Insurance for small businesses

Q: Do you offer plans for small business? We are a small business of 3 people. Or can they purchase health insurance through you individually?

A: All of these plans shown in links related to Freedom Benefits are available to small businesses on a list bill basis. The easiest thing is to allow individuals to enroll without entering payment data and then ask us to set up the list bill.

If the business plans to pay for Obamacare-type individual insurance then an additional step is required to set up a Qualified Small Employer Health Reimbursement Arrangement.

Small group major medical coverage may also be available however these are traditionally not purchased through online enrollment services. A local representative may be the best bet.

“One-employee QSEHRA”: a contradiction in terms

The issue of health benefit payments for small businesses became a lot more complicated after implementation of the Affordable Care Act. After all, the law was designed to enforce rigid compliance with health care policy and do away with the liberally designed health plans that varied from one small employer to the next. Since late 2016 we’ve had a range of legislative and administrative actions to undo the harsh effect of the original law. Now we are left with a complicated hodge-podge of rules that can confuse just about anyone.

QSEHRAs are a new type of HRA implemented in 2017 that are specifically designed for an employer with a health plan covering two or more employees since plans covering only one employee are not subject to the reforms and restrictions that the QSEHRA is designed to address. The QSEHRA adds an additional layer of regulation and restrictions to allow an employer to help pay for individual insurance, something that is already always allowed in a one employee health plan,  In short, employers with a one employee health plan have no need for a QSEHRA.

The issue came up today among accountants when the bookkeeper of a small business said that the employer could reimburse only $10,0001 of the health insurance cost of an employee. The bookkeeper was likely referring to the strict excise tax penalties imposed by 4980 of the Internal Revenue Code and the limits of the workaround. Notwithstanding the effect of any administrative action designed to weaken and diminish the impact of these employer penalties, The IRS has already determined that these restrictions and penalties do not apply to one employee health plans2. In this case the use of a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) 3 is completely unnecessary and only serves to complicate the discussion.

My point is simply this: the QSEHRA was designed to help small employers mitigate the impact of ACA market reforms on small group plans – specifically those related to an employer penalty for paying for individual insurance. Those restrictions do not exist for one employee health plans. So any attempt to use a tool (QSEHRA) to mitigate the effect of the ACA is simply not necessary and only serves to create unnecessary complications and confusion.

While there is no authority specifically prohibiting the use of a use of a QSEHRA in a one employee plan, its use could be viewed by the Service or the courts, if applicable, as an error, It the event that QSEHRA failed to meet the more strict requirements then it seems likely that the plan might still qualifiy as a tradidtional HRA. For example, an employer with a one employee health plan that provided dental benefits would fail to meet the QSEHRA requirements but would still meet the requirements for a traditional HRA.

The conclusion is simple: Don’t use a QSEHRA in one person health plans where a traditional HRA will suffice.


1 The QSEHRA maximum for family coverage is actually $10,250 for 2018.

2 IRS Notice 2015-17: Guidance on the Application of Code § 4980D to Certain Types of Health Coverage Reimbursement Arrangements

3 IRS Notice 2017-67: Qualified Small Employer Health Reimbursement Arrangements

Interim major medical insurance

At some point in the middle of the year we may find ourselves without medical insurance. Regular major medical insurance is normally not available until the following January 1. Insurers and federal regulators are tightening the rules for mid-year enrollments, called a special enrollment period, to make it even tougher to get coverage outside of the annual enrollment period,

Fortunately several types of alternate coverage plans are available to most people. You must pay the whole cost because government subsidies are not available for this type of coverage. An employer can pay part or all of the cost because these alternate plans are not subject to market reforms as explained in IRS Notice 2015-17.

Plans vary from state to state. I recommend the “Smart Insurance Marketplace“, an online insurance exchange run by a private insurance technology company I;ve worked with this company for many years and have sent hundreds, maybe thousands, of satisfied customers to them over more than a decade.

How do Pennsylvanians get their health insurance?

Pennsylvanians get their health coverage one of six ways, according to the Pennsylvania Insurance Department.

