Tag Archive | "Obamacare"

Obama Administration Delays Another Health Care Rule for Small Businesses

One of these days, employers will experience the full effects of Obamacare — but not yet, reported the Washington Post.

In the latest in a long string of delays in enforcing the rules under the health care overhaul, the Internal Revenue Service and Treasury Department announced on Wednesday that they will wait until summer to start enforcing financial penalties on small businesses that provide so-called Health Reimbursement Arrangements to their employees.

Under HRAs, employers provide spending accounts that their workers can use to cover a portion of the cost of buying individual health plans. The arrangements, which give employers a tax-free means to help pay for their workers’ health costs, do not comply with insurance standards in the Affordable Care Act, commonly known as Obamacare, according to Treasury guidance issued in the fall of 2013. Consequently, employers who elect to continue offering HRAs could be fined as much as $100 per day per employee.

In a public notice, IRS and Treasury officials announced that those penalties (in the form of excise taxes) will not be levied against noncompliant small businesses until July, giving many employers a little extra time to adjust to the new rules.

“The Departments understand that some employers that had been offering health coverage through an employer payment plan may need additional time to obtain group health coverage or adopt a suitable alternative,” the notice reads. Officials also hinted at the fact that the new online health insurance exchanges set up under the law, which were meant to give small businesses more choices and more affordable health insurance options, haven’t quite delivered.

“The market is still transitioning and the transition by eligible employers to SHOP Marketplace coverage or other alternatives will take time,” they wrote.

In regards to the rules in the health care law, the delay is nothing new for employers. Most notably, the Obama administration has several times pushed back the start of penalties for business that do not provide adequate health insurance to their employees, first pushing the entire deadline back one year and then last year announcing an even more gradual, tiered (by company size) rollout.

A year earlier, the administration instituted a one-year delay in enforcing rules requiring companies to report their health insurances costs on employees’ tax forms. Officials also delayed additional rules requiring owners to provide equal coverage to all of their employees, and they later postponed fines on health plans that don’t meet certain coverage criteria in the law.

At this point, the small business community has had about enough of the temporary reprieves and is calling for permanent solutions.

“This temporary delay serves as an important immediate step to protect small businesses from costly penalties when trying to assist employees with the purchase of health insurance,” Amanda Austin, vice president of public policy at the National Federation of Independent Business, said in a statement responding to the announcement. “However, another delay to Obamacare does not fix the underlying problems – which the administration is conceding with these actions.”

Research by the NFIB, which has staunchly opposed the health care overhaul since it was being debated in Congress, suggests that one in seven small businesses that do not provide health care plans offer some type of reimbursement arrangement.

Katie Vlietstra, vice president for government relations and public affairs at the National Association for the Self-Employed, conveyed similar frustration, calling the short delay “welcome news for our community” but insisting that “a long-term, legislative solution is still urgently needed.” She added: “America’s smallest employers need the stability of a permanent fix in order to continue to utilize this critical tool to help provide health care coverage to their employees.”

Austin’s and Vlietstra’s groups have support in Congress. Reps. Mike Thompson (D-Calif.) and Charles Boustany (R-La.) in December introduced legislation that would do precisely what the small business groups are asking for, requiring the IRS to permit small firms to continue offering HRAs. Theirs is one of many proposed tweaks to the health care law that are expected to be considered and potentially put in front of the president by the new Republican Congress.

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What ACA Has in Store for Entrepreneurs in 2015

Last year employers enjoyed a reprieve regarding the requirement to provide health insurance. The starting date of employer reporting requirements to comply with ObamaCare was pushed back from January 1, 2014 to January 1, 2015 (IRS Notice 2013-45), reported FoxBusiness.

But 2015 is sneaking up on us rapidly, and it’s important to know what your business must do.

Beginning in 2015, certain employers with 50 or more full-time employees, or full-time equivalents, must offer health insurance to full-time employees and their children up to age 26 or be subject to penalties. This is known as the employer mandate. Employees who work 30 or more hours per week are considered full-time.

We spoke with Missy Jaeger of Keas, a health management firm specializing in advising on health benefits for businesses. Their main focus is wellness and prevention, however they advise their clients on health insurance and on the impact of the Affordable Care Act (ACA).

