While I’ve not posed this question to my accountant yet it struck me last week while trying to figure out which direction we are going with our health care plan that we are potentially looking at a significant “Back door” tax increase.
As I’ve stated several times over the last couple years the ACA allows companies with less then 50 FTE’s to drop coverage completely with no penalties. Of course companies would only do this if for some reason it was better for them and typically better for their employees. Also as I’ve stated several times the only way this would be accomplished is if group rates were significantly higher then individual rates and for some reason individuals got an advantage that was not available under the group. Well both of these are the case. Everything I’ve seen over the last two years has group rates 20-25%+ higher then the exact same policy as an individual policy. Furthermore there is a disadvantage to many that may be working for a company with an active group as they are not eligible for any subsidy under the exchange. These two together are a HUGE incentive for any company with less then 50 FTE’s to dissolve their groups. The problem is that I have no idea what this is the case. Historically insurance companies, brokers etc liked groups and group rate were cheaper.
So while thinking about this and the ramifications I realized that when a company pays for the insurance premium it is a “Business expense deduction”, no taxes at all are paid on it. However if the company dissolves the group the typical way the employer will compensate the employee for now carrying the cost of the insurance will be thru a pay raise. That income is now taxed at whatever rate the employee is paying.
In the US there are roughly 30-35 Million people employed by companies with less then 50 FTE’s. Of those companies something like 90% provide insurance. Assuming that 50% of these companies dissolve their groups, I think the number will be larger, we are looking at ~15M people going from company to the exchanges. Let’s assume an average annual premium of ~10K. That means that at a 10% effective rate this is an additional 1K a year in taxes these people will be paying. ~15B dollars in revenue raised.
Some of these people may be able to get out of some of those taxes by itemizing assuming they have high enough itemization. Some may get out by working out some way to get “Reimbursed” for the cost from their company although I’ve still not verified the legality of that. I know personally of two companies that have already done the “Dissolve the group and give everyone a raise” route and suspect for many companies this will be the chosen route, resulting in the above tax increase.
I wish politician that are opposed to the ACA, could explain this to the public as well as you just did!!!
Me too. I don’t understand why they had to go to the Death Panel stuff when there is so much that sucks about the ACA. Higher deductibles. Smaller networks. Having to pay more to keep your doctor. Healthy people seeing 250% premiums increases. I could go on and on with legit stuff based on math but no they do Death Panels. It is so stupid.
I don’t understand why they had to go to the Death Panel stuff when there is so much that sucks about the ACA.
Pubs, once again, completely blew it by not facing a piss poor piece of legislation with the facts and rather choosing “Scare tactics”.
However I’m afraid that for the most part much of what you posted would have been seen as conjecture. I don’t think too many people would have forseen a complete shift in the market from Group policies being cheaper then individual policies to the opposite. From a market standpoint this still doesn’t make any sense. I think to a large degree the Pubs choose fear rather then facts because the many of the facts in this case took some understanding of economics to see the real pitfalls and the general public kind of glazes over when go there.
Can they take pre existing conditions or weight, or smoking habits into consideration for individual vs group plans? Perhaps the people buying individual plans are those who have lowest risk and those with conditions are getting into group plans?
I understand our plans are doubling in price this year as we move from a self-insured model to being given multiple choices with regional outside companies. Part of that could be how much the company is kicking in as we never really knew before. But part of it is probably what you are seeing also. We don’t have the option for individual plans.
Here’s one for you Matt. I’ve detailed before our saga with Obamacare. We finally got a new private plan through Anthem Blue Cross. More expensive for less coverage, of course. All private plans in CA are labeled with “Pathways” on your insurance card which to a vendor is code for Obamacare, which is code for lower reimbursements. So there are many doctors that won’t take you if you have “Pathways” on your card, like our primary care doctor and nearly every dermatologist in the region. Let me emphasize that we have a private plan not Obamacare. It makes no sense other than to cause chaos which of course will eventually be cured by single payer government plan for everyone.
