Author Archive | John Barrett

Researcher: Discourage Small Groups from Reinsuring

A health law specialist says states can keep small employers with younger, healthier employees from abandoning the insured plan market in 2014 by limiting the small employers’ ability to self-insure.

Mark Hall, a public health law professor at Wake Forest University, makes that argument in a commentary in the new issue of Health Affairs, an academic journal that publishes articles about the finance and delivery of health care.

The latest issue includes many articles on how the Patient Protection and Affordable Care Act of 2010 (PPACA) might affect small groups.

PPACA is supposed to start requiring health insurers to sell small group coverage on a guaranteed issue, community-rated basis starting in 2014.

If the law takes effect on schedule and works as drafters expect, some small employers will be able to use federal tax subsidies to buy coverage through a new system of health insurance distribution exchanges, and, in some cases, small employers’ employees may be able to use tax subsidies to buy individual coverage through the exchanges.

Today, many small employers hold down coverage costs by buying plans with high deductibles or limited benefits. PPACA will put limits on small employers’ ability to use benefit design to hold down costs, because PPACA will require insured plans to cover at least 60% of the actuarial value of a standardized “essential health benefits” package, Hall says.

PPACA does not provide any new subsidies for individuals paid over 400% of the federal poverty level, or about $89,000 per year, or for small employers with many highly paid employees.

PPACA requires insurers to spend 80% of small group revenue on health care and quality improvement efforts, but the law sets no limits on small group rates.

The PPACA small-group community rating rule may help small employers with sick employees get cheaper coverage, and it might reduce insurers’ administrative costs, but it gives small employers with younger, healthier employees an incentive to try to avoid subsidizing the insurance of employers with older, sicker employees, Hall says.

“Community rating, along with other [PPACA] market reforms, will founder or fail, however, if younger or healthier groups can easily avoid reforms by self-insuring,” Hall says.

“Self-insurance threatens not only the integrity of market regulations but also consumer protection,” Hall says. “For example, stop-loss coverage is not subject to any requirement of guaranteed renewability. Nor can self-insured employers use normal appeals channels for coverage denials.”

Many employers that self insure, and most small employers that self insure, use stop-loss arrangements — insurance for health plans — to limit their exposure to catastrophic losses.

Hall says states could keep small employers from leaving the insured small group market by banning stop-loss for small employers, limiting the comprehensiveness of stop-loss coverage, or applying the same rules to stop-loss coverage that they apply to the primary coverage. North Carolina already regulates small group stop-loss programs the same way it regulates ordinary small group health insurance, Hall says.

“This regulatory approach preserves small employers’ ability to select either purchased or self-funded insurance,” Hall says. “Its main effect is to ensure that the choice is not driven principally by the group’s risk profile or the employer’s desire to avoid health benefit regulation.”


Clinics halt Lap-Band surgeries

By Stuart Pfeifer, Los Angeles Times

February 8, 2012

Two clinics tied to 1-800-GET-THIN have temporarily halted Lap-Band weight-loss surgeries after the device’s maker said it would no longer sell to companies affiliated with the massive advertising campaign.

The two brothers identified in lawsuits as owners of the surgery centers also hired a top Los Angeles defense attorney to represent them in a flood of pending lawsuits. They retained John Hueston, a white-collar defense lawyer now at Irell & Manella who helped lead the Justice Department’s criminal prosecution of Enron Corp. executives Kenneth Lay and Jeffrey Skilling.

Those steps come days after Allergan Inc., the Irvine-based maker of the Lap-Band, said it would no longer sell the device to clinics affiliated with the marketing company. The Food and Drug Administration, California Department of Insurance and Los Angeles County Board of Supervisors are investigating the ad campaign and its affiliated surgery centers.

At least five Southern California patients have died since 2009 after Lap-Band surgeries at clinics affiliated with 1-800-GET-THIN, according to lawsuits, autopsy reports and other public records. Each of the patients had been treated at surgery centers in Beverly Hills and West Hills tied to the ad campaign, according to the records.

“Unfortunately, recent allegations question the safety of the Lap-Band procedures at two centers,” the clinics said in a statement Tuesday. “While we strongly believe these allegations paint a false picture of the care provided and discount our capabilities and success rate, we have stopped scheduling new Lap-Band surgeries at those centers, effective immediately.”

