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Sep 16
2009
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Sen. Max Baucus, chairman of the Senate Finance Committee recently released a detailed summary of its much anticipated version of healthcare reform. Dubbed America’s Healthy Future Act of 2009, the proposal is a 10-year program estimated to cost $856 billion paid for with $507 billion in cuts to government health programs and $349 billion in new taxes and fees. The bill does not include a government-run insurance option but does include a system of nonprofit member-owned cooperatives. Some of the items in the bill affecting small and mid-sized businesses include:
1. Qualified small employers (i.e. an employer with no more than 25 fulltime equivalent employees employed during the employer’s taxable year, and whose employees have annual wages averaging no more than $40,000) would receive a tax credit for purchasing health insurance for its employees. The full credit would be available only to employers with 10 or fewer FTEs with average annual wages of less than $20,000.
Phase I of the credit would be for tax years 2011 and 2012 and employers would need to contribute at least 50% of the employee’s health premium (or 50% of a small business bench mark premium, if lower). The credit would be 35% of the employer’s contribution.
After 2012, Phase II of the credit would only be available for a small employer that purchases health insurance coverage for its employees through a newly created state exchange in which all private insurers in the individual and small group markets will be required to participate. Again, the employer must contribute at least 50% of the premium; however the credit will be 50% of the employer’s contribution. The credit would last for two years.
The employer’s expense deduction for health insurance premiums paid would be reduced by the amount of the credit. Self employed individuals, including partners and sole proprietors, 2% shareholders of an S-Corp and 5% owners of a C-Corp would not be treated as employees for the purposes of this credit.
2. Employers with 200 or more employees would be required to automatically enroll employees into health insurance plans they offer. Employees may opt out, but they must demonstrate that they have coverage from another source. States (with the approval of the Secretary of HHS) would have the option of establishing an auto-enrollment requirement for individual and small group markets.
3. An employer would not be required to offer health insurance coverage, however all employers with more than 50 employees that do not offer coverage would be required to pay a fee for each employee who receives a tax credit for health insurance through a state exchange. Credits would be available to employees with modified adjusted gross income up to 300% of the federal poverty level. For each full-time employee enrolled in a state exchange and receiving a tax credit, the employer would be required to pay a flat dollar amount set by the Secretary of HHS equal to the average tax credit in the state exchanges. The assessment would be capped at $400 per all employees at the company.
4. Beginning in 2013, an excise tax would be imposed on insurers if the aggregate value of employer-sponsored health coverage for an employee exceeds $8,000 for individual coverage or $21,000 for family coverage annually (amounts indexed to CPI ). The employer would be responsible for reporting to the insurer the amount taxable to the insurer under this provision and will be subject to penalties for under reporting the liability. There is a good chance that this excise tax would be passed back to the insured company in some form by the insurer.
5. Employers would be required to disclose the value of the benefit provided by the employer for each employee’s health insurance coverage on the employee’s annual W-2.
6. Effective in 2010, the cost of over-the-counter medicine (other than doctor prescribed) would no longer be eligible for reimbursement through a Health Flexible Spending Account (FSA) or a Health Reimbursement Account (HRA). Also, salary reductions by an employee for a taxable year for a Health FSA will be limited to $2,000.
7. For Form 1099 reporting, the bill would eliminate the exception for payments to corporations. Also, the class of payments with respect to which reporting is required would be clarified to include gross proceeds for property as well as services. This appears to effectively require reporting on all expenditures except for those to exempt or governmental organizations, international organizations and retirement plans.
The Senate Finance Committee will vote on this bill possibly as early as next week.
