Tax breaks. As long as you pay at least half of the premium (for covering a single person, not a family), you can take a tax credit of up to 35% of the portion of the premium you pay. This is set to rise to 50% in 2014. Because this is a credit rather than a deduction, it cuts your tax bill on a dollar-for-dollar basis, making it a very valuable benefit indeed. 
  • Lower costs. The whole purpose of the law is to lower the cost of high quality health care. To that end, states are setting up health insurance exchanges, where people can shop for the best rates. And, all plans will have to offer a similar set of at least the basic benefits required by law, which should make this comparison shopping easier. Of course, no one can say for certain what effect the law will have on the price of benefits. But if costs do go down, it might be easier to afford this benefit. 

For more information on the provisions of the health care reform law, see Health Care Reform: What Employers and Employees Need to Know.

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