Health Care Reform… What is Next?

Author, Shane Medlin, Employee Benefits Account Executive, Rancho Mesa Insurance Services, Inc.

Image of words, “Affordable Care Act” and graphics of money, calculator, magnifying glass, medicine, etc.

Recently, multiple proposals to change the existing Affordable Care Act (ACA) have emerged. How will the proposed changes affect employers and their employees? The future of the ACA is still in question. However, it is unlikely that any of the proposed changes will pass congress within the next 2 years. For example, Governor Gavin Newsom is proposing to bring back the individual mandate for California in an effort to help balance the state’s health insurance exchange, Covered California™, and keep it stable. Several bills have been introduced that would reinstate the individual mandate, requiring all state residents to have health insurance starting in 2020 or pay a tax penalty.

One of the proposals known as “Medicare for All” may negatively impact employers throughout the country. Roughly 175 million Americans receive their health care coverage through an employer-sponsored plan. “Medicare for All” would remove the requirement for employers to offer health insurance to employees and would likely result in an increase in employer taxes in order to fund the program. Individuals would likely see increased taxes as well. Currently, employers have control over the benefits and plans that they offer to employees. Many employers opt to offer richer benefits at a lower price to employees to help attract and retain skilled talent. This also helps decrease absenteeism and increase productivity in the workplace. Employers that have less than 50 full-time equivalent employees are not mandated to offer benefits. The main reason that some small businesses do not offer benefits to their employees is due to affordability. Increased taxes for these employers could affect the profitability of their business.

Employers are looking for penalty relief or repeal of the employer mandate because it is still being enforced by the Internal Revenue Service (IRS). Starting in 2017, the IRS issued ACA penalty assessments in Letter 226-J. More than 30,000 penalty notices have been issued assessing $4.4 billion in penalties for the year 2015. Many of the proposed penalties were incorrect and were caused by system errors or mistakes on the employer reporting forms. The employer reporting is complex and cumbersome for the majority of employers that are required to file. Due to the complexity, many employers pay for additional services offered through their payroll service provider to assist them with the reporting. Currently, the only change for employers is a two-year delay of the 40 percent excise tax on high-cost employer-sponsored health plans, also known as the “Cadillac Tax.” This delay changes the effective date from 2020 to 2022.

We are hopeful that if any changes are made to the ACA, they benefit the Americans that need health care coverage. This includes combating the rising cost of medical care and prescription drugs. Rancho Mesa is closely following any new developments with the Affordable Care Act as they emerge. Please contact us with any questions or concerns that you may have.