NYSSCPA Briefing on the Affordable Care Act
By Anne Rosivach
Two months after the Supreme Court decision that found the Affordable Care Act (ACA) constitutional, compliance deadlines for the complex tax provisions that support the individual mandate are approaching rapidly.
Panelists speaking at a September 5, 2012, New York State Society of CPAs (NYSSCPA) Breakfast Briefing, "SCOTUS Approved: The Affordable Care Act," agreed that the public needs much more information about their choices and responsibilities under the law, and CPAs are the right people to provide the guidance they need.
The breakfast briefings feature hot topics, such as the ACA, because they are intended to foster debate and promote an ongoing dialog, Joanne Barry, executive director of the NYSSCPA said in her opening remarks. The briefings are moderated by outstanding journalists, experts in their fields, and Trudi Lieberman, moderator for the ACA debate, was exceptionally qualified, Barry said. A contributing editor at the Columbia Journalism Review, Lieberman has had a long career at Consumer Reports and has written for many publications on insurance, health care, and health care financing.
The speakers, experts in different areas of the health care industry and accounting, did not raise controversial issues during their ten-minute statements, but focused on what businesses and their advisers needed to know and do right now. Some issues were hotly debated during the Q&A, and there was general agreement that the discussion would continue over the next few years as the public continues to demand improvements in cost and quality.
Les Funtleyder, president of Poliwogg's Investment Advisory Division, a private equity firm, said that he anticipates significant changes in the broad health care industry. Companies that emphasize cost, quality, access, and innovation will succeed. Scale will matter to service companies. Three major mergers have occurred since the Supreme Court decision and this is likely to continue. Innovation is less scale dependent, but the JOBS Act should be a boost for small innovative companies.
The law will create winners and losers, Funtleyder said. Winners will be innovative biopharma companies, HMOs, and exchanges, if they become public. Losers will likely be physicians, pharmacies, general labs, and medical device manufacturers.
In the "it depends category" are hospitals, long-term care facilities, and small businesses as they weigh the costs of premiums over penalties.
Affordable Care Act
David A. Lifson, CPA of Crowe Horwath LLP, says most of the twenty-four key tax provisions in the Affordable Care Act affect the insurance industry, but he identified six that have implications for small business and individuals:
- States must come up with a minimum value plan that a business must offer.
- W-2 reporting.
- Small business tax credit.
- Tax effect on flexible spending accounts.
- Health insurance premium tax credit, which will introduce tax fraud issues; the IRS will likely install filters.
- Employer-shared responsibility.
Shawn J. Nowicki, director of Health Policy at Northeast Business Group on Health, a network of employers, providers, insurers, and other organizations working together in New York, New Jersey, Connecticut, and Massachusetts, addressed the pressure of coming deadlines for insurers, individuals, and businesses.
Right now, he said, insurance companies may be issuing rebates due to provisions in the law over how much they can devote to administration and profit. Insurers are required to issue documents that are a summary of benefits and coverage with a uniform glossary for open enrollments beginning after September 23, 2012.
Small business owners need to learn more about the small business tax credit, which can be retroactive.
Changes that will begin in 2014: high earners will start seeing a hit on their Medicare taxes, and flexible spending accounts (FSA) contributions are limited to $2,400 a year.
It is critical that CPAs and businesses prepare for the impact of the individual mandate that will go into effect January 2014. Open enrollment for health insurance plans to be offered on state exchanges begins in October 2013. To date, only about fifteen states have begun to set up their exchanges, but clients must begin to think about what kinds of plans they will offer. Nowicki summarized progress to date in three Northeast states in terms of setting up exchanges.
There is a broad spectrum of pay or play among small businesses ranging from whether to drop coverage or change their existing plans, Nowicki said.
Charles Bell, program director of Consumer Union, agreed that consumers and businesses were not well informed about the coming mandates. Bell said that we need to get the word about who is eligible for the small business tax credit, the benefit that is available right now, and the increase coming in 2014. The small business tax credit is available for nonprofits.
Employers eligible for tax credits employ fewer than twenty-five full-time workers with average annual wages of $50,000, not counting owner wages or those of their family members. The employer must also pay at least 50 percent of the workers' premiums and must have already extended insurance. Bell cited the benefit received by the owner of a bagel bakery in Utica, New York. He advised small business owners to get in touch with their CPAs.
Calling the ACA "really annoying," David A. Lifson, CPA of Crowe Horwath LLP in New York, said that the law is really about health insurance reform. The law is full of tax carrots and sticks, and the IRS has been the recipient of much of the responsibility.
Increasingly, Lifson said, what the IRS does is less about collecting revenue. He said the agency is functioning as a regulatory agency based on its present three roles: collecting taxes; functioning as a social welfare agency, by giving various credits like the child care credit; and collecting additional data. The ACA requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee's Form W-2 to determine who is eligible for subsidies and credits.
Lifson expressed concern at the degree of burden the ACA has put on the IRS, which has been working to come up with regulations. He recommended the IRS site Affordable Care Act Tax Provisions as an excellent source of information.
Lifson said that the small business tax credit that Bell gave as an example of the benefit would not work for a bagel factory in Brooklyn, saying that the limits for the credit were too low for small businesses in metropolitan areas.
Lifson encouraged CPAs to develop links with subject matter experts. "There a lots of examples in the CPA world of doing this," he said.
Some issues generated debate during the Q&A, including whether or not tort reform would lead to lower costs. The question was raised as to whether or not the exchanges would add an extra layer of administrative costs. Bell suggested that the exchanges would provide useful services to businesses and individuals. When asked by Lieberman what important guideposts for future discussion would be, Lifson said that the question of what to do if a state does not establish an exchange will be a key area for discussion. This might raise the question of whether the federal government should give block grants to the states.
Funtleyder commented that the conversation about health care is not going to go away. The public will not accept heath care as 20 percent of our GDP. There will be a "Health Care 2," in one form or another, and the issues of cost and quality will continue to be discussed for at least the next decade.
A recording of the webcast will be available later in September.
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