More US Workers Receiving Health Insurance Through Their Employers Again

More US Workers Receiving Health Insurance Through Their Employers Again

The latest data from the Labor Department shows that the percentage of private sector employees in the US offered health insurance through their employer rose from 67 percent in 2017 to 69 percent this year, the Wall Street Journal reported earlier this month. This figure had dwindled from 71 percent in 2010, when the department began conducting this survey, and this latest uptick represents the first year-over-year increase since 2012.

The Labor Department report showed that 86 percent of full-time private sector employees were offered health benefits, along with 21 percent of part-timers. Union members were significantly more likely to be offered these benefits (94 percent) than non-union employees (66 percent). Of those private sector employees offered medical benefits, 72 percent chose to take advantage of them.

Smaller employers, who are not required to offer health insurance under the Affordable Care Act, had driven most of the decline over the past eight years: Among organizations with fewer than 50 people, 51 percent offered health insurance to their employees in 2018 compared to 55 percent in 2010. Large businesses, with over 500 workers, have been more consistent in offering these benefits, with the percentage of large employers providing health insurance hovering near 90 percent since 2010.

The ACA mandates that organizations with 50 or more full-time equivalent employees offer at least a minimum standard of health benefits to employees working 30 or more hours a week, or pay a penalty of $2,000 per employee. Most large businesses already offered medical benefits before the ACA took effect and continued to do so, but some mid-sized employers have chosen to pay the penalty instead, as the cost of covering their employees would be greater, Paul Fronstin, director of the Health Research and Education Program at the Employee Benefit Research Institute, told the Journal.

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New Labor Department Rule Opens Way for More Association Health Plans

New Labor Department Rule Opens Way for More Association Health Plans

The US Department of Labor has finalized a new regulation that will enable more small businesses and self-employed Americans to buy health insurance through association health plans (AHPs), which proponents say will help lower health insurance costs for smaller employers, but which critics say undercuts the essential coverage requirements created by the Affordable Care Act. The core impact of the nearly 200-page rule is to broaden the definition of the term “employer” under the Employee Retirement Income Security Act (ERISA), establishing new criteria under which employers can join together in an association that would still be regarded as a single “employer” for ERISA purposes. SHRM’s Stephen Miller discusses what that means for how small businesses buy group health insurance:

The broader interpretation of ERISA will let employers anywhere in the country that can pass a “commonality of interest” test join together to offer health care coverage to their employees. An association could show a commonality of interest among its members on the basis of geography or industry, if the members are either:

  • In the same trade, industry or profession throughout the United States.
  • In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.

Sole proprietors will be able to join small business health plans to provide coverage for themselves as well as their spouses and children.

Previously existing AHPs, which were allowed under a more limited set of restrictions, will not be affected, unless they choose to expand in ways allowed by the new rule. The rule change, which President Donald Trump ordered the department to study last year, effectively exempts AHPs from ACA regulations that apply only to individual and small group plans by allowing them to operate in the more lightly regulated large group market. These regulations include the core package of health care services known as essential health benefits, which all plans in the individual and small group market are required to include but larger plans are not.

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Employers Fear Health Care Cost Spikes Next Year After Congress Fails to Act

Employers Fear Health Care Cost Spikes Next Year After Congress Fails to Act

The exclusion of measures to stabilize the health insurance marketplace from the omnibus spending package passed last week by the US Congress has revived concerns about sharp premium increases next year in both the individual and group health insurance markets.

A bipartisan plan had been in the works to add such measures to the spending bill, including four years of funding for the cost-sharing reduction (CSR) subsidies prescribed in the Affordable Care Act, billions of dollars in reinsurance funding to help insurance plans cover high-cost patients, and a provision opening up low-cost, catastrophic insurance plans to buyers over 30, Vox health care analyst Sarah Kliff explained last week. Negotiations broke down, however, after Democrats balked at Republicans’ insistence on including these limited-coverage plans in the legislation and reintroducing a ban on providing reinsurance funds to any insurance policy that covers abortion.

