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The Clock Is Ticking: Is Your Firm Ready for The Coming Changes To Health Care?

I know we’re just barely getting to the end of tax season, but that means that we’re also well into the second quarter of 2013. Consequently, that means that we are less than 9 months from ringing in the Affordable Care Act (ACA) along with the New Year. So while I hate to be the bearer of bad news, it’s my duty to remind you there are a lot of decisions your firm will need to make in terms of health care coverage in order to be in compliance by the December 31, 2013 deadline.

Indeed, effective January 1, 2014, massive changes as a result of the ACA, aka “ObamaCare,” will become our new reality. To put it simply, if you haven’t begun hammering out how your firm will handle these changes, now is the time to get started.

Law firms with less than 50 employees have fewer adjustments to make. However, each month, new rules and regulations are coming out, including penalties for failing to comply, so regardless of the size of your firm, if you haven’t sat down with an expert in transitioning to ObamaCare yet, make that appointment now.

If your law firm has more than 50 employees, you’re on the hook for making a number of critical decisions. Are you going to provide coverage? Or are you considering eliminating coverage and leaning towards paying penalties? Let’s face it; paying for employee health care isn’t cheap. In some cases, paying the penalties for not providing health care may be more cost effective than offering coverage to all employees.

Whether you decide to continue to offer health care coverage, or to send employees to the exchanges, if you haven’t yet met with a broker to examine the advantages and disadvantages of each option, there is no time to waste. (By way of example, I’ve been meeting with some firms since late

2012 to begin the transition process, and continue to meet regularly with them as new updates and requirements are rolled out.)

To date, there are four major considerations that you’ll need to weigh before the end of the year. Here’s how they break down:

1. Assessing Penalties
Firms  with  50  or  more  full-time  equivalent  employees that don’t offer health coverage will be subject to penalties (excluding the first 30). That means that if you have 60 employees, failure to provide coverage may result in a penalty of up to $60,000 ($2,000 penalty on 30 employees).

However, in certain cases, it may make sense for employers to opt out of offering coverage, due to the 9.5% cap on employee contributions. For example, consider an employee who earns $20,000/year. The maximum contribution towards his health coverage that you can require him to pay is $1900/ year, or about $158/month. The balance is your responsibility. In this case, if his policy is $400/month, your annual cost will be $2,904. When compared to a $2,000 penalty, it is easy to see why many firms may consider to opt out. Before you make a decision, have a broker calculate your direct and indirect costs, just to confirm that you’ve assessed your potential penalties properly.

2. Tax Implications
Law firms that choose not to offer health care coverage to employees will almost certainly miss out on tax breaks. Your contributions  to  health  care  coverage  which  are  currently tax deductible will remain deductible after the new laws go into effect.

3. How To Count Employees
Counting full time employees is no longer as simple as counting the heads of those in your office who work 40 or more hours. It is dangerous to assume that you have less than

50 full time employees if you employ a large number of part- time workers. Last summer, the IRS issued 18 pages of rules as to what constitutes a full-time employee, and the truth is;,even that didn’t answer the question. If you are unsure as to how to tally up your employees, make sure you talk with an insurance broker who understands and can explain the process of counting part-timers.

4. Reporting Requirements Are Unaffected By Offering  Coverage
Regardless of whether or not you offer health care coverage to employees, you will still face federal reporting requirements so as to determine what your penalty will be. There’s no getting around this requirement. If you were hoping to save yourself the time or hassle of having to deal with federal reporting by opting to pay penalties, you’re out of luck on this one. The federal government mandates that you report either way.

5. What  Will Opting Out Do To Your Ability  To Attract And Retain Talent?
If your firm has always offered coverage, but you’re considering opting out and paying penalties instead, you’ll have to consider what this message may send to existing and potential talent. While paying penalties may save money in the short term, in the long term, will refusing to offer health coverage limit your firm’s growth? Will you be able to attract the rising stars that firms who do offer coverage are able to attract?

Clearly, the decision to continue to provide health coverage, to begin providing health coverage, or opting to pay penalties is not one to be taken lightly. Because each firm is unique, your solution to the new laws will be entirely unique.

Whether or not you decide to change your existing policies is something you’ll need to discuss at length with an insurance broker who can illuminate the obligations and implications of deciding to pay penalties or to provide coverage. But you need to begin the discussions now. Because of the complete overhaul of our health care system, changes and new requirements will continue to roll out as the months pass, and you’ll be in better shape to roll with the punches if you’ve already begun working towards your new plans.

Steven Driss

Steven Driss is President of Lifeline Employee Benefits in Tarzana, CA. Lifeline Employee Benefits was established in 1985 to help individuals and small businesses identify and purchase affordable health insurance, disability and group insurance. For additional information visit www.health-quotes.net or contact Steven directly at (818) 774-1003 or via email at steve@health-quotes.net

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Filed Under: Practice Management

About the Author: Steven Driss is President of Lifeline Employee Benefits in Tarzana, CA. Lifeline Employee Benefits was established in 1985 to help individuals and small businesses identify and purchase affordable health insurance, disability and group insurance. For additional information visit www.health-quotes.net or contact Steven directly at (818) 774-1003 or via email at steve@health-quotes.net

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