The New Life Surgery Center in Beverly Hills and Valley Surgical Center in West Hills have stopped performing Lap-Band surgeries while they perform “a top-to-bottom medical and operational review” of their Lap-Band surgery business, the companies said.

The surgery centers are among several clinics affiliated with 1-800-GET-THIN, whose ads for Lap-Band surgery have become fixtures on Southern California roadside billboards, radio, television and the Internet.

The Lap-Band is a ring that is surgically implanted around the stomach to discourage patients from overeating and help them lose weight. Allergan declined to say why it made the decision to stop selling the device to the surgery centers.

Tuesday’s announcement that the clinics would at least temporarily halt Lap-Band procedures comes as 1-800-GET-THIN and its affiliated companies face a stream of government investigations and civil lawsuits.

Among them is a whistle-blower lawsuit, filed by two former surgery center workers, that alleged unsanitary conditions at the clinics and accused the centers of billing insurers for medically unnecessary procedures and surgeries that were never performed. There are also several pending wrongful-death lawsuits and a lawsuit, filed by patients, accusing the firms of false advertising.

Hueston said he has agreed to represent brothers Michael and Julian Omidi in “all matters arising out of the lawsuits that have been filed with respect to 1-800-GET-THIN.” The two brothers have been named in lawsuits as owners of the marketing company. Hueston said he was unaware of any criminal investigations against them.

Further, Hueston has extensive experience in crisis management. His past clients include Angelo R. Mozilo, the former chief of mortgage giant Countrywide Financial Corp.

An opposing attorney who represents former surgery center workers said he believes hiring Hueston is a sign that the Omidis view the pending investigations as a serious matter.

“I think they do see the handwriting on the wall,” said Alexander Robertson, an attorney representing former surgery center workers. “They’re circling the wagons and getting ready for the onslaught.”

In a separate development, Dan E. Chambers, an attorney who represents the two surgery centers, sent a letter to the Los Angeles County coroner defending the treatment of a patient named Paula Rojeski, who died following Lap-Band surgery in September.

The letter challenged allegations in the whistle-blower lawsuit that a series of mishaps contributed to Rojeski’s death. The coroner’s office has not yet released the cause of Rojeski’s death, even though her autopsy was performed five months ago.


Understanding HSA Tax Forms

This information, from HSA Resources, is a good summary of the IRS forms needed if you have a Health Savings Account (HSA)

HSA Tax Forms.

HSAs give you fantastic tax benefits. The IRS, however, checks to make sure you follow the rules.

•1099-SA – Distribution Report. HSA custodians are required to send an IRS Form1099- SA to you and the IRS each year you take a distribution from your HSA. The purpose of this form is to give the IRS a report showing if you took any money out of your HSA for the year. Most HSA distributions are “normal” or “code 1” distributions. This includes distributions for eligible medical expenses (a doctor visit) and most non-eligible medical expenses (a car muffler). This surprises a lot of people as the qualified medical and non-qualified distributions are lumped together. The IRS looks to you to clarify the distributions on the IRS Form 8889. You need to state that you used all the money for an eligible medical expense or you will generally need to pay taxes and penalties. Other codes include: excess (code 2), disability (code 3), and death distribution (code 4 or 6). If all of your HSA distributions were for eligible medical expenses you will not owe any taxes or penalties.

• Form 5498-SA- Contribution Report. HSA custodians must send an IRS Form 5498-SA to you and the IRS each year. The main purpose of this form is to inform the IRS how much you contributed to your HSA. The IRS then uses this to check to make sure you do not claim an HSA deduction above the amount of your HSA contribution. You will not get this form until after tax season (required by June 1) because the IRS wants custodians to record all 2011 contributions, including those made as late as your tax filing due date for 2011 (April 17, 2012 for most taxpayers). Accordingly, think of this form as an IRS tool to check on you – it’s not to help you complete your tax return. You need to know how much you contributed to your HSA. The amount will be on your HSA statements and possibly your W-2 if the contributions were made through an employer (look at box 12 for a Code W – that’s HSA).

•1040 Line 25. This is where you take your HSA contribution deduction. It’s an “above-the-line” deduction meaning that you get the deduction whether or not you itemize. The deduction is not based on income thresholds. Pre-tax employer contributions and pre-tax payroll deferral are not put on this line because your employer already excluded them the contributions from income on the Form W-2 – see Form 8889 below for details. Look also in box 12 of your W-2 Form, Code W refers to amounts that an employer put in your HSA pre-tax (both employer and employee payroll deferral amounts).