  • 27% commercial self-insured
  • 23% Medicaid and CHIP
  • 20% Medicare
  • 14% group insurance
  • 5% small business insurance
  • 5% individual insurance
  • 5.6% are uninsured

Since news coverage focuses primarily on commercial insurance, people are often surprised that commercial insurance plays such a small role in the system, covering only one in four residents. I sometimes notice a sentiment that there is something ‘wrong’ if regular insurance is not an option. That is not the case, based on statewide trends. Commercial insurance does play a larger role in secondary and supplemental insurance.

If you need coverage, then it makes sense to consider both the short-term and permanent coverage options within our heath care system. I am pleased to discuss the options and strategy. For businesses, I am pleased to assist with all aspects of health plan design, selection and enrollment.

 

Q&A about immediate outpatient costs

Many people think they can buy insurance for immediate medical expenses. It doesn’t work that way. But there are still other things to consider. Insurance is mandatory (even if it excludes pre-existing conditions) to gain entry into some treatment programs. It isn’t mentioned in this post but in severe cases Medicaid issues need to be discussed.

Q: Hi, I’m looking for a plan that will help cover some of the cost for an Intensive Outpatient Program at xxxxxxxxx, I start the program on Monday January 8 and I’m looking for an insurance plan that will help with some of the coverage because since I don’t have insurance the program is 125 per day and that’s expensive. Is there any way you could point me to the right direction for a plan to help?

A: Hi xxxxxxxxxx. Sorry you are facing this situation. There is no U.S. insurance available right now that pays for what you are asking so I suggest two things:

1) Be careful of advertising or sales agents who say this is covered

2) Consider whether it is better to have some other insurance rather than none at all. Some facilities will treat patients where the specific procedure is not covered but won’t treat them if they have no insurance at all.

Then next time you have access to open enrollment, you can get covered for these types of expenses. Meanwhile the available insurance plans you are considering do not cover this immediate planned medical expense.

Tony Novak

www.freedombenefits.org

Summary of the Tax Cut and Jobs Act

(Reportedly by Kathy Pickering – Executive Director, The Tax Institute, December 20, 2017, reproduced here after it was widely circulated on social media where I found it). Some portions related to small business employee benefit plans are highlighted.

Three highlights you need to know:

Virtually all taxpayers are impacted by the changes in the tax reform legislation
Those who itemize will have fewer expenses to deduct and a higher standard to cross
Changes to child-related tax benefits impact families
In the weeks to come, we’ll dive into each of these sections and help you identify how you will be impacted on your 2018 return.

How does tax reform affect you?

Virtually all taxpayers are impacted by changes in the tax reform legislation. Find out what could be changing on your return.

Congress just passed the Tax Cuts and Jobs Act (TCJA). Next, it will go to President Trump to be signed into law. The TCJA makes changes that affect all kinds of taxes – individual, corporate, partnership and other “pass through” business entities, estate, and even tax-exempt organizations. This article looks at tax changes for individuals.

Most changes take effect on January 1, 2018. Tax returns filed during the spring of 2018 (for the 2017 tax year) are generally not affected. But knowing about these changes now will help taxpayers plan and understand how the TCJA could impact their take-home pay and their 2018 tax refund.

Tax brackets and tax rates change for most taxpayers

Most tax filers will pay tax using a new tax bracket and tax rate structure. However, the tax rates remain progressive, meaning tax rates rise as income increases.

In comparison to previous tax brackets and tax rates, the new rates due to the Tax Cuts and Jobs Act are slightly lower and the brackets are generally slightly broader.

Rates under the TCJA Pre-TCJA rates
10%, 12%, 22%, 24%, 32%, 35%, 37% 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
View the 2018 tax rates and brackets for each filing status

Under the 2017 tax brackets and rates, a single taxpayer with $40,000 of taxable income would be in the 25% tax bracket and would have a tax liability of $5,739.

Under the 2018 tax brackets and rates, a single taxpayer with $40,000 of taxable income would be in the 22% tax bracket and would have a tax liability of $4,740.

Going forward, the brackets will be adjusted based on a different inflation measure – the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) – that is expected to grow more slowly than the previous inflation measure.

While most taxpayers will pay less, some taxpayers will pay a slightly higher tax rate under the TCJA. This is most likely to impact an upper-middle class individual with a marginal tax rate of 35%, up from 33%.

Tip: Tax brackets, rates and credits play a big part in how much tax a taxpayer will pay, but the amount of taxable income plays perhaps an even bigger role.