As a result, Jeri Clausing reports at Employee Benefit News, benefits experts and employers are now expecting premium hikes of as much as 30 percent in 2019. While the policies in question mainly concern the individual insurance market, the resulting cost issues stand to affect employer-sponsored health coverage as well:

“Destabilization increases uncompensated care, resulting in cost-shifting from healthcare providers to large employer payers,” Ilyse Schuman, senior vice president of health policy for the American Benefits Council, said earlier this month. …

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States May Impose Their Own Health Insurance Individual Mandates

States May Impose Their Own Health Insurance Individual Mandates

Although Republican efforts to repeal and replace the Affordable Care Act petered out last year without producing a bill, one of the key provisions of the law—the individual mandate—was effectively gutted in the Tax Cuts and Jobs Act passed by both houses of Congress in December. The tax reform package zeroed out the tax penalty imposed on Americans who fail to maintain continuous health insurance coverage throughout the year, rendering the requirement moot.

The effective repeal of the individual mandate undermines the ACA’s core principle of holding down health insurance costs by expanding the risk pool, raising fears of an upward spiral in premiums as healthy individuals exit the individual insurance market. In the wake of the mandate’s rollback, however, several states are considering imposing their own requirements that residents obtain health insurance, Lisa Nagele-Piazza reports at SHRM:

Massachusetts has already had an individual mandate in effect since 2007. “Massachusetts largely served as the model for the ACA,” explained Jeffrey Herman, an attorney with Greensfelder, Hemker & Gale in St. Louis.

More states may follow suit. Maryland lawmakers recently introduced a bill that would impose penalties on the uninsured in the state. And an individual mandate is also being informally advocated for or considered by state legislators or representatives of insurance exchanges in a number of other states, including California, Connecticut, Minnesota, Rhode Island and Vermont, Herman said.

Adam Solander, an attorney with Epstein Becker & Green in Washington, DC, tells Nagele-Piazza that he expects many states, particularly “blue states” with Democratic legislatures, to explore individual coverage mandates in the coming year.

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Congress Delays ‘Cadillac Tax’ on Health Plans Until 2022

Congress Delays ‘Cadillac Tax’ on Health Plans Until 2022

One of the most widely disliked provisions of the 2010 Affordable Care Act is the 40 percent excise tax it imposed on health insurance plans costing more than $10,200 for individuals or $27,500 for families. The so-called “Cadillac tax” was originally set to become effective this year, but its implementation date was later pushed back to 2020. A Republican plan to repeal and replace the ACA, which ultimately failed in Congress last year, had proposed to delay the tax until 2025, although employers have been pushing for its total repeal.

The major tax reform bill passed by Congress last month did not touch the Cadillac tax, but a resolution to restore funding to the federal government this week after legislative gridlock led to a government shutdown included a further delay in its implementation, SHRM reports:

Both political parties supported the provision to postpone the so-called Cadillac tax from taking effect until 2022, instead of in 2020—as did the Society for Human Resource Management (SHRM). The stopgap funding bill also amends other tax provisions that were part of the Affordable Care Act, such delaying the medical device tax—a 2.3 percent tax on the sale of certain devices—until 2020. …

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What Employers Need to Know About the US Tax Reform Act

What Employers Need to Know About the US Tax Reform Act

The “Tax Cuts and Jobs Act,” which officially passed both houses of Congress on Wednesday, will have a significant impact on employers throughout the US, by lowering taxes on corporate profits and most employees’ salaries, as well as by changing the tax treatment of executive compensation and a number of other rewards. Here’s a quick look at how tax reform will affect employers and employees, and what HR leaders need to be thinking about right away:

Corporate Tax Reduced

The act permanently reduces the maximum corporate tax rate to 21 percent from 35 percent starting in 2018, while providing additional avenues for businesses to avoid being taxed at higher rates. It also includes a one-time tax cut for corporations repatriating cash currently held overseas, and introduces a territorial tax system that imposes a 10.5 percent tax on future foreign profits, benefiting American companies that do a lot of business internationally. This change, which the tech sector is cheering, is meant to encourage businesses to reinvest their foreign profits in the US, but others say this approach has long-term costs that outweigh the apparent immediate benefits.