“The Affordable Care Act has created many challenges for employers. Everything done so far has increased their cost,” says Jaeger.

Setting up and administering plans and checking compliance levels can be very time consuming, not to mention costly, for business owners.

It would behoove small business owners not facing the employer mandate to consider providing health insurance plans to employees. It’s a form of pay that is free from taxation and therefore very attractive for employers and employees as well. Jaeger says, “The biggest tax break is health care. Employers spend $250 billion on health care benefits each year. Of that, $180 billion goes as tax breaks to the employee population. This is a bigger deduction than mortgage interest and any other tax breaks Americans enjoy.”

Consider the tax breaks when analyzing your costs. If your business is required to provide health insurance, then you will be thinking, ‘how do I fulfill ACA requirements cost effectively?’ Jaeger believes employers should explore consumer directed health plans with high deductible and low benefits. The premiums would be lower, and those covered would end up paying more at the point of service.

“Otherwise employees can go to a private exchange to seek benefits, go to a public exchange through the state or the federal government. Employees may even have the option to apply through Medicaid,” she says.

Jaeger adds, “Health care costs will continue to rise as technology increases unless we do things differently. What will help the ACA become effective is for each individual to participate in prevention by living healthy lifestyles – exercise, weight control, proper diet.”

It is anticipated that there will be a 4.5% to 5% increase in costs of health care for 2015. Even with these premium increases, the number of small employers threatening to terminate plans decreased from 23% in 2013 to 16% in 2014.

Small employers who provide health care may enjoy the Small Employer Health Insurance Credit, which increased in 2014 to 50% of premiums paid. Check with your tax professional as there are plenty of rules surrounding the ability to take this credit.

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Steering Clear of Obamacare’s Hidden Hurdles

The Patient Protection and Affordable Care Act, better known as Obamacare, does not have to be a bitter pill for small-business owners to swallow. But as we enter the second year under the main provisions of the law, there some critical things to keep in mind, reported The Washington Post.

For starters, companies with fewer than 50 full-time equivalent employees – the majority of small businesses – are not required by the law to offer health insurance to employees. Still, attracting the best employees often requires offering much more than a hefty salary; benefits such as health insurance can make the difference when recruiting top candidates and building an elite team.

So, even if a company has fewer than 50 employees, many employers may still want to provide an employee health benefits program — and if so, that plan will have to be in harmony with the new rules under Obamacare. What are those new rules?

Here are some of the less-discussed provisions to know about:

By far the biggest impact of Obamacare on small group health plans is the new provision for age-based rates. Individuals are now charged differently according to their age; the younger you are, the less you pay. For example, a 23-year-old employee might be charged $275 per month while a 63-year-old employee is charged $825 for the same coverage.

Premiums for spouses and dependents are also age-based. Fortunately, though, certain carriers are now offering small group policies with composite rates in both the single and dependent categories.

Another potential stumbling block for small businesses is a shorter waiting period for employees to become eligible for health-care benefits. Employers can be fined if their waiting period for coverage is longer than 90 days.

In addition, Obamacare dusted off a rarely enforced, 40-year-old compliance requirement from the 1974 Employee Retirement Income Security Act, which requires employers to provide certain information to workers about their health and retirement accounts.

In a nutshell, the Labor Department, which enforces the law, now plans to audit employers to make sure health benefit plans are in complete compliance with requirements of ERISA. Employers who are not in compliance are subject to fines ranging from $110 a day to more than $1,000 a day. To step up Title I enforcement, the department has added 1,800 new auditors.

How do steer clear of these potential stumbling blocks?

Here are my top five suggestions for small businesses to help minimize Obamacare-related headaches:

Make sure that your new hire eligibility period is less than 90 days following the date of hiring. By making the eligibility date the first of the month following 60 days on the job, for example, you can avoid any risk of being fined. That’s a simple step every employer should take immediately.

Consider moving to a high-deductible plan using an employer-sponsored health reimbursement arrangement or health savings account. Not only will this minimize costs to the company, but it will also make employees more accountable and aware of the cost of their health care.

