Regulators Put It Together
Financial Regulation
• SEC will craft a ”fiduciary standard” for life insurance agents. (See Legislation/ Regulation)
• An overhaul of the nation’s financial regulatory system will vastly expand the powers of the federal government; impose new rules on some of the riskiest business practices and exotic investment instruments.
• Congress stopped short of prohibiting some of the practices that led to the economic crisis, betting instead that newly-empowered regulators will do this.
• 2,500 registered lobbyists worked on the bill. Big lobbying fights will resume when regulators begin the nitty-gritty task of turning complex and sometimes vague laws into real-world rules.
• Even architects of the overhaul acknowledge that it may take the next financial crisis to see if the changes are effective. FA
ObamaCare
• “Waiting for the regulation” must be the advisor’s answer to many consumer and business owner questions.
• “Every time you look at this statute, you find something new.”
Attorney Marty Gringer of Franklin, Gringer & Cohen.
• State lawmakers and health care officials have no clue how they will implement powers accruing to them, especially the state exchanges.
• Financial advisors would do well to refer business-owning and some individual clients to a trusted and knowledgeable health insurance broker and/or a CPA or tax attorney.
• Business owners face complex options: keep, change or scrap the insurance plans they’re now offering; start offering a qualified plan or pay a pentalty for not doing so. FA
ObamaCare
Waiting for the Regulations
Reflecting the consumer confusion that abounds over ObamaCare, questions are pouring into insurance companies, doctors’ offices, human resources departments, business groups and especially financial advisors.
They range from the incredibly stupid such as. . .
Where do we get the free ObamaCare?. . .
To reasonable and intelligent ones seeking information that consumers and business owners need to make crucial decisions.
Unfortunately, many if not most of these questions cannot be answered – at least not yet. This is because the 2,500-page law is vague, ambiguous and even contradictory on many important specifics. How it all plays out depends on rule-making by the regulatory agencies.
“Every time you look at this law, you see something new,” Martin Gringer, a Garden City, NY, employment attorney, told FA. “Until we get regulations, we won’t be able to clearly define what’s in this thing. And even then, there will still be confusion, for the regulations probably won’t account for every possible contingency,” he said.
Much of the regulation will fall to the states, especially with the state exchanges that are supposed to be operative by 2014. But there was overwhelming confusion among state lawmakers and health care officials at a recent conference in Washington, DC.
“It’ll probably be 10 years before it all shakes out,” Chris Whatley of the Council State Governments told the Washington Examiner.
Yes, your clients need help. But from whom?
You’d be smart to recognize the limits of your knowledge of this law in particular and health insurance, generally, before advising your clients. In many if not most cases, your best course is to refer to a trusted health care broker who knows and understands the basic provisions, keeps up with developments and will give your client good advice; not just sell product.
Beyond that, your best bet is a CPA and/or a tax attorney, for the IRS probably will be setting more rules than any other federal agency.
Small Business Dilemma
Probably the most perplexing question facing a small business is whether to offer a qualified health insurance plan to its employees, chang what they’re now offering or pay a tax penalty for not offering anything or offering an “inadequate” plan.
A small business tax credit provided by the law is often cited as incentive enough for offering a plan, but this tax credit is complex, limited and good for only six years. Fewer than one-third of small businesses pass the three key tests for getting the credit: 25 or fewer employees, providing health insurance and paying at least 50% of the cost.
The penalties for offering no insurance or an “inadequate” plan – ranging from $2,000 to $3,000 per month per employee – are considered by many to be too low to deter employers from dropping their insurance plans or encourage them to start one.
ObamaCare
Who Pays. . . and When
FA compilation in consultation with Martin Gringer, employment attorney at Franklin, Gringer & Cohen, Garden City, NY (516) 228-3131 and Manhattan (212) 725-3131.
Employers
Costs Passed On By Insurance Companies
Effective 2010
• Benefits go on forever; no lifetime limits; some restrictions on annual limits based on regulations to come. (See 2014.)
• Plans must cover dependents up to age 26
• Pre-existing conditions for dependents under 19 must be covered.
• Claims may not be used as a basis for cancellation.
• An $8 billion tax (“insurance fee”) on insurance companies based on their market share. (This escalates to $14.3 billion by 2018.)
Effective 2014
• Pre-existing conditions must be covered for everyone
Employers
Direct Costs
Effective 2010
• Must provide opportunity and private space for nursing mothers.
• Aggrieved employees empowered to sue and are entitled to reinstatement, back pay with interest, damages for pain and suffering, attorneys’ fees and court costs.
Effective 2012
• Must provide 1099s to all corporate service providers receiving more than $600 a year for services or property. Accountants’ fees likely to rise because of this. (Currently, 1099s must be generated only for non-corporate service providers and only for services.)
Effective 2013
• Tax deduction for retirees’ drug subsidies under Medicare Part D is eliminated.
• Must provide Uniform Explanation of Coverage to tell employees about state exchanges, which will begin operations in 2014.
Effective 2014
• Penalties imposed on those with more than 50 employees who provide no health insurance or whose plans are deemed “inadequate.”
• Those with more than 200 full time employees must automatically enroll new full-time employees who don’t opt out.
Employees
Effective 2011
• Over-the-counter medications will no longer be covered under Health Savings Accounts (HSAs) and Flexible Savings Accounts.
Effective 2013
• Cap on contributions to Flexible Savings Accounts increased to $2500. (This will then be adjusted annually.)
• Additional .9% Medicare tax on those earning more than $200,000 per year ($250,000 for joint tax filers). Also: new 3.8% Medicare tax on investment income for same brackets. (This will be the first time that Medicare taxes are applied to anything but wages.)
Effective 2014
• Anyone not eligible for Medicare or Medicaid must obtain minimal coverage through employer-sponsored plan or another option.
Employers and/or Employees
Effective 2018
* Cadillac Tax: 40% tax on every dollar over $10,200 spent for individual coverage and $27,500 for family coverage. Tax is higher for people over 55 and/or in “high-risk” professions.
Consumers
Effective 2012
• Pay more at restaurants and vending machines because calorie counts will have to be displayed.
Effective 2013
• Additional 2.3% excise tax on certain medical devices.
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