Letter: Federal Health Insurance Tax Harmful to Employers

The federal Health Insurance Tax is an aspect of the Affordable Care Act that poses a threat to businesses across the country. The following letter of concern from Caryl Auslander, the Indiana Chamber’s vice president of federal affairs, was sent to Sen. Joe Donnelly and explains the Chamber’s position on the issue.

Senator Donnelly,

As Hoosiers, we are proud that our state has shown strong and sustained economic growth ever since the nationwide recession in 2009. It is our concern that the Federal government is hurting, rather than helping, by enacting policies that harm the employer community, specifically small businesses. In particular, we are deeply concerned by the Health Insurance Tax (or “HIT”) that is embedded in the Affordable Care Act.

This provision ensures that those individuals and businesses that have to turn to private insurance companies for coverage are stuck with a disproportionate share of the costs of the ACA. While the original intent of the HIT was supposed to be paid by the insurance companies, in reality the companies really act only as tax-collecting proxies for the Federal government.

When a consumer cannot avoid purchasing a good or service, they have little or no power to resist price increases imposed by suppliers. And when all of the suppliers are charged the same tax, they all have the same incentive to pass it along to their consumers. Thus the HIT forms a hidden tax on health insurance consumers: The families and small businesses who can’t afford to self-insure.

By some estimates, the HIT will cost more than $500 per family every year. A tax burden like that can place real hardship on a middle-class family, push poor families straight into insolvency, and keep small businesses from being able to hire new workers, reinvest in their company or provide other services to consumers. In a small firm with 80 employees, the hidden HIT alone could cost more than $40,000 a year — well over the state’s per-capita income.

The HIT is a hidden and regressive tax, and bipartisan agreement has been enough thus far to delay its full implementation. But middle-class Hoosiers and small business owners here cannot afford the continued uncertainty. On behalf of 24,000 Chamber members and customers across the state of Indiana, it is our request that you place the permanent elimination of the Health Insurance Tax at the top of your agenda. Its unconditional repeal would be a victory for transparency, good government, and economic opportunity for all.

Thank you for your leadership on this issue and for defending the people of Indiana.

Sincerely,

Caryl Auslander
Vice President, Federal Affairs

Chamber on Federal Approval of HIP 2.0 to Satisfy ACA Requirement

Indiana Chamber of Commerce President and CEO Kevin Brinegar comments on the federal Centers for Medicare & Medicaid Services giving the green light to the Healthy Indiana Plan expansion (HIP 2.0), which is in lieu of traditional Medicaid expansion required under the Affordable Care Act (ACA).

“We are very pleased that the Centers for Medicare & Medicaid Services (CMS) appreciated Indiana’s unique brand of addressing the needs of our uninsured population and recognized HIP 2.0 as the best option for Indiana to expand health care coverage. The Indiana Chamber had reviewed HIP 2.0 and urged CMS to approve it.

“HIP provides reimbursement to health care providers at Medicare rates. Otherwise, health care providers recover such losses by increasing prices for private sector employers and their employees through cost shifting. Any attempt to lessen that cost shift is welcome.

“What’s more, the approval of HIP 2.0 will provide health care coverage for tens of thousands of additional Hoosiers and bring billions of dollars into Indiana’s economy.

“We applaud Gov. Pence and his administration for recognizing that HIP 2.0 was the best course for the state and for staying firm in that belief.”

Indiana Medical Device Leaders Wary of Taxes from ACA

Gabrielle Karol of FoxBusiness.com reports on the looming taxes and fallout from the Affordable Care Act that could give some of Indiana's medical device makers big headaches. The Chamber and other business organizations continue to fight this.

In Warsaw, Indiana, known as the “Orthopedic Capital of the World,” the CEOs of medical-device companies are none too pleased with the medical-device tax imposed by ObamaCare.

In this edition of Conference Room, Iconacy CEO Tom Allen and OrthoPediatrics CEO Mark Throdahl tell FBN’s Jeff Flock that the 2.3% excise tax will have a major impact on their businesses.

“This is a tax on sales. We have no profits to pay it from, so the only way to stump up the money to pay a tax of this size is by cutting programs,” says Throdahl, whose company makes orthopedic products for children with fractures or leg or spine deformities.

Throdahl says the tax will prevent his company from growing.

“All of the engineers who surround me – their payroll is equivalent to the tax we’re now paying Washington. So we could double the size of our technical staff were it not for the medical-device tax,” says Throdahl. While Allen’s company is still in the launch phase, so the tax hasn’t yet had a major effect, he says it has hindered his ability to add staff as well.