If possible, to simplify the administrative work for your human resources team and to increase the likelihood of obtaining composite rates from insurance carriers, place all of your employees in one health plan. In most cases, if you can get a composite rate from a carrier, it will not change during the year when you hire an older worker.

Make sure you’re complying with ERISA by asking your broker to create what’s known as a Wrap Plan Document and Summary Plan Description for all of your company’s benefit plans. These documents essentially outline participants’ and beneficiaries’ rights and obligations under your health plan.

Finally, to reduce health risks, cut costs and improve employee productivity in the long term, consider implementing a variety of annual or year-round wellness opportunities for your employees. These could include health classes, health coaching, wellness challenges, smoking cessation programs and “de-stressing” activities such as yoga classes. These programs can help you build a happier, healthier and more productive workforce.

Joseph Appelbaum is founder and president of Potomac Cos., an employee benefit brokerage and consulting firm based in Rockville.

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Mid-Sized Businesses Still Very Concerned About (and Unprepared for) Obamacare

Health care costs and the Affordable Care Act represent the biggest concerns right now for owners of mid-sized businesses, a newly released survey shows, reported The Washington Post. In part, that may be because, now four years after the legislation was passed, most of them are still uninformed about and unprepared for the rules in the health care law.

More than two-thirds (69 percent) of mid-sized business owners say they are very or extremely concerned about the costs of health coverage and other benefits, while more than half (54 percent) say they are particularly concerned with the health law, according to an annual study conducted by the research institute at payroll firm ADP.

Some of that concern, the authors of the study note, may stem from that fact that fewer than half of mid-size businesses (firms that have been 50 and 999 employees) have put formal plans to manage the changes implemented under the health care law. Additionally, more than three-fourths of their owners say they aren’t confident that they completely understand the new rules.

On the whole, confidence among mid-size business owners is lacking. Only half of the roughly 750 respondents expect the industry in which they work to strengthen in coming year, while far fewer — 15 percent — believe the broader economy will improve.

In their report, the researchers point out that owners of mid-sized businesses often find themselves in a difficult position, in that they are “expected to operate with the agility of smaller businesses but abide by many of the same regulations that govern larger enterprises.” And perhaps nowhere is that more evident than in the health law.

Under some of most important provisions of the law, companies with more than 50 employees are considered large businesses, even though many would be considered small by other federal standards (the Small Business Administration’s definition generally includes firms with up to 500 workers). For example, they are not permitted to apply for small-business tax credits, shop for coverage on new employer insurance marketplaces or seek a small-business exemption to rules requiring companies to offer health coverage.

“A changing landscape, coupled with heightened responsibility, can take a toll on the confidence of mid-sized business owners,” the authors of the study wrote. “In 2014, they seem to be struggling to find it.”

It isn’t just health care concerns that are weighing heavily, though. More than half of respondents said they are very or extremely concerned with the number of government regulations. A third said they have been hit by unexpected fines or expenses in the past year resulting from noncompliance with government rules.

“In 2013 alone, there were more than 19,000 proposed changes to laws and regulations that impact how businesses manage employees,” Anish Rajparia, an ADP executive, said in a statement about the report. “So it comes as little surprise that the level and volume of government regulation made our list of top concerns three years running.”

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Sizing Up Health Costs

Via The Wall Street Journal

Small employers across the U.S. are struggling to get a handle on their health-care costs under the Affordable Care Act. Many of them say they expect their operating expenses to jump in 2014, when the law’s employee health-insurance requirements take effect. But they acknowledge that their forecasts are back-of-the-envelope calculations based on only partial information.

Starting next year, the federal government will impose penalties on any business with 50 or more full-time equivalent employees that doesn’t provide adequate health-insurance coverage to workers who clock 30 or more hours a week. If such employers choose not to offer health coverage, they will face a penalty of $2,000 for each full-time worker, excluding the first 30.

If they do offer coverage, but the insurance doesn’t meet the law’s minimum requirements, they face a penalty of $3,000 for each worker who gets a federal subsidy through state insurance exchanges.

Owners with between 50 and 200 full-time employees are in a particularly tough spot. These businesses are big enough to meet the government’s threshold for penalties, but they lack the purchasing power to negotiate the best rates with insurers.