• Form 8889-Schedule to 1040. You must file a Form 8889, an attachment to the 1040 form, for each year you make an HSA contribution or receive a distribution from your HSA. If you use tax preparation software, the software will do the form for you.

Contributions – Part I Lines 1-13. The top part of the form determines the deduction amount for line 25 on the 1040. The form separates employer contributions that were already pre-tax from those you can deduct. Generally contributions made through your employer are not taxable income on the W-2 and therefore you cannot deduct the HSA contribution on the 1040. Contributions that you made on your own generally are deductible on the 1040. The form also checks to make sure you are eligible for an HSA and that you did not exceed the federal limits. The form reviews factors like family versus single health coverage, your age for catch-up contributions and whether your spouse also has an HSA.

Distributions – Part II – Lines 14-17. The lower part of the form validates that you used your HSA distributions for qualified medical expenses. Remember the 1099-SA just lumps both eligible and non-eligible together. Line 15 is the key. You must write the dollar amount of your eligible medical expense distributions from the HSA on this line. For many of you this will match your 1099-SA total distribution because you only used your HSA to pay for qualified medical expenses. If not, you may have to pay taxes plus add a 20% penalty for the non-eligible distributions.


An Rx? Pay More to Family Doctors


The nation’s second-largest health insurer is shaking up its approach to paying doctors, putting a major investment behind the idea that spending more for better primary care can save money down the road.

The nation’s second-largest health insurer, WellPoint Inc., which insures some 34 million Americans, will offer primary-care doctors a fee increase with the possibility of additional payments, Christopher Weaver reports on Markets Hub.

Starting this summer, WellPoint Inc., which insures some 34 million Americans, will offer primary-care doctors a fee increase, typically of around 10%, with the possibility of additional payments that could boost what they get for treating the patients it covers by as much as 50%.

The new approach could pour an additional $1 billion or more into primary care, which WellPoint is betting will pay off in the form of fewer emergency-room visits and hospital stays.

“This will fundamentally change our relationship with primary-care physicians,” said Harlan Levine, WellPoint’s executive vice president of comprehensive health solutions.

Health-policy experts have long faulted the U.S. health-care system for placing too little value on traditional primary care, the front-line medical work that ranges from immunizing children to ensuring that diabetics get their blood-sugar tests. They also say that the current fee system, which sometimes fails to reward such services as planning outpatient care after a hospital stay, leads to bigger bills and worse results for patients.

Some doctors already are seeing some of the benefits that WellPoint is after. John Bender, a Fort Collins, Colo., physician whose practice is part of a pilot project involving WellPoint and six other insurers, cites a patient who was treated for a heart attack last February. She soon returned to the hospital, via an air-ambulance trip, for chest pain.

WellPoint flagged her case to Dr. Bender’s practice, Miramont Family Medicine. Doctors there took a closer look at her case and diagnosed an anxiety disorder. They referred her to their staff psychologist, started her on a low-fat diet and exercise regimen and controlled her blood pressure. At, they have been successful in helping their customers to achieve weight loss successfully.

“She hasn’t visited the emergency room since,” said Dr. Bender, Miramont’s owner. “We create a tremendous amount of value.” As part of the pilot program, Miramont earned a roughly $100,000 bonus from the insurers last year, he said.

Primary-care doctors, such as pediatricians and family physicians, often make less than half of what top-paid specialists like orthopedic surgeons earn, and the idea of changing how they are paid has been around for years. Insurers and government agencies are experimenting with a variety of approaches. But WellPoint, with its network of about 100,000 primary-care doctors, could have a much broader influence.

The “scale is so much bolder than things we’ve seen,” said Paul Ginsburg, president of the Center for Studying Health System Change, a Washington nonprofit group. “This isn’t an experiment.”

In addition to its fee increase for visits, which will vary by market, WellPoint will offer primary-care doctors payments for services such as developing treatment plans for patients with chronic diseases. It says physicians will get a chance to make even more if they help pare the overall cost of patients’ care: a bonus amounting to as much as 20% to 30% of any savings they achieve.

WellPoint is also promising that it will give doctors data and staffing help to improve their practices. In return, those doctors will have to meet requirements including some form of 24-hour access for patients and keeping a registry to monitor chronic-disease care.

The insurer said the program, which will include only primary-care doctors who meet certain quality goals, could add as much as one or two percentage points to its primary-care spending, which now represents about 6% to 8% of the about $100 billion in claims it processes annually.

