When the Affordable Care Act (ACA) was passed, many industries worried about how they would meet the law’s requirement to offer health insurance coverage to employees. The federal government didn’t create carve-outs for specific industries — but in the final rule, regulators did highlight one sector where things work a little differently: home care companies.
These companies place caregivers directly in people’s homes to provide personal and medical support. They often employ large numbers of workers, but wages are typically low and profit margins razor thin. On the surface, it looks like a recipe for penalty exposure under the employer mandate. But here’s the twist: in some cases, home care agencies may not actually be considered the common law employer of their caregivers — which means they might not have to offer coverage at all.
The Common Law Employer Test
Under ACA regulations, the IRS applies the “common law” test to determine who the real employer is. The key question is: who has the right to control how the work gets done?
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If the agency directs hours, duties, and performance, the agency is the employer and subject to the mandate.
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But if the individual receiving care (or their family) controls the details of the caregiver’s work, the IRS may view that individual as the employer — not the agency.
Why It Matters
For home care agencies, this distinction can make all the difference. A company with hundreds of low-paid employees might otherwise struggle to afford offering affordable, minimum-value health plans. But if many of their workers are technically employed by the clients they serve, the agency’s liability under the ACA’s employer mandate shrinks significantly.
For caregivers, this can mean fewer opportunities for employer-sponsored coverage — which highlights the ongoing tension between the ACA’s policy goals and the economic realities of certain industries. Families, meanwhile, might technically be considered the common law employer, but because they don’t have 50 or more full-time employees, the ACA’s employer mandate doesn’t apply to them.
Quick Summary: The ACA’s employer mandate doesn’t make exceptions for industries, but it does recognize that home care agencies may not always be the true employer of their caregivers. This nuance helps agencies avoid penalties but also underscores how complex coverage obligations can get in the real world.