The search goes on for a company plan that will get us out of this mess. Thanks Obama!!!
I don’t understand why they had to go to the Death Panel stuff when there is so much that sucks about the ACA.
Pubs, once again, completely blew it by not facing a piss poor piece of legislation with the facts and rather choosing “Scare tactics”.
However I’m afraid that for the most part much of what you posted would have been seen as conjecture. I don’t think too many people would have forseen a complete shift in the market from Group policies being cheaper then individual policies to the opposite. From a market standpoint this still doesn’t make any sense. I think to a large degree the Pubs choose fear rather then facts because the many of the facts in this case took some understanding of economics to see the real pitfalls and the general public kind of glazes over when go there.
~Matt
Because “facts” don’t sell.
If people were actually fact based, there is no possible way that Obama ever would’ve been elected to begin with. Instead, we vote for a man that voted “present” and spewed idiotic slogans like hope and change.
So how in the world would you ever expect to get a factual discussion about something going, when the other side is promising free, free, free, and more free?
I don’t understand why they had to go to the Death Panel stuff when there is so much that sucks about the ACA.
Pubs, once again, completely blew it by not facing a piss poor piece of legislation with the facts and rather choosing “Scare tactics”.
When were they supposed to address the bill? And what were they going to do to stop it? Team Donkey was going to pass it without any Republican involvement.
I don’t understand why they had to go to the Death Panel stuff when there is so much that sucks about the ACA.
Pubs, once again, completely blew it by not facing a piss poor piece of legislation with the facts and rather choosing “Scare tactics”.
When were they supposed to address the bill? And what were they going to do to stop it? Team Donkey was going to pass it without any Republican involvement.
And withe Brown victory we were all celebrating…that is until, they passed the bill as is before Brown could vote - and without House changes/conference. This is ALL on the Dems. They lied about what the bill would do.
When were they supposed to address the bill? And what were they going to do to stop it?
There was plenty of discussion about death panels and a plethora of other “Scare facts”. During that entire period I rarely heard any discussion about the true flaws of the bill.
I would agree that having many of the flaws being conjecture made this a bit more difficult.
I don’t understand why they had to go to the Death Panel stuff when there is so much that sucks about the ACA.
Pubs, once again, completely blew it by not facing a piss poor piece of legislation with the facts and rather choosing “Scare tactics”.
When were they supposed to address the bill? And what were they going to do to stop it? Team Donkey was going to pass it without any Republican involvement.
And withe Brown victory we were all celebrating…that is until, they passed the bill as is before Brown could vote - and without House changes/conference. This is ALL on the Dems. They lied about what the bill would do.
No they ‘misspoke’. In the words of morey we need to give them some ‘poetic license’.
Can they take pre existing conditions or weight, or smoking habits into consideration for individual vs group plans?
There is no difference now between individual plans and group plans as far as pre-existing conditions. As far as health weight etc I believe that is limited to a large degree as well. I know they can do smoking and non smoking but that is the same for both group and individual plans.
From what I’ve been running into you can pick out a plan and get it either as a group plan or individual plan. Same plan, same everything, group plan is typical 20-25% higher.
Part of that could be how much the company is kicking in as we never really knew before. But part of it is probably what you are seeing also. We don’t have the option for individual plans.
I think the real shit will hit the fan in a couple years from now after many small businesses have “Given raises” and dissolved their group coverage. When you’re paying 1200$ a month and then are hit with a 10% increase, pretty standard annually for insurance, and you have to pay the whole boat with no help from your employer people are going to wet themselves.
We are still looking. As I said before our rates doubled for a small business plan with 5 people. DOUBLED for less coverage. Can you say Chris Christie?
When were they supposed to address the bill? And what were they going to do to stop it?
There was plenty of discussion about death panels and a plethora of other “Scare facts”. During that entire period I rarely heard any discussion about the true flaws of the bill.
I would agree that having many of the flaws being conjecture made this a bit more difficult.
~Matt
I don’t remember anyone really knowing what were the details of the bill. Not even the Speaker of the House or the POTUS (not wanting to call him a liar).
