Health Insurance: It’s Crazy!!

Whenever I write about health insurance, I always seem to tell this story. Several years ago, within a six-month period, both my wife and daughter had their appendix removed. I thought there might be something in the water. Anytime I had even a hint of a pain in my right side, I thought I was next.

What were truly remarkable were the costs. The surgery, three days and two nights at the hospital. $25,000 for each just for all of the costs associated with the hospital. Doctors costs were additional. Insurance paid everything.

Recently,  I read a New York Times article about budget negotiations between House Democrats and Republicans and that they are close to deal on tax cuts resulting in more than $700 billion over a decade. Not sure whether this is a good thing, but it seems to be happening.

One of the items being negotiated is the delay of 2 years to 2020 of the Cadillac Tax on Health insurance that was created through the Affordable Care Act. The Federal Government will set the cost standard for what is reasonable health insurance coverage. If an employer -including churches and synagogues – provides any employee with more comprehensive coverage than exceeds this floor, the employer will be responsible for a 40% tax on the increased coverage.

Synagogues may be providing clergy and other staff with such “Cadillac” plans. Right now you don’t have to worry about a “Tax” as this aspect of the ACA does not go into effect until 2018, and may even be extended to 2020. I watched a video cast by a Washington, D.C. benefits attorney who stated that there is even a good chance that this aspect of the ACA may be repealed. We know of course that there are never any guarantees. Time will tell, I guess.

Exactly a year ago, I blogged about a way to provide a subsidy for a spouse’s health insurance plan. But what about for synagogues who offer employees a health care premium reimbursement to buy their own coverage? With the creation of the ACA, it was thought that employees could do this, and would just have to tax the amount reimbursed to employees. Back in the beginning of 2014, the IRS issued a ruling that beginning in July 2015, providing employees such a reimbursement, even if taxed, was a violation of the ACA.

An ACA violation translates to a fine of $100 a day.

An alternative is for synagogues to simply add the amount of the premium reimbursement to an employee’s salary, and not stipulate that it is for a specific purpose such as health insurance. This would satisfy the IRS and would not be in violation of the ACA.

There is one exception to this. Synagogues that are providing a reimbursement for a health care premium for just one employee can continue doing so. So for the leadership of small synagogues where the rabbi is the only full time employee and the only person receiving a health care premium reimbursement, no need to worry.

It is always advisable to consult a tax professional/lawyer and/or employee benefits expert for further guidance.

 

 

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