» Annual tax would be $36,500 per worker for noncompliance with Obamacare
By JACK WEATHERLY
Employers with fewer than 50 employees were promised a break by not having to provide group health insurance under the Affordable Care Act.
But now the IRS has served notice that under the rule that has been in effect since July 1 such employers are subject to $100 per worker per day excise tax if they help their employees with their health-care costs.
That could amount to a staggering $36,500 per worker annual tax.
“We were told over and over during the Obamacare discussions that if you had less than 50 employees there’s no requirement to provide coverage, so you don’t have to worry about any cost factor,” said Ron Aldridge, Mississippi director for the National Federation of Independent Businesses.
There are about 2,800 Mississippi members in the NFIB and “most of them for sure” have fewer than 50 employees, Aldridge said.
About one in seven of the employers reimburse their employees for medical expenses, Aldridge said.
If a company has five employees, the total tax would be $182,500. A “large” employer with 50 employees that did not provide insurance in compliance with the Affordable Care Act, would be subject to $2,000 per employee, with the first 30 employees exempt, for a total of $40,000, Aldridge said.
The NFIB is backing two measures that have introduced in Congress that would address the situation, he said.
The Mississippi Department of Insurance said in a prepared statement that if the small employer helps employees by paying their premiums, reimbursing medical expenses or raising salaries to compensate for policies bought by the individuals, the company is considered to be in violation of IRS Code Section 4980D.
A statement from the IRS to the Mississippi Business Journal stated that “these employer payment plans are considered to be group health plans subject to the market reforms [under the ACA], including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.”
The Mississippi Insurance Department said: “The rule appears nowhere in the Affordable Care Act but was developed by the Obama administration’s regulation writers at the IRS.”
“The rule punishes small businesses for providing the only health insurance support many can afford – a contribution to help employees pay premiums for their individual or family policies or to help finance direct payments for medical services,” the department said.
The IRS issue comes at a time when the fate of the state-run insurance exchange for small businesses, called One, Mississippi, is uncertain, Insurance Commissioner Mike Chaney said in an interview.
“One, Mississippi has got to be sustainable,” Chaney said. The potential problem is that Aetna is seeking to buy Humana, which is one of the two insurers in One, Mississippi, he said. “If they buy Humana, they may pull out of the state,” leaving only United Healthcare in the pool. If that happens, there is a “distinct possibility” that the state will not be able to find a replacement.
“I cannot see the state of Mississippi putting any money into” the pool “and, politically, I’m not certain that the Legislature will let us put any money into it.” The pool has been propped up by federal grants, Chaney said.
State and federal regulators will meet this week in Chicago to talk with Aetna and Humana. While the state officials will have no official say, the federal regulators will hear their comments, Chaney said.
Pepper Crutcher, a Jackson lawyer with Balch & Bingham who specializes in ACA compliance, said that, while the IRS situation looks dire, “my guess is there will be a congressional fix” and President Barack Obama will approve it.
Aldridge’s take: “Something needs to be done quickly before our No. 1 job creators are left holding the bag and are put out of business.”