Employers caught a break this month when the Obama administration
delayed an Affordable Care Act regulation imposing fines on larger businesses,
but other elements of the law remain in place, including a tax that will fall
for the first time on many businesses this week.
Most employers that self-insure or offer benefits such as Health Reimbursement Accounts and Flexible Spending Arrangements will have to pay an excise tax of $1 per covered person by Wednesday as part of Obamacare.
New and relatively small, it's easy to see how the tax could fly under the radar, according to local insurance brokers.
"I sent out an email to some of the brokers that we work with and there were really some people that didn't know anything about it," said Rich Miller, president of The Harrison Group, an employee benefits advising firm based in Havertown, Delaware County.
The money will be directed to a specific goal: funding the Patient-Centered Outcomes Research Institute, which was created under Obamacare to study treatments and systems that work best at keeping people healthy.
The tax next year increases to $2 per covered person, and the rate will be adjusted after that by the federal government until 2019, the end of the institute's authorized life.
But getting to that point will be a challenge, particularly for the brokers and accountants who generally handle a company's tax business.
First of all, the tax due date of July 31 falls on those self-insuring businesses that had health benefit periods that ended in the fourth quarter of 2012. Shawn Hughes, vice president of BSI Corporate Benefits in Bethlehem, said 70 to 80 percent of self-insured companies had plans that ended at that time.
Starting next year, it will be due for all affected businesses on each July 31 through 2020.
All employers who offer insurance plans will pay the tax. But only those who offer self-insurance or tax-advantaged plans will pay it directly to the Internal Revenue Service. For the others, the insurer, not the employer, pays the tax. Insurance companies then build the tax into their insurance rates, Hughes said.
Even within those regulations, there is uncertainty, said Aaron Newman of Aaron Newman Insurance in Nazareth. Federal guidelines, he said, are unclear if businesses pay the tax on only their employees who use Flexible Spending Arrangements or also on their covered family members. In addition, the FSA tax only kicks in when employers contribute more than $500 to their employees' benefits, Hughes added.
The frequent changes to the law and amendments to the regulations don't help, Newman said.
"It's changing so damn quickly, so unless you're really into this, you're not aware of it," he said.
Newman also said he's concerned some brokers and employers aren't aware of the looming tax deadline. "I'm finding out that those clients who have accounting firms that ... are not keyed into health reform, they just don't know."
Company officials should check with their accountants or brokers who handle their health benefits to see about their potential tax liability, he said.
The IRS could not say how many employers may be affected by the tax. The agency did say companies should use IRS Form 720 to file. irs.gov/pub/irs-pdf/i720.pdf
Those that don't file can face penalties -- except they're not quite spelled out either, Hughes said.
"It's definitely a work in progress," he said.
Miller said the law makes no exceptions for such a modest tax. "I have some clients with an HRA with four employees," he said. "We'll fill out the Form 720 for them and they'll send a check for $4."
Those taxes will add up for the institute. Using about $150 million in general-fund taxes and about $500 million in insurance plan taxes and Medicare taxes annually, the institute intends to distribute more than $3 billion in research funds by 2019. It so far has awarded $159.3 million to 126 research projects in 33 states, said spokeswoman Christine Stencel.
According to Stencel, the institute this year is committed to funding up to $17 million to address disparities in clinical outcomes in asthma care and up to $30 million to fund a multi-year, large-scale clinical trials on ways to prevent fall-related injuries in older adults.
The institute has no authority to use its research findings to influence insurer's coverage decisions, she added.
"The goal of dissemination is to help patients, family caregivers, clinicians, payers and others across the health-care community have as much authoritative, useful information as possible about their health and health care options and so they can make better-informed decisions based on the patient's particular needs and preferences," Stencel said.
Meantime, the health benefits professionals and accountants say they're scrambling to keep their clients up to date.
"There's a lot of concern," Hughes said. "We're doing everything we can to educate them."
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