Treasury Action on Health Care Law a Good First Step but Legislative Solution Needed

In a positive development for small business owners, the U.S. Treasury Department announced this week that it will delay enforcement of an Affordable Care Act (ACA) prohibition relating to standalone health reimbursement arrangements (HRAs) until July 1.

“While today’s announcement by the Treasury Department is a step forward in helping small businesses to provide affordable health coverage to their employees, a short-term delay isn’t good enough,” said Tom Woods, Chairman of the National Association of Home Builders (NAHB). “Congressional action is needed to make this change permanent.”

Your Home Builders Association has been working on several fronts to achieve this goal. NAHB CEO Jerry Howard discussed the issue of standalone HRAs in a meeting with Health and Human Services Secretary Sylvia Burwell on Feb. 5.

In addition, your Home Builders Association is calling on Congress to advance legislation based on the bipartisan bill introduced by Reps. Charles Boustany (R-La.) and Mike Thompson (D-Calif.) in the waning days of the 113th Congress that would reverse the IRS regulation preventing small businesses from providing employees with standalone HRAs.

A standalone HRAs is an employer-provided benefit that offers participants a spending account to reimburse them for qualified medical expenses. However, in light of the ACA’s ban against health plans with an annual dollar limit on essential benefits, standalone HRAs have been deemed impermissible.

“We look forward to working with Reps. Boustany and Thompson to re-introduce legislation that will require the IRS to reverse its regulation preventing small businesses from providing standalone HRAs so that they can provide better health coverage to their employees at lower costs,” said Woods.

More time for full time

The U.S. House of Representatives recently passed HBA-supported legislation, the Save American Workers Act (H.R. 30), which would repeal the Affordable Care Act’s 30-hour definition of “full-time employment” and restore the traditional 40-hour workweek.

Restoring the conventional 40-hour definition of full-time employment would provide greater certainty to small employers, which in turn would provide for greater flexibility for planning and future growth. The ACA’s definition stipulating that 30 hours constitutes a full-time work week does not reflect employers’ workforce needs or employees’ desire for flexible hours.

Builders looking to expand their businesses may be deterred from growing and refrain from hiring additional employees. The new definitions could also set a dangerous precedent for redefining full-time status in the future.

Health Care: Lost Coverage, Pre-Existing Conditions and Exclusions

By Jason Freeman, J. Freeman and Associates

Lost Coverage
It’s human nature. Negative news tends to get our attention a whole lot quicker than warm, fuzzy, feel-good news. And, there’s a lot of negative news out there about Obamacare.

Not a day goes by that we don’t get a call that starts off with, “I’m losing my coverage,” or “I heard my friend is being dropped. Am I going to be dropped, too?” Here are a few reasons why you may be dropped from your plan:

  • The insurance carrier is exiting the marketplace – Some insurance carriers have plans that are not making them any money, or that do not provide coverage that meets the new federal mandate.
  • Your employer is dropping the group coverage – Many employers can’t afford to keep up with the increase in costs. Small businesses with less than 50 employees are not required to provide health insurance, and even large employer groups may find it less expensive to pay the fine than to provide medical coverage.
  • Your spouse’s employer is no longer offering family coverage – In an attempt to maintain corporate earnings, some employers may choose to pay for coverage for the employee only. Even if they do allow for family members on the policy, the portion that you would have to pay may be so high, that you would be better off finding a policy elsewhere.

Pre-Existing Conditions
One reason your coverage will never be dropped, is for a pre-existing condition. A key component of the new health care law is that insurance companies can no longer charge more or deny coverage to those with pre-existing conditions.

As of January 1, 2014, insurers are also not allowed to limit the dollar amount of health benefits—either annually or over a lifetime. And, you can not be dropped or denied coverage when you get sick.

