Tag Archives: health insurance

Supreme Court Upholds the Affordable Care Act

The Supreme Court has issued its opinion in King v. Burwell, the much anticipated case regarding whether Affordable Care Act subsidies are available to purchasers of insurance on the Federal Exchange or whether the plain language of the Act restricted such subsidies to only those purchasing insurance through an “Exchange established by the State.” The Court, over strongly worded dissent, determined that the Act permitted payment of subsidies for insurance purchased through the Federal Exchange, leaving Obamacare, as it is known, intact. Had the court ruled as the dissent held, then millions of people would have effectively been exempted from the requirement to purchase health insurance (the “individual mandate”) because their health insurance cost, when not supplemented by a subsidy, would have exceeded 8% of income. The outcome of such a decision could have led to the “death spiral” for the Act, since the underlying financial assumptions that keep insurers in business are directly related to the effectiveness of the individual mandate.

The Court’s decision will provide certainty in the healthcare marketplace. King v. Burwell was widely seen as the last, and best, chance for opponents of the Act to obtain a judicial veto of the Act. Opponents of Obamacare now realize the Court will make every effort to uphold the Act in future cases.

Read Supreme Court Opinion here:  Supreme Court Opinion

 John L. Moore
jmoore@williamsparker.com
941-329-6620

Update – Employer Reimbursements of Individual Health Policy Premiums Temporary Relief Issued for Small Employers – until June 2015 And IRS clarifies reimbursement rules for 2% Sub S shareholders and for Medicare & Medigap premiums & TRICARE uncovered expenses

Small Employer Relief Until June 30, 2015

In November we alerted you that employers that reimburse employees for the cost of purchasing individual health insurance policies risk being subject to ACA penalties of $36,500 per year per person.  Here is a link to our prior alert: http://blog.williamsparker.com/businessandtax/

On February 18, 2015, the IRS issued temporary relief for small employers (those that don’t qualify under the ACA as an “applicable large employer”) from these enormous penalties.  The temporary relief ends June 30, 2015.

Under the soon to be published IRS notice (Notice 2015-17), small employers that aren’t classified as “applicable large employers” will not be hit with the ACA $36,500 per person penalty for either 2014 or for the period from January 1, 2015 through June 30, 2015.  Starting July 1, 2015, the penalties will apply, so almost all employers need to stop premium reimbursement policies to avoid penalties.

To be eligible for the temporary relief, an employer is considered a small employer if it does not employ an average of 50 or more full-time employees (including full-time equivalent employees) on business days during the preceding calendar year.  An employer’s small employer status is looked at separately for 2014 and 2015 for purposes of this temporary relief.

An employer that qualifies for the temporary relief does not need to file Form 8928 reporting failure to satisfy the mandates of providing ACA compliant coverage for the period that the employer is eligible for the relief.

Reimbursement of 2% Sub S Shareholders

The new IRS notice also provides relief or clarification for employer health premium reimbursements provided to 2% Sub S shareholders.  Until further guidance is published by the IRS, and in all events through the end of 2015, health insurance premium reimbursements to 2% Sub S shareholders will not trigger the $36,500 ACA penalties.

The exception for 2% Sub S shareholders does NOT apply to reimbursements provided to other employees of the Sub S employer.  As a result, reimbursements to the non-2% Sub S shareholder/employees will trigger the ACA penalties (but may be temporarily suspended until June 30, 2015 if the employer is not an applicable large employer – see above).

Reimbursement of Medicare, Medigap and/or TRICARE Premiums

The IRS notice also addresses employer arrangements that reimburse employees for Medicare, Medigap and TRICARE premiums.  The IRS notes that the reimbursement of Medicare premiums by an employer may violate the Medicare secondary payer rules which are not tax rules but impose severe penalties.  On the tax side, the IRS advises that an employer program that reimburses Medicare, Medigap or TRICARE premiums (or uncovered medical expenses) without the employer offering the employee coverage under an employer sponsored minimum value health plan will trigger the $36,500 per person per year penalty.  The exception that allows an employer to reimburse the Medicare, Medigap or TRICARE premiums (or medical expenses) without triggering the ACA $36,500 penalty requires the employer to offer employer health coverage and comply with a number of other very specific requirements.  For more information, give us a call or email.

Carol L. Myers
cmyers@williamsparker.com
941-893-4001

Federal Agencies Issue Warning to Employer Clarifying the Dangers of Reimbursing Employees for the Cost of Individual Health Insurance Premiums and of Offering Cash Incentives to Opt Out of Employer Sponsored Coverage

In recently issued FAQs (which stands for “Frequently Asked Questions”), the three agencies in charge of compliance with the Affordable Care Act (the “ACA”) alerted employers to three practices that will cause the employer to be subject to ACA penalties of $36,500 per year per person. Importantly, this $36,500 per year penalty applies to each individual affected by the ACA failure.  As a result, it can be applied and calculated counting both employees and dependents whose coverage has been affected by the practices described in the FAQs.

Notably, the only small employers excepted from these requirements are employers who have only one employee, and governmental employers.  For this purpose, the number of employees are counted looking at all related controlled group companies together.  The annual $36,500 per affected individual penalty must be self reported and paid by the employer (on IRS Form 8928).

First, the FAQs alert employers that reimbursing employees for the cost of premiums to purchase individual health insurance policies violates the requirements of the ACA.  The FAQs emphasize that the practice violates the ACA regardless of whether the reimbursements are made on a pre-tax or post-tax basis.

Second, the FAQs alert employers that offering a cash incentive to high risk / high claim individuals to opt out of the employer health coverage violates the ACA.  The FAQs emphasize that it does not matter whether (i) the cash incentive is offered on a pre-tax or post-tax basis, (ii) the employer is involved or not involved in the employee’s selection of alternate coverage, or (iii) the employee obtains individual health insurance.  If the cash incentive option is offered to ALL eligible employees, the violation of the ACA will not occur.

Lastly, the FAQs alert employers that cancelling group health policies and setting up instead a reimbursement program to coordinate with individual insurance policies that employees purchase with premium tax credits on the Marketplace exchange is not permissible.  The FAQs point out that the employees who are covered by the reimbursement programs will not be eligible for premium tax credits and that the reimbursement arrangement itself will violate the requirements of the ACA triggering the $36,500 per person per year penalties on the employer.

For more information, see http://www.dol.gov/ebsa/faqs/faq-aca22.html

Carol L. Myers
cmyers@williamsparker.com
941-893-4001