Tag Archives: tax credits

Small Businesses Sending Employees to The Exchange

Brian Adams, who sells fireplaces in Indianapolis, is like many of the nation’s small-business owners. As the cost of providing health benefits has climbed, he has struggled to afford coverage for his employees — a problem the new health care law was designed, in part, to address.

But a year after the law’s introduction of the insurance exchanges, provisions that were supposed to help small businesses offer employee health benefits are largely seen as a failure. And Mr. Adams, like many of his fellow business owners, is sending employees to the exchanges to buy their own coverage instead.

Nancy Smith, who runs the Great Arizona Puppet Theater in Phoenix, made a similar decision. Her business employs only a handful of people who need insurance, and she was able to offer only plans with high deductibles. She and her employees decided buying individual policies made the most sense.

“Everyone wanted to do it because our costs were too high,” she said.

Most of the focus on the Affordable Care Act has been on whether individuals can find affordable coverage through the online marketplaces. But the law also had the goal of creating a robust insurance market for small businesses by making tax credits available to businesses that provide coverage and creating small-business exchanges where companies could more easily find low-cost plans.

The small-business exchanges were barely functional in most states last year, and it remains to be seen whether the Obama administration will manage to stop the steady decline in the number of employers offering coverage to their workers. The administration is poised to try again when open enrollment begins on Nov. 15.

Federal officials say they do not know how many small businesses signed up for coverage in the small-business exchanges, but the numbers are likely to be very small. In California, for example, only 12,000 people were enrolled through the state’s small-business exchange, compared with more than a million who enrolled as individuals there. To date, few businesses have availed themselves of the tax credits available for purchasing coverage for low-wage workers.

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Jeffrey R. Ungvary President

Jeffrey R. Ungvary

Business Owners See Respite in Health Insurance Costs

A steady rise in health insurance costs appears to be slowing down for business owners. But with several important changes still looming under the health care law, it’s unclear whether that will continue in the years ahead.

Health costs for employers increased only 3 percent last year, according to the Kaiser Family Foundation’s recently released employer health benefits survey, matching the lowest annual growth rate since the group started tracking the numbers in 1999. Owners, especially those running small businesses, had historically been prone to double-digit increases from one year to the next.

It’s the second straight year that the annual growth rate has slowed, according to Kaiser, mirroring several other reports of health costs rising more modestly for private businesses — a pattern that Kaiser CEO Drew Altman called “good news for employers and workers.”

On one hand, the slowdown comes as a bit of a surprise, given that enrollment in new government-run insurance exchanges for small businesses — generally considered one of the health care law’s primary means of lowering rates for employers and the only way to secure some of the law’s new tax credits — has been very slow across the country. The Kaiser survey, which is based on responses from more than 3,000 firms, showed that only a tiny fraction of firms purchased plans through the new exchanges last year.

In addition, a new rule requiring many companies to provide comprehensive health plans were expected to increase costs for those that previously offered minimal or no insurance plans to their workers.

However, early renewal of existing health plans and a string of delays to that so-called “employer mandate” have allowed many firms to continue offering plans that do not comply with new minimum coverage requirements in the law. That has likely muted some of the rise in premiums we would otherwise see as employers shift to more robust, and thus more expensive, plans.

To read more, click here.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary


Court Rules: No Subsidies for Individuals for Health Insurance

A federal appeals court has ruled the Obama administration cannot subsidize insurance premiums for nearly 7 million Americans, dealing a serious blow to the Affordable Care Act (this does not impact state funded exchanges like New York and Connecticut). The ruling sets up an almost-certain appeal to the U.S. Supreme Court.

Two judges with the D.C. Circuit Court of Appeals in Washington ruled Tuesday that the text of the reform law clearly forbids income-tax subsidies to go to low- and middle-income Americans who use one of the 34 federally run insurance exchanges. The tax subsidies have been flowing since the beginning of the year, based on a 2012 interpretation of the law by the IRS.

The actual text of the law says the sliding-scale tax credits are only available for coverage purchased “though an exchange established by the state,” which only 16 states did. IRS officials had claimed the imprecise wording of the law contradicted Congress’ overall intent to expand insurance coverage as widely as possible. But that argument did not win the day Tuesday.

“Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges “established by the State,” we reverse the district court and vacate the IRS’s regulation,” the two-member majority wrote.

The ruling was the second dose of bad news for the Democrat-passed reform law this summer. Last month, the Supreme Court dealt a major symbolic blow to the law by ruling in Burwell v. Hobby Lobby Stores that the administration could not force the owners of closely held corporations to defy religious objections and cover contraceptives in their employees’ insurance plans. The ruling prompted new legislation to ensure contraceptives are covered without cost for millions of women, but the future of that proposal is far from certain.

Tuesdays ruling poses a much greater financial threat to the law’s internal function, but the decision was not altogether surprising.

During oral arguments in March, the judges seemed to be split along the partisan lines that eventually became the 2-1 vote on Tuesday, with Republican-appointed judges Thomas Griffith and A. Raymond Randolph voting for the plaintiffs and Democrat-appointed judge Harry Edwards siding with Obama’s IRS.

To read more, click here.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary