Breaking: Cadillac Tax Delayed
The Cadillac Tax has been delayed for two years from 2018 to 2020 by President Obama. With this delay, a repeal could be in reach for congressional leaders and business groups who oppose the Cadillac tax. The legislation also suspends the medical device tax until December 31, 2017 and delays the health insurance tax one year.
Whats a Cadillac Tax?
The 40% excise tax applies to the cost of employer health plan coverage exceeding certain threshold amounts, which were originally set for 2018 at $10,200 for individuals or $27,500 for families. These thresholds are indexed and will be higher on the delayed effective date in 2020. The Omnibus also calls for a study on how to determine adjustments to these thresholds to reflect age and gender differences between businesses. While the tax was originally non-tax deductible, the Omnibus changes that treatment and makes the tax deductible. Originally, the Cadillac Tax was pushed back by the behest of Unions to 2018 from the original proposed 2014 date. Most Unions with generous health care packages would not be complaint within that time frame.
The bipartisan vote on the Consolidated Appropriations Act was 316 to 113 in the House, and 65 – 33 in the Senate. Many employers, unions, insurers and industry groups have opposed the tax based on concerns around administrative and financial burdens for employers and adverse outcomes for employees.
Medical Device Tax
The tax bill will place a two-year moratorium on the ACA’s 2.3% tax on the sale of medical devices. The tax imposed under this provision will not apply to sales during the period beginning on January 1, 2016, and ending on December 31, 2017. This applies to sales after December 31, 2015.
Health Insurance Industry Tax
The tax bill places a one-year moratorium on the so-called HIT tax (Health Insurance Industry Tax). If passed, the industry tax will not apply for calendar year 2017, which should result in less of an increase to group health insurance premiums for 2017.
So who said Washington bipartisanship was over? There is hope going into the New Years.
The Con Ed lockout this Summer couldn’t come at a more heady time. I’m not referring to the obvious temperature swelter but more to the employee health benefits that are at the back bone of virtually every recent Labor dispute. With the Con Ed dispute, Management’s has acquiesced on the health insurance . “Con Ed did accede to “public pressure” on Sunday by reinstating health insurance for the 8,500 members of Local 1-2 of the Utility Workers Union of America, a company spokesman said. The workers have been collecting unemployment benefits for two weeks but had to pay for their own prescription medicine and doctor visits because the company cut off health coverage when the old contract expired, at midnight June 30.”
Interestingly, Unions are major stakeholders in Healthcare as their benefits have been traditionally rich incentives attracting to workers. However, with A.C.A. (Affordable Care Act) otherwise known as Obamacare their health programs are very much in danger of additional taxation or member withdrawal. Unions estimate these provisions will raise the cost of health coverage by an additional $1,000 a year. In fact, a Union members may fare better on the Individual Mandated Exchange with projected individual direct insurance dropping 70% things will open up. A lower/middle income member will likely qualify for an additional discount credit. A more affordable health plan just may be a possibility.
There are other reasons the Individual Health Plan may be better:
- Unions as other self insured group must now comply with added benefits for preventive care, maternity care, Age 26 dependent care, pre-existing condition waivers.
- No Annual Limits on essential benefits by 2014
- No Lifetime Limits
- No more mini-med plans – discount health plans are prohibited. The movie John Q , based on a true story, where a father is told his son’s transplant will not be covered based on th elicited mini-med plan covering him up to $20,000. Large companies such as McDonald’s have also sponsored mini meds.
- Cadillac Tax – By 2018 a 40% excise tax on health plans that exceed $10,200(single) and $27,500 (family).
The original Cadillac Tax was pushed back by the behest of Unions to 2018 from the original proposed 2014 date. Most Unions with generous health care packages would not be complaint within that time frame.
However, not all is grim for Unions. HHS has issued waivers to 1,625 plans covering 3,914,356 individuals were exempt from these mandates through 2014. According to Heartland “More than half of the approximately four million individuals receiving waivers are union members, including 82.9 percent of those covered in the most recently updated list of waivers.”