The ACA’s “individual mandate” requires all Americans to have some form of health insurance, or pay a fine. But, as with everything in life, there will always be some exceptions to the rule. Those exempt from penalties for noncompliance, include:

  • Prisoners
  • Indian tribal members (Native American descent)
  • Members of certain religious groups or health care sharing ministries (HCSM)
  • Anyone uninsured for less than three months per year (e.g., during a job transition)
  • Those with incomes too low to require a federal tax return
  • Individuals that have suffered a hardship (available on a case-by-case basis)

There is still much to learn as we navigate this ever-changing landscape of health care reform. But it is our mission to educate our clients, answer questions and assist in the transition.

Healthcare Myths, Realities, and Consequences

By Jason Freeman, J. Freeman and Associates

There is a lot of information and discussion “out there” about the new health care law. Some of it is good. Some of it is very confusing. Conflicting messages, inaccuracies, negativity and hearsay have led to many misconceptions. We regularly hear things like:

  • Health insurance plans must be purchased through the Marketplace. This is false. Individuals and business owners can still purchase health care coverage through private brokers or directly from insurance carriers. Just be sure that it is a qualified plan that meets the new federal requirements. You can also have a private insurance broker help you sign up through the Health Insurance Marketplace.
  • If you already have a health plan, you can keep it. This is generally true. However, the health care law requires all plans to include a broader set of benefits. As a result, many insurers are leaving the market, or discontinuing some plans because they do not include the required benefits, and doing so is cost prohibitive. Millions of Americans have already received these cancellation notices, forcing them to shop for new coverage.
  • My premium will be less under Obamacare. This is a maybe. All plans are required to cover essential services that may not have been covered by your previous plan. It is also possible that you may qualify for a subsidy.
  • My premium will be more under Obamacare. This one is also a maybe, but more than likely, true. If your current provider is abandoning the market and you need to find a new plan, you will most likely see an increase. If your current plan does not meet the new federal requirements, your new plan premium or total out-of-pocket cost will no doubt be higher.

In South Carolina, lawmakers are working to pass legislation that would eliminate the ACA in this state. The bill outlaws state health care exchanges and prohibits state agencies, officers and employees from implementing any part of the federal health care reform. The state would issue tax deductions to any South Carolina residents that pay the federal penalty for not complying with the ACA.

Be aware—ultimately medical insurance will be nothing more than a tax. So, when your insurance agent delivers the bad news, don’t shoot the messenger. It’s actually already happening, to some extent, under the current version of the ACA. Your premiums (taxpayer dollars) are spent on insurance subsidies to offset the cost of health insurance for low income individuals and families. And since everyone is required to have some form of policy or pay a fine, it kind of sounds like a tax—doesn’t it?

The full effect of the ACA on the overall economy is yet to be seen. Corporate profits will remain as companies find ways to survive. Jobs will be eliminated to keep the number of employees below 50 (the minimum requirement to offer health insurance) or just cover the increased cost of health insurance. Full time workers will be reduced to part time, other positions will be subcontracted out, and some job functions will be farmed out overseas. Ultimately we will find ourselves facing a much more complex dilemma than a non-functioning government website.

In the future, top medical care may very well be harder to come by. Quality care will become quantity care. Will the liability of our medical professionals become more controlled when they are being forced to treat a number versus an individual?

But who’s really behind these changes to our health care system? How many pharmacies were in a 5 mile radius of you 10 years ago? How many today? Are the pharmaceutical companies striving for and profiting from posturing of our new world of medical insurance for all?

We have always been told to “be careful for what you wish for.” Did we really wish for every American to be insured? This country was built on having the God-given right to choose, not the right to be covered.

Frequently Asked Questions about the Affordable Care Act

UPDATE (September 9, 2013):
Any employer with at least one employee and $500,000 in annual revenue must notify all employeess by letter about the Affordable Care Act’s health-care exchanges.  Failure to comply may result in fines up to $1,000 per day.  Click on the links below for important information about this requirement for employers.

Do not expose your company to a fine.  Comply with this employer mandate by informing your employees of their coverage option in the Health Insurance Marketplaces (Exchanges). 

