As of July 1st, small businesses across the U.S. began incurring fines for having the audacity to pay their employees extra money in their paychecks to enable them to purchase their own healthcare insurance. The fiends!
Prior to the passage of the Affordable Care Act, with its mandate that all Americans purchase insurance and requirement for businesses to offer employees insurance plans, many small companies provided coverage by directly reimbursing medical costs or for the cost of private insurance plans. Businesses do it because that’s a less complicated process than dealing with an official health insurance plan, but continuing to do so after July 1 could cost them hundreds of dollars in fines each day.
The new rule is the result of an Internal Revenue Service interpretation of part of the ACA. It seems intended to force employers to offer a group health insurance plan (or leave their employees to fend for themselves on the health insurance exchanges).
The IRS says those reimbursements — technically known as “employer payment plans” — are “considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.”
The end result?
“Such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code,” according to the taxmen.
The new rules also require that employee health benefits go through payroll, which is then subject to taxes, lowering the amount employees receive and increasing the cost to operate the business.
This is a perfect example of a coercive government law that provides no benefit to business and even less benefit to those in the workforce which it’s theoretically designed to help. This is a “fix” for a problem that didn’t exist, and one that brings with it thousands of dollars in penalties for companies that are doing the right thing in what has been deemed the “wrong way” by bureaucrats.
Let’s not ignore the last point about heath costs going through payroll and thus now being eligible for taxation either – is this a happy coincidence for the government, or an intentional money grab instituted by lawmakers? I’ll always err on the side of greed in government and an ever-expanding state.
If this were a country governed “for the people, by the people,” this would be quickly remedied and amended to allow for direct compensation for employees to pay for healthcare, but I’m not going to wait for any fireworks to go off early, or to be wowed by policymakers’ efforts to make anything less complicated, even if it makes total sense.
As more and more people become affected by the increasing cost of ACA mandated insurance, more will seek alternatives. For one such alternative, look into the concept of health sharing with our friends at Health Excellence Select.
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