Is your agency an Applicable Large Employer?
Count full-time employees (30+ hours a week or 130+ a month) and add full-time equivalents from everyone else: total part-time hours in the month ÷ 120. Average the monthly totals over the prior calendar year.
Worked example. A Texas agency has 30 caregivers and office staff at 130+ hours a month, plus 60 part-time caregivers averaging 44 hours a month.
- Full-time employees: 30
- Part-time FTEs: 60 × 44 = 2,640 hours ÷ 120 = 22
- Total: 52 → the agency is an ALE.
Two home care specifics. Entities under common ownership are combined under the controlled-group rules, so multiple agency LLCs or franchise territories with the same owners count as one employer. And caregivers with variable hours can be classified using the IRS look-back measurement method (a 3–12 month measurement period followed by a stability period), which is how most agencies decide who must be offered coverage without re-running the math every month.
What an ALE owes if it doesn't comply (2026 amounts)
- 4980H(a), no offer: if you don't offer minimum essential coverage to at least 95% of full-time employees and any one of them gets a subsidy on HealthCare.gov, you owe $3,340 per full-time employee minus the first 30. In the example above: (30 − 30) × $3,340 = $0 a year, triggered by a single subsidized caregiver.
- 4980H(b), unaffordable offer: if you offer coverage that's unaffordable or below minimum value, you owe $5,010 for each full-time employee who enrolls in a subsidized marketplace plan.
Why Texas's Medicaid decision changes your exposure
Penalties are only triggered when a full-time employee actually receives a premium tax credit on the marketplace. Who can get one depends on income:
| Caregiver household income | Can they get a marketplace subsidy? | Can they trigger a penalty for you? |
|---|---|---|
| Below 100% FPL | No. Texas has not expanded Medicaid, and marketplace credits start at 100% FPL, so these caregivers fall into the coverage gap | No |
| 100%–400% FPL | Yes | Yes — each one is a potential $5,010 (b) trigger, or the single trigger for the (a) penalty |
| Above 400% FPL | Generally no in 2026, now that the enhanced credits have expired | No |
Texas has not expanded Medicaid and has the nation's largest coverage gap (non-disabled adults without dependent children generally cannot get Medicaid at any income). Caregivers at 100-400% FPL can claim premium tax credits, each a potential $5,010 4980H(b) trigger for non-offering ALE agencies; those under 100% FPL cannot. kff.org ↗
Texas uses the federal marketplace, HealthCare.gov, with about 4 million enrollees - second only to Florida - so the 2026 expiration of enhanced premium tax credits hits Texas caregivers hard. healthcare.gov ↗
Because so many Texas caregivers earn 100-250% FPL, low-cost MEC plans priced within the $129.89/month FPL safe harbor or CHOICE arrangements (formerly known as ICHRAs) are common home care strategies to block both 4980H(a) and (b) penalties. irs.gov ↗
What counts as "affordable" for a Texas caregiver in 2026
Coverage is affordable if the caregiver's self-only contribution is no more than 9.96% of household income. Since you can't know household income, the IRS provides three safe harbors:
| Safe harbor | How it's calculated | 2026 monthly ceiling for a Texas caregiver |
|---|---|---|
| Federal poverty line | FPL × 9.96% ÷ 12 | $129.89 regardless of wage |
| Rate of pay | Lowest hourly rate × 130 hours × 9.96% | $93.87 at the $7.25 minimum |
| W-2 wages | 9.96% of Box 1 wages | Varies; known only after year-end |
The Texas-specific point: at Texas's $7.25 minimum, the rate-of-pay safe harbor is worse than the FPL figure. The crossover is about $10.03 an hour. If your lowest caregiver wage is below that, use the FPL safe harbor and price self-only coverage at or under $129.89 a month. Above it, rate of pay gives you more room. This is why low-cost MEC plans priced inside the FPL figure and CHOICE arrangements (ICHRAs) are the two most common structures among agencies in low-minimum-wage states: either one blocks both the (a) and (b) penalties if set up correctly.