Your company is moving from a self-funded arrangement to a private exchange? Are you talking about your employee contribution amount doubling or the per employee per month cost to the company doubling?
I don’t remember anyone really knowing what were the details of the bill. Not even the Speaker of the House or the POTUS (not wanting to call him a liar).
I think what you remember is that “No one had read it”, that is in fact the truth. But the bill itself existed, although not for very long. The Reps, rather then reading it and finding out how really bad it was, went right to the “Death panel” stuff. IF they would have read it they could have easily clarified what “You can keep your doctor” meant. In fact IIRC there were several here that pointed out this flaw and “Lie” before the bill was passed.
We are still looking. As I said before our rates doubled for a small business plan with 5 people. DOUBLED for less coverage. Can you say Chris Christie?
As I posted earlier we are more then likely moving into the exchanges. We have 3 people on the plan and we are looking at a 36.9% increase to move from the current group policy to an ACA compliant group policy which has not only a larger,20% larger, deductible but also a larger total family out of pocket. Rather then the 2X single deductible, the policy is now a 2.5X or 3X. IOW the single deductible went from 5K to 6K and the total out of pocket went from 10K per family to 15 or 18K…for 36.9% premium.
We redid our old non compliant plan thru the end of the year and are waiting for solid numbers from the exchanges and groups before we make a choice.
If the numbers hold we will likely dissolve our group. Not sure what we will do as far as compensation to the employees for this however. At present we are paying 80% of the employees portion and 30% of the dependents. The easy way out is to simply give raises and then not have to deal with insurance except for your own.
FWIW talking to the broker she’s had a couple companies do this and ~30% of the insurance plans are in default for non payment 90 days later.
I don’t remember anyone really knowing what were the details of the bill. Not even the Speaker of the House or the POTUS (not wanting to call him a liar).
I think what you remember is that “No one had read it”, that is in fact the truth. But the bill itself existed, although not for very long. The Reps, rather then reading it and finding out how really bad it was, went right to the “Death panel” stuff. IF they would have read it they could have easily clarified what “You can keep your doctor” meant. In fact IIRC there were several here that pointed out this flaw and “Lie” before the bill was passed.
~Matt
My Congressman who wrote part of the bill is quoted as saying that he cringed when he heard Obama say if you like your insurance you can keep it. I asked him if he knew that this statement wasn’t true why didn’t he say anything and he said that it was impossible to explain it in a soundbite. Now keep in mind that he had at least 3 60-90 minute town hall meetings about the ACA and he never once said anything about that. Pelosi, Obama, and all the others knew what this bill would do and lied to the public to get it passed. I read the bill because I was thinking of going to medical school and I knew that that statement was a lie.
Out of pocket has a materially different meaning in an ACA plan. Typically, in CA this was definitely true, the out of pocket maximum was actually an annual coinsurance maximum. Under the ACA out of pocket is an umbrella that includes all covered expenses to the member. This difference is especially meaningful if you’re dealing with expensive drugs, which previously could have an unlimited maximum. Secondly, you should look at your networks. Again in CA, with the exception of one carrier, individuals have no access to a full network the way groups do. Many of the largest and most reputable hospitals and physicians in southern CA are not included in the individual networks. In CA the only reason to go to the exchange is the availability of income based tax subsidies. Part of the ACA is that any plan available in the exchange must be available out of the exchange for the same premium. In some cases there are “better” non-exchange plans available directly with the carrier (in CA even these plans don’t have access to the full network). Another thing to check is the method in which the family deductible can be met. Some plans allow any number of the family members to satisfy the deductible. Some require one family member to satisfy the individual deductible then the remaining family members can satisfy the balance of the family amount. This applies to out of pocket maximums as well.
Is your carrier not making your plan available to be “grandmothered?” Some time near July HHS issued a guidance that allowed non-grandfathered, non-ACA plans to be “grandmothered” for an additional year. The carrier has to make it available to you though.