Given that Warsaw is known for its medical-device companies, the tax could also have a profound effect on both the community and the state of Indiana.

“There are estimates that over 40,000 jobs will be impacted in the medical technology industry by the medical-device tax,” says Throdahl.

Indiana Economic Development Corp. president Eric Doden says the tax is particularly disappointing to the community given the strides made to reduce the tax burden paid by these companies.

“In Indiana, we have had a history of entrepreneurship particularly in this arena. And these are high paying jobs and the thing that sort of disappointed us as a state is that Governor Pence and the State House [have] done an incredible job of lowering taxes and trying to create a better environment for these businesses to start to grow,” says Doden. 

Chamber Members: New ACA Helpline can Help Alleviate Your Health Care Stress

Concern over the Affordable Care Act (ACA) — from its complexity to actual implementation — is something we continue to hear a lot about from the business community. To better assist with those inquiries, we are pleased to introduce a new service exclusively for Indiana Chamber members.

The Indiana Chamber's ACA Helpline is now here to help your organization navigate through the complicated health care reform processes and obligations. This FREE service is similar to the popular HR Helpline; we encourage employers of ALL sizes to use this member benefit.

Mike Ripley, Chamber vice president of health care policy, will be answering your questions. He is a former insurance agency owner and was chairman of the House Insurance Committee as a state representative.

Ripley says while employers are faced with a more reasonable timeline overall due to the employer mandate being delayed until January 2015, there is still plenty that needs to be taken care of between now and then. Virtually all the rest of the employer responsibilities and various levels of compliance remain the same — as other ACA provisions were unchanged.

Among the common questions from employers:

  • Who is considered a full-time employee?
  • What if we offer coverage but our employees don't take it?
  • What is the employer shared responsibility payment?
  • Do we have to provide notice to our employees?
  • How do we know if our coverage is affordable/provides minimum value?
  • Will our company qualify for small business tax credits?

Make your own list of issues and start using the Chamber's ACA Helpline today! Call Mike Ripley at (317) 264-6883 or send an email to [email protected].

Indiana’s New Medical School Opens

Tried to get in to see your primary care physician lately? It’s possible you’ve found it harder and harder to get a quick turnaround time on an appointment, unless it was scheduled months in advance.

There’s a likely reason for that: a shortage of primary care physicians, plus more patients in the system, equals less time for you to see your doctor. (That’s not to mention what will happen when the full brunt of the Affordable Care Act begins in 2014, forcing huge numbers of new patients to vie for attention from a dwindling number of physicians.)

In 2011, I wrote a story for BizVoice® magazine about Marian University opening the first college of osteopathic medicine in the state – and the first new medical school to open here in more than a century.

The Marian University College of Osteopathic Medicine will open next week and will produce about 150 graduates per year, according to a press release from the school.

While writing that story I found some sobering facts about our looming doctor shortage:

“The American Association of Colleges of Osteopathic Medicine is predicting a shortage of more than 150,000 doctors by 2025 (nationwide).

“Indiana’s statistics are staggering: The state is short 5,000 physicians. By 2020, Indiana will need 2,000 more primary care physicians. Of 92 counties, 57 are medically underserved. The mental health provider shortage is 38%, while the deficiency in primary health care physicians is 30%”

So you can see we have a dire need for more physicians.

Do you know the difference between an osteopathic college and a college of medicine? Here’s a quick run-down of the differences:

  • Doctors who graduate from an osteopathic college earn a DO degree; those who graduate from a college of medicine earn an MD degree
  • DO’s and MD’s are in the same medical board; qualifications are essentially the same
  • It mainly comes down to philosophy. When I spoke to the college’s dean, Dr. Paul Evans, in 2011, he said this about the difference: “The philosophy of osteopathic medicine stresses looking at the patient as a whole and the wellness and prevention aspects of medical care. The bottom line (for both) is to treat the patient”
  • Students in both types of school earn a four-year degree and then begin three to seven years of postdoctoral medical education, residencies and fellowships
  • Osteopathic medicine traditionally graduates more primary care physicians

After that story, I sought out a DO for my primary care physician and am quite happy with the results. Cheers to the new school of osteopathic medicine!

Don’t be Unprepared Because of Health Care Reform Myths

Tracey Gavin of Apex Benefits Group wrote a notable column for Inside INdiana Business recently, pointing out the dangers for employers of not being prepared for fallout of the Affordable Care Act. She lists eight common myths that you need to be aware of:

Those answers could help implement solutions that go beyond compliance, but help minimize the financial impact and even capitalize on strategic opportunities through proper planning and preparation.