Personal and dependent exemptions are eliminated

In 2017, taxpayers claimed a personal exemption for themselves, their spouse (if married filing jointly) and each qualifying child or qualifying relative. Each exemption reduced taxable income by over $4,000 in 2017. Under the TCJA, personal and dependent exemptions are eliminated from 2018 through 2025.

In 2026, taxpayers can claim personal and dependent exemptions again.

Child tax credit increased through 2025

Through 2025, the TCJA increases the maximum child tax credit from $1,000 to $2,000 per qualifying child. The refundable portion of the credit increases from $1,000 to $1,400. That means taxpayers who don’t owe tax can still claim a credit of up to $1,400. The higher child tax credit will be available for qualifying children under age 17, as under current law.

Also, the child tax credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) of over $200,000 or $400,000 (MFJ). This phaseout more than doubles the phaseout range under current law. Taxpayers can’t claim a child tax credit for a child who does not have a Social Security Number (SSN) by the due date of the return.

In 2026, the child tax credit will change to the rules used in 2017, with a maximum credit of $1,000 per qualifying child, and lower phaseouts.

New credit for non-child dependents available through 2025

The TCJA allows a new $500 nonrefundable credit for dependents who do not qualify for the child tax credit. Taxpayers can claim this credit for children who are too old for the child tax credit, as well as for non-child dependents. There is no SSN requirement to claim this credit, so taxpayers can claim the credit for children with an Individual Tax Identification Number (ITIN) or an Adoption Tax Identification Number (ATIN) if they otherwise qualify.

Taxpayers cannot claim the credit for themselves or their spouse (if MFJ).

In 2026, the credit for non-child dependents will no longer be available.

Standard deduction increases through 2025

The standard deduction will increase. In 2018, the standard deduction amounts will be:

$12,000 (single)
$18,000 (head of household)
$24,000 (married filing jointly)
Because of the increase and because of changes to the rules for itemized deductions, many taxpayers who previously itemized deductions will now claim the standard deduction instead. This means they may not have to file Schedule A. However, taxpayers may want to continue to track their expenses so they have the information to make the comparison and choose the tax benefit with the bigger value.

Many itemized deductions eliminated, limited or modified

 

Before the tax reform bill takes effect, about 30% of taxpayers itemized deductions on Schedule A, instead of taking the standard deduction associated with their filing status. However, the TCJA has a large impact on itemized deductions, as several itemized deductions have been eliminated or modified.

 

Fully eliminated

Miscellaneous itemized deductions subject to the 2-percent floor
Employee business expenses
Tax preparation fees
Investment interest expenses
Personal casualty and theft losses (except for certain losses in certain federally declared disaster areas)
Limited

State and local income taxes (SALT) or state and local sales tax, plus real property taxes, may be deducted, but only up to a combined total limit of $10,000 ($5,000 if MFS)
Home mortgage interest has several modifications:
Interest on a home equity loan is no longer deductible
Interest on a new home mortgage is limited to interest paid on a maximum of $750,000 ($375,000 if MFS) of a new mortgage taken out after December 14, 2017.
Taxpayers with a mortgage taken out before December 15, 2017 can continue to claim home mortgage interest on up to $1 million ($500,000 if MFS) going forward; the $1 million ($500,000 if MFS) limit continues to apply to a refinanced mortgage incurred before December 15, 2017.
Modified

Charitable contributions: The deduction for charitable contributions is expanded so that taxpayers may contribute up to 60% of their adjusted gross income, rather than up to 50%.
Gambling losses remain deductible, but only to the extent of gambling winnings. The definition of losses from wagering transactions is modified.
Medical expenses remain deductible. For 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of AGI. In 2019, the threshold will increase to 10% of AGI.
The overall limit on itemized deductions (often called the Pease limit) is also eliminated by tax reform under President Trump.

Most of the changes to itemized deductions will remain in place through 2025. In 2026, itemized deductions will generally follow the rules in place before the TCJA.

Many “Above-the-line” deductions eliminated, limited or modified

 

As with itemized deductions, many “above-the-line” adjustments have also been eliminated or limited:

Fully eliminated

Alimony deduction for payments made under orders executed after December 31, 2018. For new orders, the TCJA no longer allows payors to deduct alimony payments or requires the recipient to report income for alimony received. (Payments under existing orders are grandfathered and may continue to be deducted by the payor and should be reported as income by the recipient.)
Tuition and fees deduction expired under previous law and was not renewed by the TCJA.
Domestic production activities deduction (DPAD)
Mostly eliminated

Moving expenses are disallowed (except for the expenses of active members of the military who relocate pursuant to military orders).

