Health Insurance Info for Colorado

news & commentary on health insurance and benefits

The Affordable Care Act Turns Four…

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The American Action Forum has published an eye-opening research paper on The Affordable Care Act, and comes to the conclusion that “regulatory costs exceed benefits by twofold”.

From the opening summary: “From a regulatory perspective, the law has imposed more than $27.2 billion in total private sector costs, $8 billion in unfunded state burdens, and more than 159 million paperwork hours on local governments and affected entities. What’s more troubling, the law has generated just $2.6 billion in annualized benefits, compared to $6.8 billion in annualized costs. In other words, the ACA has imposed 2.5 times more costs than it has produced in benefits.”

For the full report, including the employment impact and policy implications for small business, go here.

The Coming Disaster

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OK, there – I said it. It will be an unmitigated disaster. The relationship between The State and The Citizen has now been forever altered. I’m of course speaking of Obamacare, a.k.a. The Affordable Care Act. But, from now on, we’ll just call it Obamacare for short. Has such a great ring – after all, hasn’t The Prez himself now embraced it?

It will not be our place, going forward, to rail against the excesses of the great unwashed masses who really did vote for “stuff”, including “free” health care, such that it is. Rather, it will be our  pleasure to point out all of the unintended (really – unintended? but I jest) consequences of the greatest piece of social engineering that has ever hit a nation, short of the Russian Revolution. Stay tuned, as this is going to get really entertaining – or, perhaps not, depending on your viewpoint (you small business owners, who have just been reclassified as a “large business” – you know what I’m talking about).

Obviously, I’m no fan of this legislation (thankfully, having an opinion isn’t a hangin’ offense – yet). Obamacare is, of course, the opening gambit in the final throes of a complete government takeover of the health care sector – whether five years or twenty years from now. In spite of the near-complete abdication by the media of their responsibility to report what is factual and accurate about Obamacare, some truths have filtered out. So, one of our responsibilities will be to elaborate on these “truths”, in spite of the near-total blackout you’ll get from most in the media, so that you, my dear readers, can begin to understand the enormity of what one-party rule and flagrant “gifting” to minority coalitions can create. Havoc, in other words.

(My sympathies in advance of those who will look back fondly on these pre-Obamacare days of full-time employment – meaning, forty hours a week, that is. Working two part-time jobs is really going to be stimulating!)

Beyond that, there will be numerous changes (hell, I might as well say it – changes in the thousands!) to health insurance, health insurance regulation, health insurance markets, health insurance policies, health insurance coverage, health insurance taxes – you get the idea – over the coming five years, as we rush headlong into the full implementation of Obamacare, which doesn’t fully  land on everyones doorstep until 2018. We will be here, barring some unforeseen event, giving you all of the gruesome details, so that you can watch the unfolding train-wreck with us. Get the popcorn. Lock the door.

By the way, as of this writing, SCOTUS has decided that the Liberty University lawsuit, essentially about religious liberty and the new contraceptive mandates, should be heard, and apparently will be tracked to eventually wind up with the Justices. This may or may not be a side-show: it may give the Court a second bite of the apple when it comes to the constitutionality  of Obamacare. Yawn. I don’t think this is going to change much – I mean, what are we now 0 for 3? – not counting an election. I feel somewhat better about the Courts’ recent decision (9-0) regarding religious liberty, but beyond that, I don’t see this impacting the roll-out of Obamacare except in certain narrow ways – and this Administration will just do what it wants anyway. And besides – who ever said that Obama wants religious groups, such as the Catholic Church, delivering health care anyway? Better to turn it over to non-profit and completely controllable Accountable Care Organizations. They’re easier to unionize, anyway.

Next week I’ll talk about the new federal health plan option for states that have decided to back-hand the feds and refuse to start their own exchanges. Yes, we finally now have a “public option”. Stay tuned…




Sebelius: The health insurance “death spiral”

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As if we didn’t already know this: The infamous HHS Secretary tells us what she really thinks in Congressional testimony.

Read the comments on that page, too – very interesting.

Another story on this topic references the infamous McKinsey study released last year. “At least 30 percent of employers are likely to stop offering health insurance once provisions of the U.S. health care reform law kick in in 2014, according to a study by consultant McKinsey,” Reuters reported. “McKinsey, which based its projection on a survey of more than 1,300 employers of various sizes and industries and other proprietary research, found that 30 percent of employers will ‘definitely’ or ‘probably’ stop offering coverage in the years after 2014, when new medical insurance exchanges are supposed to be up and running.”

The Obama Administration went to a full-court press in an attempt to deflect and discredit this story as being a put-up job by a) the insurance industry, b) Republican operatives, and c) all of the above, even going so far as to label it an “outlier” (whatever that means!). In fact, Democrats used these and other arguments in a kitchen sink attempt to discredit a study that was, by the way, funded entirely by McKinsey. Their efforts were less than successful, and I can assure you that the survey’s results are, anecdotally, true: I’ve been told the same thing by many clients.

Surprisingly, even Howard Dean says that the McKinsey study is one that “the Democrats don’t like but I do and I think it’s true.” Dean likes it because it will remove a burden from small businesses. Note that Dean, always a proponent of single-payor, pulls no punches as he advocates for a government system, whereas the Obama folks are trying to camouflage their real intent: destroying private insurance companies by crashing their reserves and limiting their ability to offset health care costs with appropriate premiums, which will lead to the same thing.



