Should you provide
It is imperative that everyone have health insurance. Given this, providing healthcare will attract some of the best talent and can be a “make or break” attribute for certain candidates. Undoubtedly, making sure your nanny is covered with quality insurance is a benefit for everyone involved. As a care provider for your children, it is in the family’s best interest to ensure their nanny has adequate healthcare coverage prior to hiring him/her. Regardless of their health history, nannies are around small children and need to ensure their personal health is always good. In some situations, highly qualified, experienced nannies will require health insurance options as part of their employment package. According to the International Nanny Association, 17% of all nannies receive some form of employer-paid health insurance. This included 7% who received full health insurance coverage paid by their employers, and 10% who were provided with partially paid health insurance coverage.
However, providing health insurance to in-home childcare providers is not required and adds significant additional expense. Luckily, there are several affordable options to consider.
Options for Nanny Insurance
Healthcare has become a part of negotiating and onboarding nanny candidates. Various health insurance plans can give candidates various coverage and contribution options. Providing multiple options allows the nanny to choose what type of insurance he/she requires and if there are any additional coverage needs (for dependents or spouses, etc…). Some current options for nanny health insurance include:
Affordable Care Act: Individuals can now purchase their own private insurance policies through the Affordable Care Act (ACA), which includes subsidies that help pay monthly premiums. The ACA also allows employer contributions toward a health insurance policy to be considered a non-taxable compensation. This means that neither party is taxed if you employ only a single nanny. It becomes a win/win situation for both the nanny and the employer.
Existing student or family plan. If a candidate is less than 26 years old, he or she may be eligible to remain listed as a dependent on their parent’s family plan. Also, if the candidate is currently a student, he or she may have access to significantly discounted student health insurance plans offered through their college or university.
A spouse’s healthcare plan. Some candidates may already be covered through their spouse’s plan, if married. This can significantly reduce their need for comprehensive healthcare, but a candidate may still need some supplemental insurance options.
Temporary or short-term health insurance policies. These policies require renewal every six months to a year and tend not to cover pre-existing conditions, but tend to be more affordable.
Catastrophic insurance. This type of policy does not include many day-to-day health expenses for treatments of things such as colds or other non-life-threatening conditions, it would cover significant problems like a car accident or hospitalization. These plans also tend to be relatively cheap, but usually have high deductibles associated with them.
Discussing Insurance With Your Nanny
Before employing a child care provider, you should sit down and discuss insurance options with the candidate. Some candidates may have several options to attain health insurance coverage including through their school, from their spouse, or as part of a dependent within a family depending on age. In addition, some candidates may be willing to cover health insurance independently and/or may have been covering their own health insurance in their previous position. It is good to find out what their current situation is and how flexible they are. During reference calls, asking about health care coverage can be a great way to determine options that have worked for the candidate in the past.
Please take note: as a prospective employer, you cannot ask about specific medical conditions. It is generally best to present options, discuss general preferences, and allow the candidate to perform their own research to see what meets their specific needs.
Here are few points to discuss with your candidates:
Previous Insurance plan: Your nanny may hold an existing insurance coverage that he/her prefers and has established care providers within the network of their existing plan. If this is the case, it would be good to understand the requirements of the candidate and the cost of their current plan to inform the viability of options under consideration. If there are certain physicians or specialists that are preferred, they likely take multiple forms of insurance, which can be verified in advance of a switch. There also may be certain protocols around prescription coverage or other specific coverage items that should be addressed.
Independent Insurance: Does your would-be nanny currently possess independent health insurance through a private plan or their spouse? If they do and are willing to maintain their existing insurance, then this will likely reduce your obligation to provide comprehensive coverage. However, a discussion with the candidate is still warranted to determine if additional coverage is desired or needed.
Specific needs: Does the candidate have specific needs, such as prescription coverage or specialty provider coverage? Also, do they have dependents that need coverage?
Paying for Your Nanny’s Insurance
If you have opted to pay for your nanny’s health insurance, then you will need to decide how you want to cover the premiums. Depending on your negotiation with your nanny candidate, some employers opt to reduce annual income to cover the cost of nanny health insurance premiums, creating a net neutral annual compensation plan. Other employers will cover health insurance premiums on top of the agreed-upon compensation for childcare, enhancing the total package.
Some employers opt to pay the insurance company directly, and others choose to provide compensation directly to the nanny for purposes of health insurance premiums. There are pros and cons to both and the tax consequences are handled differently:
Paying the insurance company directly:
Can ensure insurance is maintained and current
Provides direct expenses trail for audit purposes
Can be recognized as tax free compensation
Paying the nanny to cover premiums:
Can be included directly in paycheck, limiting the number of payments that are made each month
Can be blended with total compensation and viewed as reducing compensation to pay for healthcare premiums
Provides additional compensation flexibility to the nanny
Health Savings Accounts (HSA) for your Nanny
Depending on the type of health insurance your nanny has, the deductible could be high. Such out-of-pocket expenses can create a burden when needed in a lump sum in the case of an accident. Your nanny can set aside the funds required for the deductible on a pre-tax basis through a Health Savings Account and consider it a part of the health insurance plan each year. If the HSA is not fully utilized, then he/she can roll it into the next year. Saving money is often hard, but Health Savings Accounts allow your childcare provider to set aside funds on a pre-tax basis and provides needed funds to meet deductibles.
Tax Credits Help Pay for Insurance
If you have opted to pay for or contribute to the cost of your nanny’s insurance, then there are tax credits that can be beneficial. The credit, known as the Health Insurance Tax Credit for Small Employers is offered if you purchase your nanny’s policy through the Small Business Health Options Program (SHOP) The credit can only be obtained if you pay for at least 50% of the premium and your nanny’s wage is less than $50,000 per year. The credit is approximately 50% of your contributions to your nanny’s plan. However, federal tax laws remain in a constant state of fluctuation so always confirm tax implications with your accountant.
Don’t Forget the Cost of Prescriptions
When building a health insurance plan with your nanny, you should both look closely at prescription coverage. Many policies cover prescriptions, but some do not. The cost of pharmaceuticals has risen significantly in the last decade so making sure that your nanny can afford the expense is imperative. This may mean purchasing a more expensive plan. An HSA account can also help with these out of pocket expenses.
No-No of Employer Insurance
According to the International Nanny Association, the federal government has ruled that nannies are not independent contractors but considered to be employees of the family. If you already own a business, you might be tempted to add your nanny to your employer's insurance plan, but this is a big ‘no-no.’ It is illegal to place a household employee on your company’s insurance plan if that person is not employed by the company.
Undoubtedly, when it comes to exploring health insurance plans for your nanny, it pays to be creative and to consider your many options. What works for one nanny’s unique situation might not work as well for another so you need to sit down and discuss what type of health insurance your nanny requires and try to consider how you can contribute. In recent years, health insurance for nanny’s has become a significant bargaining chip that cannot be overlooked by either side.