Stays the same

Educator expense deduction (K-12 educators can deduct up to $250 per year for unreimbursed classroom supplies.)
Student loan interest of up to $2,500 can be deducted by qualifying taxpayers for interest paid on student loans.
Health savings account (HSA) deduction
IRA deduction
Deductions for self-employed taxpayers (SE tax, SE health insurance, SE qualified retirement plan contributions)
Some education benefits remain the same, others modified

Taxpayers can continue to claim the American Opportunity Credit, a credit of up to $2,500 per year for the first four years of college education, and the lifetime learning credit, a credit of up to $2,000 per year for qualifying education expenses.

 

Taxpayers can continue to use savings bonds for education, educational assistance programs provided by employers, 529 plans and Coverdell education savings plans to save for college. Some scholarships and tuition waivers can continue to be treated as tax-free if certain conditions are met.

 

529 plans can now be used for K-12 expenses.

Plans can distribute up to $10,000 each year for tuition incurred for enrollment or attendance at a public, private, or religious elementary or secondary school.
The $10,000 limit for elementary and secondary school is applied on a per-student limit.

Taxpayers whose student loans are cancelled because death or total and permanent disability may be eligible to treat the cancellation of debt as tax-free.

Health care penalty eliminated

The penalty for failure to obtain health insurance coverage (the “individual mandate”) will be eliminated beginning in 2019. Taxpayers who did not have coverage in 2017 or 2018 will continue to owe a penalty for those years, unless they qualify for an exemption.

Self-employed taxpayers may claim a new deduction for qualified business income

Self-employed taxpayers can deduct up to 20% of qualified business income from a sole proprietorship, partnership, or S corporation. There are a few limitations placed on the deductions, but many small businesses will be able to benefit.

Example: A self-employed taxpayer has taxable income of $60,000. All of the income is from the business. The qualified business income deduction is $12,000 ($60,000 × 20%).

Taxpayers may benefit by adjusting withholding and estimated taxes

Because of all the changes made by the TCJA, taxpayers should consult their tax professionals for next steps.

Tax professionals can help with Form W-4 planning by verifying they have the correct income tax withholding set up with their employer.

Taxpayers who are self-employed and others who make quarterly estimated tax payments should check with a tax professional and determine whether they need to adjust their estimated payments.

Taking the time to make changes now will help ensure a smooth transition from year to year and eliminate refund surprises.

Interesting trends in individual health insurance

This past week the individual health insurance open enrollment period for 2018 closed in 39 states using the federally controlled insurance exchange called Healthcare.gov.  We think that the trends favor growth in services like Freedom Benefits. The U.S. Department of Health and Human Services is charged with reporting on the results of that enrollment period. Associated Press dug into the enrollment data further and published some surprise results. Taken together with other previously released information, these are the trends in individual health insurance:

Overall, enrollment was unexpectedly strong considering the actions that factions of the federal government took to sabotage its own program. Without enrollment support, without advertising and with a short enrollment period almost 9 million signed up for coverage.

This insurance exchange is exclusively for working people with a suitable income. In most states, those who do not meet minimum earnings levels are not allowed to enroll through Healthcare.gov but instead are referred to state Medicaid programs.

Most applicants (about 4 out of 5) qualify for a reduced premium based on their earnings that keeps their total expense at or below 16% of household income.

The total enrolled is far less than the projections made by the Department of Human Services before the Trump administration took actions to sabotage the insurance program.

The Trump administration shortened the enrollment period and cut off advertising funding so that fewer people would sign up for their benefits. The strategy worked to some extent. Fewer people enrolled for health insurance in 2018.

Most Healthcare.gov enrollees (about 7.3 million of the total 8.8 million enrolled) live in rural working class areas that voted for Trump and Republicans in 2016. Political observers predict that the government’s efforts to cut the health benefits of the working class will hurt their chances in future elections.

Yesterday President Trump said that he hopes and expects that his party’s success in eliminating the tax penalty known as the ‘individual mandate’ will ultimately result in a collapse of these federally funded health benefits for working-class Americans.

