Small Business Health Care Tax Credit

Small employers that have 25 or fewer full time employees (FTEs) may be eligible for incentives from the federal government to provide their employees with health coverage.  Unfortunately, a very low percentage of employers are taking advantage of this credit.

Which Expenses Qualify?

The expenses that an employer may count toward the tax credit include the health insurance premiums paid for each employee.  Contributions to self-insured plans such as Health Reimbursement Arrangements (HRAs), Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) are not eligible for the credit.

What Are the Qualifications?

To qualify for the Small Business Health Care Tax Credit, employers must meet the following criteria.

1. Firm size:  A employer must have less than the equivalent of 25 full-time workers when totaling all individuals' hours of employment.

2. Provide health care coverage:  The employer must confirm that it pays at least 50% of the cost of health care coverage for employees.

3. Wages paid: Employers must pay their workers an average of less than $50,000 per year.

Any employer that satisfies all three of these requirements is eligible for the tax credit; however, the smaller, lower wage employers will receive a larger tax credit than those employers who just barely meet the criteria. Click below to view the IRS instructions for the Credit.

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Calculating the Tax Credit

The Small Business Health Care Tax Credit currently offers a maximum benefit of 35% of an employer’s premium contributions (25% for nonprofits) to a health insurance plan. Only the employer contribution is counted toward the credit—not the entire premium cost. In order to qualify for this maximum credit, an employer must have 10 or fewer FTEs who have average wages of $25,000 or less. The benefit becomes slowly less generous as employers reach the $50,000/25 FTE.

In 2014, the tax credit will increase from a maximum of 35% of premium costs to 50% (35% for nonprofits). The credit will be available only to those who purchase insurance through the Small Business Health Options Program (SHOP) Exchanges. Employers will be able to claim this credit for only two years.

Below is the link to the worksheet that will generate a report for employer size and eligibility for a tax credit. 

https://compliance.benefitmall.com//?bid=m/foUrpuJi2HdHQUG8bRJQ==&fk=1

Nothing About Health Care is Simple

By: Rob Cannon

Maryland enacted small group health reform in 1993 and introduced some of the same provisions as the new national Health Care Affordability Act.  For example, in Maryland, there is no medical underwriting for small employer groups.  When the Maryland law was first enacted, small employer groups had to have two people enrolled in the health benefits program.  Maryland Nonprofits was instrumental in pushing through a change that reduced the requirements to only one full-time staff person for a nonprofit organization.  Maryland Small Group legislation eliminated pre-existing condition exclusions.  This has benefited nonprofits that employ differently-abled people, HIV positive individuals, people who are controlling mental health issues through medication, or other individuals with chronic disease.  Maryland’s legislation has guaranteed coverage, but at a price.  

The increased health insurance costs come at a time when most nonprofits are seeing flat or decreased revenues.  Many organizations have been forced to keep salaries at 2008 levels while absorbing health care cost increases of 20-30 percent per year.  Over the last decade, the cost of providing medical care has risen far more rapidly than most other costs.  You see plenty of ads for drugs on television and in print that may make us feel better, but aren’t a necessity.  People are living and working longer, increasing medical expenses.  The quality of life for most has increased in later ages, but some come at a significant cost, which is why you see more people talking about Long Term Care Insurance.  Yet, despite the wonderful advances in medicines, we are engaging in destructive behaviors like over-eating and under-exercising that result in expensive medical interventions.  Ask any Maryland Nonprofits member that fights cancer if annual mammograms or colonoscopies should be eliminated to reduce the cost of health care… the answer is going to be no.  Ask an advocate for mental health if the drugs enabling a schizophrenic to hold a job should be excluded from health insurance… the answer is going to be no.  All of this (and more) contributes to the double digit rise in health care costs.

This year has seen the introduction of the new Federal Health Care Affordability Act.  In the months since its passage, medical personnel, policy analysts, and lawyers have poured over it trying to figure out how it all will be implemented.  The document has some of the best and brightest minds in DC scratching their heads.   It is difficult for the Executive Director of a small nonprofit who is dealing with fundraising, program evaluation, and balancing the budget to also stay on top of all the new health care rules and regulations.

Since Maryland Nonprofits was founded almost twenty years ago, members have been asking why a health insurance pool for nonprofit employees doesn’t exist. Under Maryland small group law, health insurance pools are prohibited.  Even if a pool were allowed, Maryland Nonprofits members have possibly the worst demographics for such a pool.  The staffs of nonprofits, both large and small, tend to be older, more educated, and more likely than the general population to have on-going medical needs.  Older workers tend to need more medical attention.  More education leads workers to know and seek out the full range of available medical services including lifestyle improving drugs and mental health services.  Nonprofits are more likely to hire individuals that may have on-going medical needs, for example, a cancer support group hires a cancer survivor to head the organization.  This type of employee increases the costs of providing health care to nonprofit staff greater than the general public.  Most nonprofits, however, benefit from the community rates ensuring coverage for all eligible employees regardless of their medical needs or history.  