A CHOICE (ICHRA) counts as an offer of coverage. It's affordable if the caregiver's cost for the lowest-cost self-only silver plan on HealthCare.gov for their rating area, minus your monthly allowance, stays within the 9.96% test.
IRS Rev. Proc. 2025-25 ↗ · IRS HRAs ↗ · minimum wage → see the Texas wage & hour page
2026 federal compliance calendar (Texas adds nothing to this list)
| Date | Obligation | Who | Authority |
|---|---|---|---|
| Ongoing | Track caregiver hours under your measurement/stability periods | ALEs | IRS |
| Mar 2, 2026 | Furnish Form 1095-C to full-time employees, or post a website notice and furnish within 30 days on request | ALEs | IRS |
| Mar 31, 2026 | E-file Forms 1094-C/1095-C with the IRS (e-filing required at 10+ returns) | ALEs | IRS |
There is no Texas filing, no Texas furnishing deadline, and no Texas penalty. If you also employ caregivers who live in California, New Jersey, Massachusetts, Rhode Island, or DC under a self-insured plan, those states' reporting rules may apply to those employees; see the state-by-state ACA hub.
Texas continuation coverage (mini-COBRA)
Texas state continuation lets employees of insured groups keep coverage for up to 9 months if not COBRA-eligible, plus 6 additional months after COBRA exhaustion for COBRA-eligible employees. tdi.texas.gov ↗
What Texas does not require
Texas has no state individual mandate or employer 1095 reporting, no auto-IRA mandate, and no paid family leave program - and state law preempts local predictive-scheduling and paid-leave ordinances. cri.georgetown.edu ↗
Frequently asked questions
We have 48 full-time caregivers and a handful of part-timers. Are we under the threshold?
Probably not. Add the part-timers' monthly hours and divide by 120. Two part-timers at 120 hours a month between them add one FTE, which puts you at 49; a third pushes you to 50 and ALE status the following year.
Does Texas require us to file anything about health coverage with the state?
No. Texas has no state individual mandate and no state 1095 reporting. Your only filing is federal (1094-C/1095-C) if you're an ALE.
Can a caregiver earning below the poverty line trigger a penalty against us?
Not in Texas. Marketplace credits start at 100% FPL and Texas hasn't expanded Medicaid, so caregivers below 100% FPL can't receive a credit and therefore can't trigger 4980H. Caregivers between 100% and 400% FPL can.
We pay $9.50 an hour. What's the most we can charge for self-only coverage?
Use the FPL safe harbor: $129.89 a month in 2026. At $9.50 the rate-of-pay method only allows $123.01, so FPL is the better harbor until wages pass about $10.03.
Does a CHOICE (ICHRA) count as offering coverage in Texas?
Yes. An affordable CHOICE (ICHRA) satisfies both the 4980H(a) offer requirement and the (b) affordability test, measured against the lowest-cost silver plan on HealthCare.gov for each caregiver's rating area.
We're under 50 FTEs. Is there any reason to offer coverage?
No mandate applies, but agencies under 50 commonly offer a MEC or CHOICE (ICHRA) to reduce turnover, and the same affordability math determines what you can charge caregivers.
Not legal advice. Confirm details with the cited official sources or counsel. Full disclaimer
- https://cri.georgetown.edu/states/
- https://www.healthcare.gov
- https://www.irs.gov/affordable-care-act/employers/identifying-full-time-employees
- https://www.irs.gov/affordable-care-act/employers/information-reporting-by-applicable-large-employers
- https://www.irs.gov/newsroom/health-reimbursement-arrangements-hras
- https://www.irs.gov/pub/irs-drop/rp-25-25.pdf
- https://www.irs.gov/pub/irs-drop/rp-25-26.pdf
- https://www.kff.org/medicaid/status-of-state-medicaid-expansion-decisions/
- https://www.tdi.texas.gov/pubs/consumer/cb005.html