WellPoint officials said they think the company’s upfront investment in primary care could reduce its projected medical costs by as much as 20% by 2015 by improving overall patient health and reducing the need for costlier medical services.

Elizabeth Curran, who oversees the insurer’s national network programs, said Aetna wants to “make the appropriate investment to help support” doctors as they seek to improve their practices.

Several early medical-home pilot projects have shown signs of improved quality and patient satisfaction, researchers said. Some regional insurers, such as Maryland-based CareFirst BlueCross BlueShield, have moved ahead with broader programs.

Still, “we have no strong evidence of cost savings yet,” at least based on short-term results published so far, said Meredith Rosenthal, a Harvard researcher who studies health-care payment.

WellPoint said its savings projections are based largely on its own data from medical-home pilot projects.

One big question is whether higher payments from any one insurer can change the way doctors work, given that many patients will still have more-traditional coverage. Bruce Bagley, medical director for quality improvement at the American Academy of Family Physicians, said he welcomed the new efforts. But, he said, “if you only have 10% of your practice that you’re getting paid extra for, that’s not enough to get your attention.”

WellPoint pointed to its substantial market share of 15% to 46% of people with coverage in the 14 states it serves. It said it expects around 70% of the primary-care doctors in its network to join its new program by the end of 2014.


How Defined Contribution Health Benefits Help Employers Recruit and Retain Employees

It costs a typical employer the equivalent of 6-9 months in salary each time they have to replace a salaried employee—that’s $20,000 to $30,000 for a $40,000 manager in recruiting and training expenses, along with the potential lost revenue from customers.

Employers can save approximately half of these expenses, $10,000 or more per replaced employee, with a health benefits plan that helps them recruit new employees and retain existing employees.

Defined contribution health benefits provide many advantages over traditional employer-sponsored benefits. Rather than paying the costs to provide a specific group health plan (a “defined benefit”), employers can fix their costs on a monthly basis by establishing a defined contribution health plan that gives employers and employees full control over healthcare costs – the employer’s costs are predictable and controllable, while employees are given full control over their health care dollars and choose a portable plan that meets their exact personal needs.

How do defined contribution health benefits work?

An employer gives each employee a fixed dollar amount (a “defined contribution”) that the employee chooses how to spend. Typically, employees are allowed to use the defined contribution to reimburse themselves for personal health insurance costs or other medical expenses such as doctor visits and prescription drugs.

Under the traditional approach to health benefits, the company selects and funds the same insurance plan for all employees in a one-size-fits-all approach.

Alternatively, in a defined contribution approach, the employer designates a fixed amount of money, the “defined contribution”, and employees purchase personal health insurance directly from any insurance company they choose, selecting products that specifically meet their family’s needs and budget.

What is a personal health policy?

A personal health policy, sometimes called an “individual” or “family” health insurance policy, covers you and your designated family members. You purchase a personal health policy through a licensed health insurance agent who is appointed to represent the insurance companies in your state.

Personal health policies now cost 1/3 to 1/2 the price of similar-benefit employer-sponsored coverage in 45 states. This is primarily because insurance carriers in 45 states are allowed to: (1) price based on age bands and (2) reject or charge more to applicants for personal policies with pre-existing conditions.

If you or a member of your family are rejected or charged more for a personal health policy because of a pre-existing medical condition, you typically become eligible for state-guaranteed (“HIPAA-guaranteed”) or federally-guaranteed (“PCIP”) personal health insurance.

How do businesses determine the amount of money allocated to employees?

Providing different levels of benefits to classes of employees is at the core of benefits compensation and is routinely done by major corporations.   With salary and other types of compensation, employers routinely compensate groups of employees differently. Field sales people are compensated differently than sales managers. Some employees get company cars, while others earn quarterly bonuses. Because health benefits are such an important part of compensation, why not provide benefits that vary by class of employee?

With defined contribution health benefits, businesses can create employee classes that offer benefits tailored to the company’s objectives, transforming a health benefit plan into a tool to find and keep great people.

For example, consider an electrical contracting company who struggled to hire and keep journeymen electricians in a very tight labor market. Instead of offering the same health plan to all employees, the company created separate classes for apprentices and journeymen and gave journeyman $350 more per month in their HRA. This large increase helps the company reduce attrition among journeyman. Plus, it creates a visible incentive for apprentices to complete the education required to become journeymen.