Myth No. 1: I don't need to worry about Health Care Reform or make any decisions until January 1, 2014.

Truth: Employers need to plan now. Some need to determine their status as "large employer" under the federal statute. Others need to begin the process of determining full-time status for certain classes or types of employees. Failure to do so can trigger maximum penalties – or worse, fines for non-compliance.

Myth No. 2: It is less expensive to terminate our medical coverage plan and just pay the penalty.

Truth: Aside from the impact on employees, many employers will find that once the penalties and tax consequences are accounted for, there may be little to no savings to terminate their coverage. In fact, some will actually pay more by terminating their plan.

Myth No. 3: An employer may ignore the law the first year or two – since they believe the worst that can happen is they end up paying some sort of penalty around $2000 per employee –minus 30.

Truth: No! A dangerous myth. An employer that is subject to the federal law – and willfully avoids compliance – is subject to a fine of $100 per day, per affected person. An employer with 50 equivalent full-time employees that ignored the law (versus an honest mistakes while trying to comply) could be fined $5000 (or more if dependents are included) per day — until the employer corrects the noncompliance. It is clearly noted in the regulations this fine can be levied at up to $500,000 per employer.

Myth No. 4: After health care reform is implemented, most employers will stop offering medical benefits.

Truth: There may be changes to plan offerings and contribution strategies, but few employers plan to drop coverage, according to a Towers Watson and National Business Coalition on Health survey. The reasons to offer coverage to employees have not changed just because health care reform was passed. For example, attracting and retaining employees remains important part of the business operating efficiently.

Myth No. 5: My carrier and broker will take care of everything.

Truth: Some will. Others may not be able to. An advisor's inability to help employers maintain compliance and quantify the financial risks leaves employers vulnerable to serious fines, penalties, excess costs and tax implications. Employers must be proactive and understand the financial viability of their employee benefits programs and impact to their organization.

Myth No. 6: A simple calculation for "pay or play" will provide our company with an accurate projection of financial risk under PPACA.

Truth: Unfortunately, this myth is perpetuated by the many online – or – "black box" calculators in the marketplace. The truth is employers need to do an analysis that captures all the inter-related and moving parts of PPACA that can impact the financial sustainability of their plan. Cost drivers such as plan design, contributions, migration, and many other factors. To complicate this, scenarios need to be modeled precisely and include projecting how changing one factor can in turn impact all the others.

Myth No. 7: Employers that offer a self-funded plan will have very little compliance costs or issues.

Truth: Self-funded plans do in some ways have more plan design flexibility under health care reform and potentially avoid some tax assessments. However, the majority of regulatory requirements apply to groups irrespective of their plan funding. Regardless of funding status, all employers will need to understand the financial ramifications of health care reform to their business and employees.

Myth No. 8: Employees would be financially advantaged by obtaining coverage through Medicaid or the Exchange.

Truth: Maybe. Certainly most individuals qualifying for Medicaid would be advantaged. Individuals who could qualify for tax subsidy may or may not be financially advantaged when premiums and out-of-pocket expenses are compared to employer-sponsored health coverage. Those whose household income is greater than 400 percent Federal Poverty Level (FPL) would be faced with much greater premiums and out-of-pocket expenses compared to employer-sponsored coverage.

CBO Estimate of Those Who Will Lose Employer-Provided Health Insurance Under ACA Doubles

The Washington Times reports that many more Americans than previously thought will lose employer-provided health insurance due to the newly enacted health care law, supported by President Obama. This unfortunately contradicts his campaign rhetoric during the 2012 debates and speeches on the matter.

President Obama's health care law will push 7 million people out of their job-based insurance coverage — nearly twice the previous estimate, according to the latest estimates from the Congressional Budget Office released Tuesday.

CBO said that this year's tax cuts have changed the incentives for businesses and made it less attractive to pay for insurance, meaning fewer will decide to do so. Instead, they'll choose to pay a penalty to the government, totaling $13 billion in higher fees over the next decade.

But the non-partisan agency also expects fewer people to have to pay individual penalties to the IRS than it earlier projects, because of a better method for calculating incomes that found more people will be exempt.

Overall, the new health provisions are expected to cost the government $1.165 trillion over the next decade — the same as last year's projection.

With other spending cuts and tax increases called for in the health law, though, CBO still says Mr. Obama's signature achievement will reduce budget deficits in the short term.

During the health care debate Mr. Obama had said individuals would be able to keep their plans.