Planning for repeal of Obamacare

Posted on Posted in Affordable Care Act, Employee Benefits, Health Insurance

PLAN NOW TO BENEFT FROM THE REPEAL OF THE AFFORDABLE CARE ACT

Obamacare is still the law of the land as we end 2016. We all agree that health care law will change in 2017 but we do not know specifically how or when. Leading Republicans say that the repeal of the Affordable Care Act will be the first action of the next Congress but that a replacement system is many months away. The rhetoric is to keep the good parts of the reform law but to discard the restrictive provisions that now harm businesses.

What should businesses do in the meanwhile? Business owners are forced to make real choices now about how to work within this unworkable legal framework. Those choices for America’s businesses need to be made independently of the timeline and political process that governs health care reform.

Last year I often blogged about my surprise that peer accountants chose to ignore portions of the Affordable Care Act in their discussions with business clients. I noted that hundreds of thousands of small businesses remained in violation of ACA and were possibly subject to huge tax penalties built into the law. I wondered how advisers would handle client’s upset when employer health plans were deemed in violation and subject to penalty. That never happened. Tax preparers who were supposed to calculate the tax penalty simply ignored the issues. I’m not aware that any business penalty was assessed by IRS in my area of focus. So now I wonder if those CPAs who ‘played dumb’ on ACA issues weren’t actually a whole lot smarter than me.

Employer risks related to health care fall into two categories:
1) Failing to provide legally required coverage – the risk that an employee’s attorney will assert a claim against the employer for medical expenses that would have been covered has the employee been covered under the employer plan as prescribed by law.
2) Tax penalties from non-compliance – For small companies, these primarily focus on the employer’s involvement with employees who receive subsidized individual insurance coverage through an exchange plan. For larger companies, these include the so called “play or pay” rules.

The two question employers ask most often are “What do we do if we can’t afford it?” and “Do I dare risk not complying?”. That usually leads to discussion of a third topic “What are the available workarounds?”.

I caution clients that a CPA is not permitted to provide advice based on the low probability of being audited and penalized. Some regulators even seem to get excited by the mere mentioning of the topic of compliance in generic discussion pieces like this article. Yet is seems clear that this consideration is front and center in the minds of business owners. I expect that casual non-compliance will expand in the early part of 2017 and I don’t expect to see any consequence of that trend among employers.

The best clue we can find about the future of employer-provided health plans after Obamacare is likely a look back at the most successful health plans before the law was implemented. Health Reimbursement Arrangements, Flexible Spending Accounts, integrated Section 125 Cafeteria Plans and partially self-funded plans are all poised to make a comeback. Already some firms are heavily marketing their Obamacare alternative products under various clever names. My small business employee benefit consulting practice marketed under Freedom Benefits seems likely to resurrect from its slumber during the Obamacare years.
I see this as the beginning of a period of opportunity for employee benefits planning but also a period of high risk for employers who rely on biased or inaccurate advice. I’m excited to offer businesses cost-saving options that will also raise employee morale. The most promising aspect of the planned repeal of Obamacare is that it will likely reopen the possibilities to consumer-driven (rather than government-driven) health care choices. Yet we must remain aware that our underlying long term health care crisis is far from averted. Proportionate attention to the risks as well as the benefits of changing health plan designs is important during this time of transition

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