SANTA ROSA -- Business owners, particularly the wine industry that makes up a significant proportion of the North Coast economy, need to pay attention to major health care insurance, tax and estate law changes this year to avoid steep noncompliance penalties and mitigate significant tax increases, according to local tax-planning and insurance experts.
Mike Parr, employee benefits broker with Northwest Insurance agency, a subsidiary of George Petersen Insurance, focused on how business owners should prepare for health care reform at a recent roundtable on wine industrial financial issues hosted by accounting firm Moss Adams LLP.
"There are positive aspects of the new health care reform bill at a time when insurance costs are increasing 10 to 20 percent annually," said Mr. Parr.
Since March 2012, all preventative care is covered by all carriers and plans under the federal Affordable Care Act. Children are also covered up to age 26, and insurers cannot decline coverage for children with pre-existing conditions for individual coverage. Furthermore, lifetime maximums on health insurance plans have been eliminated.
A small-business tax credit covers eligible employers with 25 or fewer full-time equivalent (FTE) employees whose annual wages are less than $50,000. This tax credit equals 35 percent of an employee’s annual premiums the employer has paid for in years prior to 2014. It will increase to 50 percent after 2014.
Employers must provide employees with a summary of benefits and coverage (SBC), available from a broker or health insurance carrier. This document must include relevant data, including out-of-pocket costs, deductibles, limitations, referrals, etc., with definitions and examples, along with a standard form to help participants understand and compare plan options, according to Mr. Parr.
The penalty for not providing the summary is $100 per day for each affected employee.
Covered California is the name of the online health insurance exchange (coveredca.com) where small business employers with two to 50 workers can purchase group health insurance. Individual health plans are also available, along with access to a Federal Subsidy Assistance calculator."
The exchange is scheduled to go live on Oct. 1 for health insurance plans with a Jan. 1, 2014, or later effective date. The exchange website already is live and has background information.
Employers are also required to provide employees with a notice of insurance exchange (NIE). The deadline for issuing these notices was originally set for this March, but has been delayed by state and federal courts. A new date has not been established.
An employer mandate to provide health care insurance applies to large businesses with 50 or more full-time-equivalent (FTE) employees, each working 30 or more hours per week, or 130 hours per month.
This mandate does not include designated seasonal employees working less than 120 days during the year. Leased employees also are not included. If a business is a large employer, seasonal employees working in excess of 30 hours a week are eligible for the penalty calculation.
The employer mandate comes with a series of penalties for non-compliance, such as when coverage is not offered and one employee obtains a subsidy in the exchange, triggering a state or federal audit and fines.
Will large employers keep their health care plans? Research suggests that most will, according to the experts at the roundtable.
"Top reasons for keeping their plans include retaining current employees, the ability to attract future talent and also in order to maintain employee satisfaction and loyalty," Mr. Parr said. "This doesn’t mean that employers won’t compare the cost of offering health insurance to costs associated with paying penalties."Big changes to tax law in 2013