Some companies announced that they were passing a portion of their tax windfall onto their employees, either with across-the-board bonuses or increases in their internal minimum wage. Moves like these will please President Donald Trump and Congressional Republicans, who have long argued that slashing corporate taxes would lead to higher employment and wages. To critics, however, these announcements look more like public relations plays or attempts to curry favor with the administration, while investors, not employees, are expected to see the lion’s share of the gains.

Payroll Scramble

The first thing employers will have to do in the new year in response to these tax changes is to make sure their payroll deductions reflect the new rate and bracket structure, which has been significantly altered. The bill also dispensed with the personal exemption employees are used to using to calculate their taxable income, while roughly doubling the standard deduction. Payroll management companies Paychex and ADP say they expect to make these changes quickly and that employees should start seeing the new rates reflected in their paychecks as early as February. However, the Internal Revenue Service must first produce new withholding tables, which could take more time than usual given the overhaul the bill made to the system of deductions and exemptions. Employers will have to await further guidance on this from the IRS.

Executive Pay

The tax reform bill removes from the tax code a controversial provision introduced in 1993 that capped the tax deductibility of top executives’ compensation at $1 million, unless that compensation was “performance-based.” Originally intended to rein in the explosion of CEO and CFO pay packages, the measure failed to do so, and critics say it actually backfired by encouraging companies to shift executive compensation into stock options and pay for performance. Although it is unclear how the new rule will affect the way top-level executives are paid in the long term, it does give boards some decisions to make right now in order to maximize their tax benefit, such as whether to shift a CEO’s bonus payment from 2018 to 2017 so that it remains tax deductible. For more details, SHRM’s Stephen Miller has a helpful breakdown of the bill’s impact on executive compensation and payroll in general.

Other Employee Benefits

The bill changes the tax treatment of a variety of employee benefits, such as adding a new credit for wages paid to qualifying employees on leave under the Family and Medical Leave Act, but cutting the deduction for commuter benefits. SHRM’s Stephen Miller also provides a comprehensive explanation of these effects here.

Impact on ACA and Health Insurance Market

While Congressional procedure prevented Republicans from using the tax bill to formally repeal the mandate for individual health insurance coverage created under the Affordable Care Act, the bill takes the teeth out of the mandate by zeroing the tax penalty for failing to obtain coverage. This change will have major implications for the individual insurance market, potentially driving up premiums as healthy individuals exit the market, no longer fearing a tax penalty. The bill does not address other aspects of the ACA to which businesses have objected, such as the employer mandate and the so-called “Cadillac tax” on high-value health plans, but has emboldened business groups to push for more changes to these controversial policies in the coming year. As health care policy expert Timothy Jost explains in detail, scuttling the individual mandate will have some consequences for the employer-sponsored insurance market as well.

How the New US Tax Reform Bills Would Affect Employers

How the New US Tax Reform Bills Would Affect Employers

Late last week, Republicans in the US Senate and House of Representatives both passed versions of a comprehensive tax reform bill whose signature feature is a hefty cut in the corporate tax rate, from 35 to 20 percent. The bill, which received no Democratic votes in either house of Congress, now goes to conference, where lawmakers from both chambers will attempt to reconcile the two bills. Significant differences still exist between the two versions, however, and the Senate bill underwent a number of hasty revisions at the last minute before being passed in the middle of Friday night. It is therefore still uncertain whether Republican lawmakers will be able to agree on an identical bill that can pass both the Senate and the House.

Both versions of the bill have major implications for employers, beyond the tax breaks for businesses. Together, the bills touch on health insurance, retirement plans, and other employee benefits, but do so in different ways. SHRM’s Government Affairs team prepared a handy chart comparing the bills’ employer implications side-by-side, while Stephen Miller gives a comprehensive rundown of the differences:

Tuition Benefits: The House bill would eliminate the employer-provided education assistance deduction under Internal Revenue Code Section 127, which allows employers to provide up to $5,250 of tax-free tuition aid to an employee per year at the undergraduate, graduate or certificate level. The Senate version does not eliminate the education assistance deduction. …

Individual Health Coverage: The Senate’s bill would effectively repeal the Affordable Care Act’s (ACA’s) individual mandate, which requires most Americans to have health insurance, by reducing to zero the tax penalty for going without coverage. The House bill leaves the individual mandate in place.…

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