Posts Tagged ‘Patient Protection and Affordable Care Act’

What You Need To Know About Obamacare Employee Dumping

Thursday, June 5th, 2014

You may have heard some buzz lately about the Obama administration and/or the IRS barring employers from “dumping” employees onto the health care exchanges – with some truly severe cash penalties for doing so. But is this really “new” news? What exactly does this mean? It might surprise you to know that employee dumping is not all it seems.

A recent New York Times article explains that “employee dumping” is the practice where an employer drops health insurance coverage to its employees, the employees go to the health care exchange to buy insurance, and then the employer on a pre-tax basis reimburses its employees for their premiums. This “have-your-cake-and-eat-it-too” approach (with various ways to accomplish it) was one of the leading responses to this legislation that Obamacare consultants developed. The administrating agencies (IRS, HHS, DOL) shut this option down when they issues guidance in September 2013. ANY attempt by an employer to pay an employee a pre-tax benefit for health insurance has since then been a very dangerous approach, although some exceptions exist (e.g. retirees only). This current “news” is simply a clarification that these things are indeed busted.

Can You Still Drop Health Care Insurance Coverage?

What if you want to drop your coverage, send employees to the exchange, and then increase their after-tax pay so that they can pay for exchange insurance? That’s OK, it doesn’t conflict with the rules. It’s only pre-tax benefits you should be concerned with.

What if you increase worker pay as I just described, and then the employee sinks that cash into an HSA that they get from a bank (for free)? That gets them a tax deduction (up to certain limits) … is that OK?  Yes! Remember that what the IRS is looking to prevent is employers trying to give pre-tax benefits without offering insurance – that is the “evil” that these regulations are designed to combat. Once the employer pays taxable wages to an employee, the employee is free to use whatever means they have available to be tax efficient.

A Pit Trap For The Unwary

So is “employee dumping” limited to the situation where employers are trying to push tax-free cash to employees? Actually no, and this is why I refer to this as “a pit trap for the unwary.” Dumping also refers to the practice of employers encouraging workers with high medical bills to go to the exchange.

What exactly does this mean? Think of it this way … As an employer, you have an insurance plan that still takes into account the health and claims of your workforce (they still exist). If you can get an employee to the exchange that has $400,000 of medical costs a year, you could potentially save a large sum of money and your employee is not harmed because they can get quality coverage on the exchange for no more than a healthy individual can.

Some companies throw a cash kicker on top for the employee to voluntarily drop coverage (what’s an extra $10,000 in cash if you are saving $100,000+). Everybody wins, right?  Well, not the Exchange. If it’s discovered that you – the employer – are doing this, there are administrative rules in place that can throw that cost back at you. Insurance companies have a duty to report suspected employee dumping, so be careful!

Obamacare Help

Have you considered “dumping” or are you unsure if you’re heading down this path? If so, contact Rea & Associates. Our team of Ohio tax professionals can help you determine what path is best for you to take, as well as help you stay in compliance with Obamacare rules and avoid any pitfalls along the way.

Author: Joe Popp, JD, LLM (Dublin office)

 

Interested in reading more on how Obamacare will impact you and your business? Check out these posts:

Peeling Back The Onion: Answering 3 Popular Obamacare Questions

Health Insurance Options: SHOP, Drop, Roll, or Self-insure?

How Will ACA Federal Exchange Premiums Affect Ohio Small Businesses and Consumers? 

 

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Peeling Back The Onion: Answering 3 Popular Obamacare Questions

Thursday, December 12th, 2013

As Obamacare becomes more and more of a reality to individuals, I’m being asked lots of questions. In the past few weeks, I received three questions that I’m finding are common concerns among the people I’ve talked with. I wanted to share these questions and provide some insight into each. So let me peel back the Obamacare “onion” and help you better understand how you may be impacted or what options you have available to you.  (more…)

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How Will ACA Federal Exchange Premiums Affect Ohio Small Businesses and Consumers?

Friday, August 16th, 2013

By now, you’ve been hearing a ton about the Affordable Care Act (yes, even from us), and you may be getting tired of all this news. However, it’s critical for you and your business to stay up-to-date on what is changing and what is being decided as it relates to the ACA. The Ohio Department of Insurance (DOI) recently announced in a press release that if you’re an individual consumer who chooses to buy health insurance through the federal government’s insurance exchange, you’ll be paying approximately 41 percent more than what you paid in 2013. And if you’re a business owner, you’ll see somewhere in the ballpark of an 18 percent increase.  (more…)

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Some PCORI Fees Due This Wednesday – Do You Owe?

Monday, July 29th, 2013

And so it continues… the next deadline in a long list of fee deadlines for the Affordable Healthcare Act is fast approaching. If you are a business that is self-insured for health care (this includes Health Reimbursement Arrangements/Accounts), and if you had a plan year end on or between Oct. 1, 2012 and Dec. 31, 2012, then you have a new fee to pay by this Wednesday, July 31, 2013. Calendar year plans are included in this because their end date would have been Dec. 31, 2012.
(more…)

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What Should You Be Prepared For Now With the ACA?

Tuesday, July 9th, 2013

By now you have probably heard about the one-year delay to certain aspects of the Affordable Care Act (ACA).  But beware!  The other elements of the law are going into effect soon and there is one that may have sneaked past you – a new filing and fee due July 31, 2013.  (more…)

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