With current administration posts coming from Union there wouldn’t be much surprise if these allowances continue. Would it be that bold to predict for Union Members in 2014 will be allowed to use their Individual Exchange income tax credits for their Union benefits packages? Small businesses may not be as lucky.
Small Business Tax Credit. From our blog http://alexmillers.wordpress.com/2011/04/18/president-kills-new-1099-reporting-of-ppaca/
More small businesses are providing health insurance to their employees in 2011 as a result of the tax credit of up to 35% and 25% for non-profits offered through PPACA starting in 2010. Several insurers have reported significant increases in small group enrollments. Coventry Health Care added 115,000 small group enrollments, representing an 8% increase; and Blue Cross Blue Shield of Kansas City saw a 58% jump, 38% of which had never offered health benefits to employees before.
Click video IRS – Health Care Small Business Health Care Tax Credit
Calculator – See How Much the Small Business Tax Credit Can Save Your Business
Further information can be found at http://www.irs.gov/newsroom/article/0,,id=223666,00.html. In addition, we have a simple work sheet that can determine exactly how much the credit is worth to you. Importantly, the Tax Credit will increase to 50% for small businesses by 2014!
Please contact our office for further guidance on your group’s plan.
The President yesterday released with great anticipation his own version of the Reform Health Bill. This is the opening bid before Thursday’s Bipartisan Summit.
The proposed Bill for the most part is similar to the Senate Bill passed in December with a few minor changes anticipated to cost almost $1 trillion over 10 years. The comprehensive bill adds cost saving measures and more affordability for lower income Americans.
As expected and in step with both Houses the proposal eliminates pre-existing condition but raises the penalty for individuals not paying into a mandatory health plan to 2.5% of adjusted gross income by 2016. Included, also, is an increase in the tax credits for health insurance premiums a sort of carrot and the stick model.
Spurred by recent rate increases by insurers such as Anthem’s 39% planned rate hike in California there is a provision to establish a new Health Insurance Rate Authority to give guidance and oversight to states and monitor insurance market behavior. “If a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.”
Also included is elimination of Nebraska’s politically wrangled special deal to help pay for a proposed Medicaid expansion, and would instead provide more help for all states to pay for their new Medicaid enrollees. It would delay enactment of a the Cadillac tax (40% tax in excess of $10,200/$27,500 for single/ families) on high-cost employer-sponsored insurance plans with no special exceptions to Union groups.
There is elimination of the Medicare Rx “doughnut hole” for Part D. There will be a 25% coinsurance fee instead for seniors in this gap. Currently, the gap starts after the first covered $2830 and continues on the next $4550 with only a 5% member responsibility thereafter.
Our small employer groups will be relieved to know that groups under 50 employees are exempt form the mandate. Under the Senate plan, employers with more than 50 employees that do not offer coverage would pay a $750 assessment for each full-time employee. The White House proposal would bump up that assessment to $2,000 for each full-time employee. However, in determining the assessment, an employer’s first 30 employees would be excluded from the calculation. Taking the case of an employer with 100 employees that did not offer coverage, for example, its assessment would be 70 times $2,000.
The proposal also is believed to retain a provision in the House and Senate bills that would impose a $2,500 annual cap, starting in 2011, on the maximum annual contributions that could be made to health care flexible spending accounts such as HRA and FSA.
Our position is that Health Care Reform done responsibly is important and inevitable for the sustainability of our country. While the current leaves millions uninsured it just as importantly leaves many who are already insured struggling to pay and possibly drop out going forward. Addressing the cost factors for those already insured is being understated.
Stay tuned till the end of the week for the Bipartisan Summit. We expect to see proposals on creating tax credits for employers who already offer benefits. Also allowing insurers to easily cross state lines and increase competition by creating a basic Federal health package. This will allow strong reputable companies like Humana to enter the NY/NJ/CT market and side step the choke full of mandates. NY already includes almost 20% of overall costs going to these add-ons.