This is Post 3 in a series of blogs discussing the impacts of healthcare reform on Americans.
The President’s pronouncement that, “if you like your insurance you can keep it.” has been heralded as both a benefit of healthcare reform and also promoted as a hollow promise of the Affordable Care Act (ACA). We all know that when it comes to employer sponsored health insurance plans nothing stays the same for long.
Who chooses your insurance?
Even without any mandated plans under the ACA, businesses have found it necessary to add and drop plan offerings in an attempt to stem the escalating premium increases. All too often the plan an employee liked last year gets dropped or changed in the current renewal cycle. These changes, sometimes initiated by the employer and sometimes by the insurer, inevitably have higher deductibles and premiums.
What’s in store? TBD
Until the individual and group plans to be offered under the state health insurance exchanges are released, with their respective premiums, no one is certain how businesses will react. Will businesses add small group plans, drop them or find a happy medium? What isn’t changing is that health insurance premiums will still be deducted pre-tax on payroll. This is a huge tax benefit not only to the employee but also to the employer because it reduces the amount that withholding tax by reducing the taxable income. Here are some of the provision affecting businesses and some that are set to launch in 2014.
Self-Employed, Sole Proprietors
These folks will have the option of enrolling in or retaining any small group insurance that they are eligible for and is offered in their state. Otherwise, self-employed and sole proprietors will be able to take advantage of the insurance exchange and any applicable premium tax credits or cost reduction offered under the income guidelines of the ACA.
Small Business Tax Credit
For tax years 2010 through 2013
- Maximum credit is 35 % for small business employers
- Maximum credit is 25 %for small tax-exempt employers such as charities.
- 2014 the maximum credit increases to 50% for small business and 35% for tax-exempt employers
- Sliding scale: The smaller the business or charity, the bigger the credit.
- You can carry the credit back or forward to other tax years.
- Contribute at least 50% of the cost of each employees (not family) health insurance.
- Have fewer than 25 full time equivalent employees.
- Average annual wage of those employees must be less than $50,000 per year.
Full IRS instructions and guidance
Provisions starting in 2014
Large busines employers, 50 plus employees, could be subject to assesment payment if:
- A full time employee is certified to receive applicable premium tax credit or cost reduction payment when
- The employer does not offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; OR
- The employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that either is unaffordable relative to an employee’s household income or does not provide minimum value.
- A “full-time employee” is an employee who is employed on average at least 30 hours per week
- Assessment: $2,000 per full-time employee beyond the company’s first 30 workers.
Section 18A of the Fair Labor Standards Act (FLSA), as added by section 1511 of the Affordable Care Act, directs an employer to which the FLSA applies, and that has more than 200 full-time employees, to automatically enroll new full-time employees in one of the employer’s health benefits plans (subject to any waiting period authorized by law, no greater than 90 days)
For lower-income employees who spend between 8% and 9.8% of their income on premiums, large employers can provide the employees vouchers equal to the amount of the employer’s premium contribution.
This program addresses the rising cost or health insurance offered by employers, governments and unions to retirees when they retire before they are eligible for Medicare. Employers and unions that are accepted into the program will receive reinsurance payments for health benefit claims for retirees age 55 and older who are not yet eligible for Medicare, and their eligible spouses, including surviving spouses, and dependents. The amount of the reimbursement to the employer or union is 80 percent of medical claims costs for the health benefits of an individual between $15,000 and $90,000.
In general, the provisions affecting business are modest. Most experts don’t see a large change to employer offered health insurance with or with out the provisions. But time and the details of the plans offered under the ACA will be the largest determiner of business decisions with regards to the health insurance they ultimately keep or drop.