Small Business California has spent a lot of time trying to understand the Affordable Care Act’s provisions and IRS regulations. Two issues have come up that I think are important for small businesses to understand.
The IRS has said that businesses that provide health insurance to their employees must offer coverage to their employees dependents. Interestingly the definition of dependents does not include spouses but children under 26. I would think in California most employers would offer this coverage to the spouses also.
While they have to offer coverage to dependents the business does not have to pay for it. The problem here however is because the employer has offered coverage to the dependents the dependents are not eligible for the subsidies in the Exchange. These subsidies are significant and many situations will arise where the employee would be better off if the employer dropped coverage for them and let the employee set up an individual policy covering them and their dependents taking advantage of the subsidies.
There is a lot of debate on this and I have tried over the last month to get confirmation and am reasonably certain this is the case.
When the Affordable Care Act passed it was assumed that individuals purchasing health insurance would have to pay in after tax dollars. To my knowledge the IRS has not come out with their regulations on this and many think the delay is because they ultimately will rule that in certain cases like an employer setting up an account like a cafeteria plan will allow the employee to pay in pretax dollars. While this may be good it will be a severe blow to the Small Business Health Insurance Options Program[SHOP] in the Exchange. The IRS regulations should be coming out any day on this.
Small Business California
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