The Obama administration says the law will help small employers. It will let them “pool risk with other small businesses to get more competitive rates, said Erin Shields Britt, a spokeswoman for the Department of Health and Human Services, through new small-business insurance marketplaces, known as “exchanges,” which are expected to open this fall.

Here’s a look at how three small employers are bracing for the change:

Pickle for a Pizza Chain
Business: Ziegler’s NYPD LLC, Phoenix

Rough Calculations: The local pizza chain figures providing health coverage could cost up to $250,000 next year.

Options Considered: Using automation to boost productivity and buying less expensive ingredients and supplies.

“We don’t want to curtail expansion plans” because of the health-care law, said president Richard Stark. But the business will need to find a way to absorb the law’s costs. Currently, the pizza chain doesn’t offer its 350 workers an employer-sponsored health-insurance plan. It does offer its 40 salaried managers reimbursements if they obtain health-insurance coverage elsewhere.

Mr. Stark was a loyal patron of NYPD — short for New York Pizza Department — for three years before becoming a part owner in 2000. The 58-year-old, who has a professional food-service background, consulted the two brothers who founded NYPD and helped them open a second location. Mr. Stark became the majority owner in 2008. NYPD now has 11 locations, and Mr. Stark says he is on track to double the number of locations within five years.

Next year, Mr. Stark intends to offer a health-insurance plan for the first time to comply with the law. “At the end of the day, if we take care of our team members, they will take care of the guests,” he said. “I philosophically believe people having health care, regardless of age, is positive.”

But it could be expensive. In addition to its 40 managers, NYPD has 90 hourly workers — mostly kitchen staff — who are considered full-time under the law and who would therefore be eligible for the benefits.

Mr. Stark isn’t sure how many of those workers will opt into the company’s new plan, considering that most are younger, healthier and lower-paid workers who might go on a parent or a spouse’s plan, or who may forgo insurance coverage and pay a minimal penalty.

One way to offset the new expense is to negotiate with vendors for lower-cost ingredients and packaging, such as pizza boxes. Mr. Stark also plans to streamline business operations, perhaps by preparing some items like sauces and dressings at an off-site location, and by investing in equipment like dough mixers and vegetable slicers to automate certain tasks, he says.

Employees may see less take-home pay “because their total compensation is increasing, from our perspective,” if they take health benefits, Mr. Stark said. Managers’ bonuses are tied to company profits, so if the law erodes profit, managers may get smaller bonuses, he says.

And as a last resort, NYPD would raise prices of some menu items, Mr. Stark says. “We will have to work smarter to be more efficient and more profitable,” he says. “We will need to find the pennies and nickels and dimes everywhere.”

Consultant Asks a Broker
Business: Future State Inc., Walnut Creek, Calif.

Rough calculations: Health-care costs could rise by $200,000 to about $400,000 a year.

Options considered: Dropping insurance and paying a $2,000-per-employee penalty.

“I could make more money in the short term if I cut benefits,” said Steven Laine, president and CEO of business consulting firm Future State, but he fears he would lose employees. His 93-person firm now pays more than 50% of the premiums for 32 employees who currently take the coverage it offers, spending roughly $200,000 total a year.

If all 77 full-timers were to participate in the company’s plan next year, its health-care costs likely would more than double, he said. But he doesn’t know how many will join the company plan, which makes it very difficult to estimate and plan for the costs.

“Some of the folks have other sources of insurance, like a spouse,” he said. “But right now I can’t predict how many that might be.”

Mr. Laine, 52, a University of California Los Angeles graduate with three children, says he spoke to his insurance broker in December and was told that when he renews his company’s health plan for 2014, his premiums could go up by anywhere from 15% to 60% — regardless of whether more employees choose to be covered by his firm. “The message is, ‘We really don’t know; we have no way to predict for you what it will cost in any reasonable way,'” he said.

On the other hand, his firm could drop insurance, and face $94,000 in penalties. But the decision is a lot more complicated than which option is cheaper. Insurance benefits are tax-free, and a lot of firms don’t want to risk losing workers to competitors — or getting bad publicity for ditching coverage.

