Health Insurance Benefits for You and Your Team

Businessman And Problems

Affordable Care Act – Confusing, Overwhelming?

The 2010 Affordable Care Act became law on March 23, 2010. Whether you agree with this law or not, the law is having a major impact on the cost of doing business and the rules associated with this legislation are complicated. A national speaker that I recently listened to on this topic said, “The rules are the most confusing, overwhelming and poorly implemented laws and regulations the tax professional industry has ever faced. This is not meant to be a political statement, it is meant as a professional research interpretation of the hundreds of pages of documents written, re-written and yet to be written regarding these changes.”

One area of complication, that has come up recently, is related to how small businesses are able to provide health insurance to employees without sponsoring group plans. Are you currently reimbursing an employee directly for her health insurance? Or, are you paying a non-sponsored company plan for an employee? If you answered, yes, you need to know that as of January 1, 2014 the Affordable Healthcare Act prohibits this from occurring. If you continue to reimburse your employee or pay a non-group sponsored plan you could be subjected to a $100 per employee, per day penalty. The following is a summary of the current health care benefit environment as well as some tips and a solution for your consideration:

Employers that Sponsor Group Health Plans

If your office sponsors a group health insurance plan and provides this insurance to your employees in a non-discriminatory method (unless the plan is grandfathered), then your ability to deduct the premiums paid as an employee benefit doesn’t change.  This means that business receives a deduction and the employee receiving the benefit doesn’t pay taxes on the benefit received.  The only significant difference from last year, as a result of IRS Notice 2011-1, is your ability to discriminate who may receive this benefit.

Employers that DO NOT Sponsor Group Health Insurance

IRS Notice 2013-54 now prohibits an employer from paying premiums on individual employee policies directly, and prohibits the employer from reimbursing employees for premiums paid for health insurance.  I see this occurring often inside practices, especially dental practices.  It occurs either for the doctor or possibly for a key employee.  Now, any reimbursement or direct payment needs to be included in taxable wages to the employee rather than being treated as a non-taxable fringe benefit.  Also, note that doing this may subject you to the penalty noted above.

Are there exceptions to the rule?

Yes, IRS Notice 2013-54 lists 5 exceptions to the rule, which are considered “Excepted Benefits”.  While these are exceptions, they are not fantastic solutions for the healthcare practices with whom we work, they do still offer some potential benefits.  The exceptions are:

  1. Health Reimbursement Accounts (HRA’s) are allowed to reimburse employee medical costs, including health insurance for employers with only one (1) full-time employee.
  1. HRA’s may reimburse for dental, vision and long-term care costs.
  1. HRA’s may be used when integrated with group health insurance.
  2. HRA’s may be used to reimburse for indemnity and cancer policies, and
  3. HRA’s may be used to reimburse retirees health care costs. 

Traditional HealthCare Flex plans are no longer allowed unless the employer sponsors health insurance.

However, broad full Section 125 Cafeteria plans are still allowed.  The utilization of a Section 125 plan can be beneficial to both the employer and the employee.  This type of plan allows an employee to utilize an unlimited amount, pre-tax for health insurance (with the exception of any insurance purchased through the exchange) and up to $2,500 for out-of-pocket expenses.

Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™, Enrolled Agent,  and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client, contact Mike at www.vmde.com

Please note: I reserve the right to delete comments that are offensive or off-topic.

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