As there are no minimum or maximum contribution requirements, a business can design their defined contribution health plan to fulfill its exact recruiting and retention needs.


Recruiting and retaining key employees is essential to every business, and a company’s health benefit program is a key part of the compensation they offer to their employees. Due to the rising costs of traditional employer-sponsored health insurance, defined contribution health benefits are gaining popularity in the U.S. Rather than paying the costs to provide a specific group health plan (a “defined benefit”); employers might want to consider fixing their costs on a monthly basis by establishing a defined contribution health plan.


The high risk of high-risk pools

When the health reform law’s high-risk insurance pools launched last summer, there was a lot worry that the new coverage option would be swamped by demand from uninsured individual. Then, there was worry about too little demand: The insurance pools saw anemic enrollment, with some states enrolling just a few dozen subscribers. And now, there’s a new worry: The high-risk pools attracted such expensive patients, with costly medical needs, that nearly a quarter are running short on cash.

Nine states have asked HHS for additional funds to continue running their Pre-Existing Condition Insurance Plans, the program meant to cover some who insurers have denied coverage between now and 2014, when insurers’ ability to discriminate on preexisting conditions ends. Two states, New Hampshire and California, have requested additional funds twice now, as their high-risk pool’s bills exceed expected costs.

Montana is among the states seeking more funds, and it points at the type of people who enrolled in the plan as the reason for it’s request. The Montana plan has 269 members, a $16 million budget and, via the Billings Gazette, not enough money:

The $16 million, issued in mid-2010 as part of the federal health reform law, was supposed to cover costs of the subsidized health insurance program through 2013 for as many as 400 people covered by the pool.

Yet initial cost estimates turned out to be too low, because the medical costs per covered customer are higher than expected, said Cecil Bykerk, executive director of Montana’s pool.

“Our numbers (for enrollment) were fairly accurate, but per-member, per-month claim costs have been much higher than the original assumptions that we used,” he said.

This isn’t exactly surprising: When the federal government created a new health insurance program catering to those who have had trouble obtaining insurance in the past, it makes sense that those who have very high medical costs would be first in line. It hasn’t helped that the premiums have proved relatively pricey: In Montana, the monthly premium for the high risk pool is as high as $681. Anyone who enrolls in a plan with that kind of premium likely expects to have relatively expensive medical costs in the near future.



Group Health Shrinks as Individual Health Grows

The government is documenting what commercial health carriers and brokers have been saying for months: 2010 was a terrible year for group health plan enrollment.

Brokers, consultants and others said group plan case sizes fell that year as employers slashed head counts.

Analysts at the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) say in the latest National Health Expenditure Accounts report that group health enrollment fell by 2.6%, to 166 million.

The drop meant that 4.5 million lost employer-sponsored coverage than gained it.

The number of people with individual health coverage increased 3.6%, to 22 million, but that market is much smaller than the group market. The increase in individual health program enrollment translated into a net gain of only 800,000 covered lives.

Enrollment in Medicare increased 2.5%, to 47 million, and enrollment in Medicaid increased 5.8%, to 54 million.

Together, those programs and the Children’s Health Insurance Program (CHIP) now cover about 104 million people, or about one-third of the U.S. population.

The number of people who were uninsured increased 1.6%, to 47 million. The rate of increase in the number of uninsured people was down from 8.9% in 2009.


IRS Puts W-2 Health Advice in a Nutshell


January 6, 2012

An Internal Revenue Service (IRS) has tried to boil the new tax Form W-2 health benefits cost reporting requirements down into terms that mortals without advanced accounting credentials can understand.

Wanda Valentine, a senior tax analyst at the IRS, writes about the new W-2 reporting requirements in an employer newsletter.

The Patient Protection and Affordable Care Act of 2010 (PPACA) requires the IRS to establish health benefits cost reporting requirements. Later, the IRS is supposed to set up a program to impose an excise tax on health benefits packages with costs that exceed a designated threshold.

Employers are supposed to report an employee’s health benefits cost in Box 12 on the W-2 using Code DD to identify the amount.

Benefits cost reporting is voluntary for the W-2 forms now going out, but reporting is supposed to become mandatory for issuers of 2012 W-2s.

Even in 2012, “the amount reported does not affect tax liability,” Valentine says.

The IRS tried clarify the new reporting rules earlier this week in IRS Notice 2012-9, a long, complicated batch of guidance.