Mr. Laine is worried that it would be difficult to attract or retain staffers without a health plan. Moreover, dropping insurance “fundamentally goes against our organization’s values,” he said.

IT Firm Foresees an Edge
Business: Pro Computer Service LLC, Moorestown, N.J.

Rough calculations: Premiums stabilize, or perhaps even decrease.
Options Considered: No changes because the company hopes it will gain a competitive boost.

Anthony W. Mongeluzo believes the health law will lower and stabilize insurance premiums for his 13-year-old information-technology-services firm. He also thinks it could give his business a leg up against rivals.

Mr. Mongeluzo, the company’s 32-year-old president, has roughly 40 employees today, but since his firm is growing — he said revenue is on track to reach $7 million in 2013, up from $6 million last year — he is hiring. He expects his head count to be above 50 by January, when the employer provisions of the health law go into effect.

The company already offers a health-insurance plan that covers hospitalizations, doctor visits, maternity care and prescriptions, so the law “isn’t going to hit my wallet,” he said.

Mr. Mongeluzo relies on technology and streamlined business processes to keep his overhead low, so he can afford to cover 55% of premiums for employees and their families. “My understanding from talking to my broker is that we will be in compliance” with the law, he added.

Under the health law, insurers must justify to regulators any plans to increase premiums more than 10% a year. For this reason, Mr. Mongeluzo, who started Pro Computer Service after graduating from college in 2000, said he doesn’t expect his firm’s future premiums to increase as much as they have in the past, an average of roughly 20% a year.

Mr. Mongeluzo said he has always offered his employees health benefits, in part because he believes it helps with retention, and he stressed that turnover at his firm is low.

His staff also enjoys regular office videogame competitions. “You’ll see squishy balls flying around the office,” he said, adding that he is a pretty eccentric entrepreneur, often working out of a sport-utility vehicle retrofitted with a three-foot-long desk, two computer screens, a fax machine and shredder.

Because many of his competitors currently don’t provide health benefits to their employees, he thinks some will be forced to raise prices, or lay off workers to avoid the law. That, he figures, might give him the opportunity to offer lower rates than his rivals and land more clients.

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Fewer Businesses Provide Health Insurance

Via CNN Money

Employee health insurance is on the decline, and for small businesses, it’s gone from bad to worse. The share of small companies providing insurance plummeted from 47% to 38% between the years 2000 and 2011, according to a report from the Robert Wood Johnson Foundation. The proportion of all companies offering insurance slid from 59% to 52%.

Annual premiums paid by individuals doubled from $2,490 to $5,081, while family premiums rose even more, from $6,415 to $14,447. As a result, fewer companies are offering health insurance, and fewer employees are taking it. The Robert Wood Johnson Foundation defined a small business along new health reform guidelines: those with fewer than 50 employees. The organization is a long-time supporter of health care reform.

“Small businesses just have so many pressures,” said John Lumpkin, the foundation’s senior vice president. “When they’re facing these economic crunches, one of the things they have to cut to survive is health insurance.”

Tiny companies have a harder time dealing with rising insurance costs for two reasons. These firms typically have smaller profit margins. Additionally, insurance companies charge them higher rates. That’s because insurers view each company as a separate pool of risk, and smaller companies have fewer employees to spread out that risk. “You’re not going to get the same discount as a large business,” Lumpkin explained. “In the insurance market, the number of people that you have determines your leverage.”

In total, 11 million people lost insurance during an 11-year period. The number of people whose work provided insurance dropped from 170 million to 159 million.

Will Obamacare halt the rise in premiums? No one knows yet. But there are two prevailing theories. Obamacare forces insurance companies to provide coverage to all, including those with preexisting conditions and dangerous habits, such as smoking. Critics fear that will drive up premiums. However, Obamacare’s individual mandate also forces everyone to buy insurance or face penalties, which spreads out risks and costs. Supporters think that will make insurance cheaper.

What is clear is that some health reform measures are already facing setbacks. The Small Business Health Options Program is supposed to let business owners choose a level of coverage and have their workers pick among competing plans that qualify. However, regulators have recently proposed changes that could cause small businesses to avoid Obamacare exchanges.

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