I have given talks about the health care bill to a variety of groups, including physicians, but this is the first time that I have presented to a room full of accountants. Attendees received CPE credit.
My talk focused on the economic impacts of the employer mandate. This has been the focus of my earlier presentations, but this one differed in that I focused on the tax assessments.
Additionally, I had more concrete examples of employers responding the way that I have predicted (since we are moving closer to the January 2014 start date of the mandate); namely cutting hours to shift workers to PT status (30 hours/week) and laying off workers.
I suggested that accountants should familiarize themselves with the rules. Employers with 50 or more employees fall under the mandate. This includes separate businesses owned by the same person. For example, someone could own a garden store with 20 FT employees and a restaurant with 30 FT employees. The IRS will view this as the sum of the two (50 FT employees) in terms of assessment. Additionally, spouses should be careful when they own separate companies. The IRS could view your companies together and the couple could find both businesses falling under the mandate, even if separately they employ less than 50 workers.
How much are the assessments? There are several assessments, but the most damaging is the one for firms not offering health insurance. Suppose a firm employs 60 FT workers and does not offer qualified health insurance after January 2014 and one of their employees goes to the state exchange and uses federal subsidies. The firm will be assessed (60-30)*$2,000=$60,000 for 2014. (The government is quite pleased to remind you that the firm gets the first 30 workers free!)
What are the alternatives for this firm?
The average premium for an individual plan in 2007 (and it has risen since) was $4,704/year and $12,680/year for a family. A common value used to estimate qualified coverage is 80% of the average, or $3,763 and $10,144, respectively. If an employer covers 70% of the premium, this would require an employer to pay $2,634 per individual plan and $7,101 per family plan. The firm with 60 FT workers would see their expenses increase in 2014 by 60*$2,634=$158,040 to 60*$7,101=$426,060!
The choice between offering and not offering is an easy one: do not offer and pay the fee! This will result in a rush of folks to the state exchanges...which have yet to be set up.
Other alternatives include moving 11 of the workers to PT (moving the firm under the threshold for the mandate) and filling additional gaps with other PT workers. Imagine being one of the workers that was working over 30 hours per week and now being pushed under. Additionally, the worker has the added cost of purchasing health insurance through the state exchange as they fall under the individual mandate at a time that their income has fallen (unless they can find another PT job, but those are increasingly hard to get in the current labor market.)
If you would like to see the presentation you can find it below.
Enjoy,
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