One of the benefits of membership with Maryland Nonprofits is a partnership with Gorges and Company, Inc., an insurance agency that has worked with nonprofits for almost two decades. Gorges understands the current Maryland law and is staying abreast with the constant changes in the federal law. Gorges can assist you in designing the best possible program for your staff.  Some points to consider:

• In Maryland, health care rates are based on the ages of your staff upon renewal.  Changing the date of a new hire or termination can dramatically impact your rates for a full year.  Gorges can help you calculate the right time to do staff changes to minimize your annual health insurance costs.
• Increased deductibles reduce costs to the employer significantly.   A $1,200 deductible may save $1,500 or more in premium per employee.   Gorges can help you design a program that will enable you to fund the deductible while reducing the overall cost of health insurance.
• We moved a group with a traditional PPO to a new PPO (with the same company) and reduced the doctor copay from $20 to $10 and reduced the prescription deductible from $250 to $100.  The monthly individual premium went from $960 to $877.  The group with 6 employees will save almost $6,000 a year.

For smaller nonprofits, please be aware that you may be eligible for the new health care credit for 2010.  If you have fewer than 25 staff with average salaries less than $50,000, you may be able to collect up to one-third of the premiums paid. 

For more information on calculating the credit, contact Rob Cannon from Gorges at 410.561.8280, 800.449.8280 or robc@gorgesco.com .  To help you save time, Gorges also handles other insurance products for nonprofits like Long Term Disability, Directors and Officers Liability Insurance, and more.  Please talk to Rob about other insurance products on which Gorges can help you save money!

Basic Insurance Issues for Students Attending College

Leaving Home for college can be a exciting experience. In the excitement, parents may overlook the fact that college students encounter insurance issues which haven't been considered. Before there's an auto accident, a fire in, or theft from, a dorm or off-campus apartment, or an unexpected trip to the "ER", its important to review your, and your child's, insurance needs to make sure you have the necessary coverages.
Some key things to consider are:

Q: Does my Homeowners Policy (HO Policy) cover my son or daughters property if he/she lives in a dorm?
A: Most HO Policies cover personal belongings up to a certain percentage (usually 10%) of the personal property limit stated in your HO policy. Because of this limitation, and the possibility your student may bring high priced electronics and valuables to school, its important to check the coverage limits of your policy. If you think you aren't adequately covered, consider increasing your policy limit, or purchase a renters policy to ensure no coverage gaps exist.

Q: Do these coverages and limitations apply if my children live in off-campus housing?
A: Most HO Polices will NOT cover personal belongings for students living in off-campus housing. Nor will the landlord's insurance. In this case, you are encouraged to purchase renters insurance, AND, whether your children reside in a dorm or off-campus housing, compiling a list of possessions, to include purchase prices, model numbers, etc., will assist when filing a claim, with deciding how much renters insurance will be needed, or how much to increase your HO Policy limits. (Taking pictures or videos is also encouraged).

Q: Are there auto insurance issues I should discuss with my agent?
A: Inform your agent if your children go away to college. If they don't take a car, you may be entitled to a premium discount, but still be able to retain coverage should they come home for holidays, or borrow a car while away at school. If they do take a car, premiums may increase or decrease, depending on the location of the school. In addition, maintaining a certain GPA may entitle you to a "good student discount", whether they bring a car to school or not.

Q: Are there health insurance issues to consider?
A: Children attending college who are younger then 26 may maintain coverage on your insurance, as long as they're not offered coverage through their own employer. If your child attends college in another state, your plan's network of hospitals and preferred doctors may not extend there. However, your student will likely have coverage for emergency care, but need to travel to a preferred doctor or hospital for routine care. Check your plan's provisions, or contact your provider to find out what benefits are available.

Q: What if my children don't have insurance, or it's limited by network service issues?
A: Consider purchasing a "student health care plan". Such plans are sold by insurers who have contracted with the college. Contact your child's college for more detailed information. Another alternative would be to purchase an individual health insurance policy through your agent.

Q: Are there other issues to consider?
A: There are several to discuss with your agent including:

• Tuition Refund Insurance
• Life Insurance
• Identity Theft Insurance

Q: How do I know what I should do?
A: Making such a decision about your options is yours- and yours alone under the law. As your independent insurance agent, we can help explain these options. Our agency's job is to help provide your with information, so you can make informed decisions. Please call our office with any questions at 410-561-8280.