Beginning July 1, the Internal Revenue Service says businesses that raise the pay of full-time employees to help them buy healthcare insurance, are subject to a $100 per day excise tax. The IRS says under the Affordable Care Act, the payments are considered group health plans not covered by the ACA. Attorney Pepper Crutcher, with Balch and Bingham, says it's a stiff penalty for businesses with 50 or fewer employees. He says some can't afford health insurance, but to retain key staff, they increase employee salaries to cover the cost.
"They are entirely legally protected if they decide to say I'm not going to offer any insurance coverage. So, people smack their foreheads and say 'gee wouldn't our government rather that our small employers help employees in this way, rather than do nothing for them?' " said Crutcher.
Crutcher says it's an issue he's hopeful Congress will address. He adds even though small businesses may provide money to cover the cost of insurance, workers don't have to buy it. Roy Mitchell with the Mississippi Health Advocacy Program, says some employees who receive a subsidy from their employer buy catastrophic insurance or other policies that do not meet ACA guidelines. He says the excise tax is designed to close those loopholes, encourage employers who can, to provide health insurance, or use the small business exchange operated by Mississippi Insurance Department to provide coverage.
"The tax implications of it can be avoided by utilizing the state SHOP Marketplace. It addresses many of the concerns of small employers," said Mitchell.
Mitchell says small businesses can qualify for a tax credits and deductions. However, some employers say affordability is still an issue.