About the Affordable Care Act
Originally scheduled for Jan. 1, 2014, the Employer Shared Responsibility provisions of the Affordable Care Act will now go into effect on Jan. 1, 2015. The White House announced the one-year postponement on July 2, 2013. Your HBA fought for this delay to give businesses more time to adjust to the new rules. In a letter to the Treasury Department, NAHB said “the employer community needs additional time to properly analyze their workforce and negotiate their plan designs. This is especially true for the small business community, which often lacks access to the human resources staff and technology available to larger businesses.” The delay will provide employers additional time to plan and to adapt their employee health coverage policies to meet the still-to-be determined requirements of the law. The final rules regarding implementation have yet to be published, and it may be six months or more before the new rules are promulgated by the U.S. Treasury Department and the Internal Revenue Service (IRS).

Frequently Asked Questions:

Which employers are subject to the shared responsibility provisions?
All employers who employ at least 50 full-time employees, or who employ an equivalent combination amounting to 50 full-time positions of full- and part-time employees, are subject to the shared responsibility provisions.

A full-time employee position is defined as 30 hours per week. Employers with less than 50 full-time employees are not subject to the shared responsibility provisions.

Will subcontractors be counted as employees?

No. Independent contractors are not employees, and are not to be considered in the determination of the 50 full-time employee threshold.

Are employers required to offer their employees health insurance?

No, but large employers (50 employees or more) who do not offer health insurance coverage to their full-time employees will likely be subject to the shared responsibility penalty. To avoid the penalty, these employers must offer health insurance coverage to substantially all full-time employees (95% or more), but not part-time employees.

What is an Employer Shared Responsibility penalty?

It is a non-deductible excise tax that will be imposed after Jan. 1, 2015 on employers who do not offer affordable health care insurance with minimum coverage levels to full-time employees, and when at least one of their full-time employees receives a tax credit for purchasing coverage through an Affordable Insurance Exchange.

If one of my full-time employees declines my offered health insurance, and purchases coverage through an Affordable Insurance Exchange, will I be subject to the employer shared responsibility tax?

No. As long as you offer qualifying affordable health insurance, you will not be subject to the tax penalty.

What is the amount of the tax for employers who do not offer health insurance?

The tax payment (or penalty) is $2,000 for each full-time employee, minus 30 employees. An example: the calculation for 50 full-time employees would be 50-30 = 20 x $2,000 = a penalty of $40,000).

What qualifies as an affordable health care plan with minimum coverage levels?

Under safe harbor provisions, offered health insurance coverage is affordable if the cost to the employee does not exceed 9.5% of the yearly wages paid to the employee by the employer. The minimum coverage level is met by offering a group health plan or group health insurance coverage that is either:

  • A governmental plan
  • Any other plan or coverage offered in the small or large group market within a state
  • A grandfathered plan offered in the group market

I understand that a qualifying health insurance plan must also provide minimum value to avoid the penalty. What is “minimum value?”
A plan fails to provide “minimum value” if it pays for less than 60% of covered health care expenses. A minimum value calculator will be made available by both the IRS and the Department of Health and Human Services to assist employers in their calculations.

Is the health insurance plan that I currently offer to my full-time employees sufficient to avoid payment of the employer shared responsibility tax?

Most health insurance plans that existed on March 23, 2010 are eligible for grandfathered status, provided that the plan is not subsequently changed to:

  • Significantly reduce benefits or coverage
  • Raise co-insurance charges
  • Significantly raise co-payment charges
  • Significantly raise deductibles
  • Significantly increase the employee’s share of the premium
  • Decrease annual payment limits, or impose new limits

Where can I get more detailed information?

The IRS Question and Answer page will be an excellent resource once it has been updated. NAHB will monitor the progress of the proposed regulations, and will add information to this FAQ when it becomes available concerning the implementation of the Affordable Care Act components. We will also post a more definitive FAQ when the final regulations are published.

View the NAHB-submitted comments on the act, and the additional comments made by NAHB as a member of the Coalition to Promote Independent Entrepreneurs.