The number of people in the U.S. without health insurance is rising again. This was the impetus that pushed us into health care reform from the 1960s through 2010.  It’s difficult to believe that the problem will fester for another 50 years before the government takes action again.


The takeaways that are important for us at Freedom Benefits:

There is opportunity for year-round enrollment outside of the exchange open enrollment period.

The elimination of the individual mandate penalty means that it is no longer important that insurance meet federal legal requirements. Consumers are free to pick the insurance they want.

There will be demand for the lower priced insurance called skinny plans, short term medical, supplemental plans and limited benefit medical insurance.

The Trump executive order to promote the sale of insurance across state lines means that citizens in locations without low priced insurance may soon have other options.


I predict that most of the individual health insurance market will return to the private sector enrollment within a year.

ID cards not issued to dependents

I received this question from a health plan member today regarding ID cards for covered dependents. The information may be worth sharing because this is a common question:

MEMBER QUESTION:  I got two I.D card both have my name, i want to ask where is my daughter’s I.D card

MY RESPONSE: I am responding as the independent adviser and not as a representative of your insurance company.

To the best of my knowledge, ID cards are always issued in the name of the policyholder. I am not aware of any legal authority which allows and insurance company to issue an ID card in the name of a covered dependent. Duplicate ID cards may be issued and these may, include the names of covered dependents. The actual content of printing on the ID card varies among plan administrators.

For more information, you may wish to contact the members services office by telephone as listed on your insurance ID card.


The point is that:

  1. ID cards are typically not issued in the names of dependents.
  2. Some, but not all, health plan administrators list the names of covered dependents of the card.
  3. ID card printing and issuance practices vary between insurers but this practice of issuing cards only to the policyholder is consistent.

User Q&A: Insurance for doctors visits

This type of question highlights an issue that has risen to near crisis level lately apparently because of the combination of: 1) people with low levels of information look for cheaper coverage, 2) The lack of doctor visit coverage in high deductible Obamacare policies, 3) misleading sales practices of health insurance by boiler room telephone call centers, 4) an increase in skinny policies and the number of inexperienced agents selling them.


Q: “CAN I GO TO A FAMILY DR OR PRIMARY DR FOR VISIT, I HAVE A LOT OF MEDICAL PROBLEMS”*

A: It sounds like you need a policy that provides a payment for doctor visits without a large deductible.  Some of the health insurance plans you looked at provide that, others do not. Please pay attention to the coverage and limitations that are printed in the summary of coverage. If you want, we can arrange for an enrollment agent to call you to discuss and explain it further.

*I reproduced the question exactly as it came to me in this format and wording that seem to indicate a consumer lacking sophistication for buying insurance.

Disclosure of VBA Accident ADD Insurance

This content is provided for educational purposes only and is not an offer of coverage and is not intended to represent a communication from an insurer.

This content describes Accidental Death, Disability and Dismembership insurance.

Insurance is underwritten by Federal Insurance Company, a member
insurer of Chubb Group of Insurance Companies.

The coverage described in this literature may not be available in all  jurisdictions. This is descriptive only. Actual coverage is subjective to the language of the policies as issued. Exclusions & Limitations apply. This policy provides ACCIDENT insurance only. It DOES NOT provide basic
hospital, basic medical or major medical insurance as defined by the New
York State Insurance Department. The expected benefit ratio for this policy is 85%. This ratio is the portion of future premiums which the company expects to return as benefits, when averaged over all people with this policy.

IMPORTANT NOTICE — THIS POLICY DOES NOT PROVIDE COVERAGE FOR
SICKNESS.

Chubb, Box 1615, Warren N.J. 07061-1615.

The benefit amount shown is your accidental death benefit amount. The benefit amount for accidental dismemberment is a percentage of the
accidental death amount. The benefit amount for your spouse/domestic
partner is 50% of your amount and for your dependent children is 20% of your amount. If you have no dependent children, your spouse / domestic partner’s
benefit is equal to 60% of your amount. If you have no spouse/domestic
partner your dependent children’s benefit amount is equal to 25% of your
amount.

 

Highlights of coverage of VBA accident insurance are listed here.

A summary of benefits is here.

The source of this content is the product brochure.