Benefits: the small employer tax credit for 2010

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The small employer tax credit, which was added to the Internal Revenue Code by the health care reform law, is effective for taxable years beginning in 2010.

Anthem has been gracious enough to produce a fact sheet on the tax credit.

For more details about whether you qualify for the tax credit and how to claim the credit,  talk with your tax advisor, due to the complexity associated with determining the amount of credit an employer is entitled to receive. Or, call me and I can help.

BYA: Credit for small employer health insurance premiums

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Q: “Would you mind enlightening me on the credit given to employers after March 2010 for up to 35% of employee health premiums if under 10 employees? I want to make sure I understand it correctly. Is this done by the insurance company or is this something the employer must do on their 941 report..”

Excellent question! The credit for small employer health insurance premiums was part of the Affordable Care Act passed earlier this year, and gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010, or, in IRS-speak in Notice 2010-82, “the credit is available for taxable years beginning after December 31, 2009”. The credit is, generally, 35% of premiums paid, claimed on Form 3800, General Business Credit.

The regulation deals with Form 8941, which allows some small employers a credit on a percentage of health insurance premiums paid for by the employer. That’s the easy part – the difficulty is in the details, which are described, based on the notice guidance, here. A summary flier is available, as well.

An “eligible small employer” uses Form 8941 to figure the credit. An eligible small employer must meed the following three requirements:

  1. You paid premiums for employee health insurance coverage under a “qualifying arrangement”.
  2. You had fewer than 25 “full-time equivalent employees” (FTEs) for the tax year.
  3. You paid average annual wages for the tax year of less than $50,000 per FTE.

FYI: A “qualifying arrangement” is generally considered to be a fully-insured health insurance policy that requires you to pay a uniform percentage, not less than 50%, of the premium cost for each enrolled employee’s health insurance coverage.

Note that, for a tax-year beginning in 2010 only, “a qualifying arrangement includes any arrangement that requires you to pay at least 50% of the premium cost for single (employee-only) coverage for each employee enrolled in any health insurance coverage you provide to employees, whether or not you pay a uniform percentage of the health care premium cost for each enrolled employee”. For tax years after 2010, you must pay at least 50% of the enrolled employees health insurance coverage, not excluding dependents.

In your question, you mention 10 employees as a limit. Actually, what happens is that the credit is reduced if you had more than 10 FTEs; if you had more than 25 FTEs for the tax year, your credit is reduced to zero. There is also an average annual wage limitation which further reduces your credit if  you paid average annual wages of more than $25,000 for the tax year. The exact details and worksheet for figuring the credit are in the instruction for Form 8941, linked above.

So, who isn’t an employee for purposes of this credit?

  1. The owner of a sole proprietorship,
  2. A partner in a partnership,
  3. A shareholder who owns, generally, more than 2% of an S Corp,
  4. A shareholder who owns more than 5% of the outstanding stock in a non-S Corp

Note that there are additional details that expand on the above limitations in the Notice and instructions, and there are additional limitations on leased employees, seasonal employees, household and other non-business employees (although you do not have to be in a business or a trade to qualify for the credit), and Ministers.

For employers who are offering HRA’s or HSAs, there could be confusion. The guidance allows high-deductible health insurance plans (HDHPs) as health insurance coverage; it does not allow payments to HSA accounts, as defined under Sec. 223(d)(1) of the IRS Code. Similar restrictions on FSAs and other self-insured plans apply to the credit.

Lastly, if you reward your employees with a richer health insurance plan than average, you credit is further reduced for tax years beginning in 2010. Example: for Colorado employers, the average annual premium must not exceed $4,972 for employee-only coverage, or $11,437 for family coverage.

UPDATE: IRS guidance on small business health care tax  credit

DISCLAIMER: I am not a tax consultant, and this information is considered to be general in nature. Check the links above to download the Notice, Form, and Instructions. Always check with a tax professional, as the above information may change.

Health reform at-a-glance: small group/large group

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The new health care reform law established, for the first time, federal definitions of “small employer” and “large employer” for health insurance markets. Prior to the passage of this legislation, states defined these markets for themselves.

Here are the new rules:

  • From now until 2016, states can define the size of small employer groups as either 50 and fewer employees, or 100 and fewer.

Colorado has defined “small employer” for group insurance purposes as 50 or fewer, and there doesn’t seem to be any rush to change this with the passage of federal law, for now.

Beginning in 2016, the new definitions will apply – businesses with, on average, 1-100 employees in the preceding calendar year will be “small employers”. “Large employers” will be those who had, on average, 101 or more employees in the preceding calendar year (and at least one employee on the first day of the plan year).

For employers who are used to calculating COBRA continuation eligibility, the full-time calculation accounts for both full-time and part-time employees, using the same general formula (part-time employees counted as fractions).

TIP: Full-time seasonal employees who worker fewer than 120 days during the year are excluded.

There are inconsistencies in the application of these new federal definitions that will need to be ironed out, assuming the entire health reform act isn’t amended, repealed and replaced, or successfully challenged in court.

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