“The amount reported on the Form W-2 should include both the portion paid by the employer and the portion paid by the employee,” Valentine says.

Valentine notes that, under current law, employers will always have to include some types of expenses and will never have to include others.

The IRS is developing guidance for handling a third batch of benefits expense categories. It will provide transitional relief allowing employers to keep those expenses out of the W-2 health benefits cost totals until guidance is available, Valentine says.

Categories that can always stay out of the health benefits cost total include the cost of:

  • Long-term care coverage.
  • Coverage for “HIPAA excepted benefits,” such as accident insurance and disability insurance.
  • Liability insurance.
  • Worker’s Compensation
  • Archer MSA amounts
  • Health Savings Accounts (HSAs)
  • Salary reductions for flexible spending accounts (FSAs)

Valentine says transitional relief treatment is available for:

  • Employers filing fewer than 250 Forms W-2 for the previous calendar year.
  • Multi-employer plans.
  • Health Reimbursement Arrangements.
  • Dental and vision plans that are not integrated into another group health plan.
  • Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements.
  • Wellness benefits, employee assistance plans and on-site medical clinics, to the extent that the employer does not charge any amount to qualified beneficiaries for applicable COBRA continuation coverage or similar coverage.
  • Forms W-2 furnished to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year.

Survey shows California healthcare costs rising, benefits shrinking

By Marc Lifsher, Los Angeles Times

January 4, 2012.

Fewer California companies offered their workers health insurance last year, and the ones that did charged employees more for their coverage.

That’s among the findings of an annual California Employer Health Benefits Survey released Wednesday by the California HealthCare Foundation, a research and grant-making nonprofit organization.

According to the survey, premiums for employer health insurance plans have risen 153.5% since 2002, a rate that’s more than five times the increase in California’s inflation rate.

In the last two years alone, the proportion of state employers offering coverage to workers fell to 63% from 73%, the survey said.

“This is a departure from previous years and could be an early sign of future changes,” the foundation report noted in commentary on data collected between July and October 2011 in interviews with 770 private firm benefit managers.

The steady rise in costs during a prolonged economic downturn contributed to decisions by about a quarter of employers to either reduce benefits or increase cost sharing for employees in 2011. A slightly smaller percentage, 22%, opted to make workers pay more of the share of the higher premiums.

Health insurance is expected to take even more money out of workers’ pockets this year. The survey indicated that 36% of California firms said they were either “very” or somewhat” likely to raise the amount that their staff paid in premiums in 2012.

Rising costs and shrinking coverage are accelerating, said Anthony Wright, executive director of Health Access California, a group that advocates for expanded health insurance coverage.

“They are frankly multi-decade trends,” he said. “What is notable is that this is more significant than usual.”

What’s been a “gradual erosion of employer-based coverage in good years” has evolved into “a steep one in bad years,” Wright said. “To be down to 63% [of California companies offering coverage] is huge. It used to be up over 80%.”

Patrick Johnston, president of the California Assn. of Health Plans, blamed the rising premiums on expensive technology, the spread of chronic disease and an aging population, among other factors. Johnston’s organization represents 40 California health plans that cover 21 million people.

What’s more, he noted that years of cutting reimbursements to doctors and hospitals by the government-run Medi-Cal program have created a “cost shift” that has to be “made up in negotiations for higher rates for commercial payers such as employers.”

Insurer profits, Johnston argued, are not a leading cost driver since publicly traded California insurers keep only 13 cents out of every premium dollar to pay for expenses and to secure earnings that average 3% to 5% of revenue.

Both Wright and Johnston predicted that full implementation of President Obama’s healthcare reform plan in 2014 could go a long way toward broadening coverage and to an eventual control of raging medical cost inflation.

“I hope that some of the reforms start to change the picture,” Wright said. “It’s clear that if we repeal [the law] or retreat back to the status quo, we will have some trends that simply are unsustainable.”


Every Small Business Needs to Know About These Potential Regulatory Changes

Paychex Inc. released its list of the top 12 potential regulatory changes that small businesses need to know about in 2012. Paychex works closely with the IRS and other government agencies and is constantly monitoring regulatory and compliance-related matters.

• Health Coverage W2 – The IRS further delayed a requirement for smaller employers to report the cost of employer-sponsored health coverage on employee Forms W-2, indefinitely postponing it until further guidance is issued. However, employers that file 250 or more Forms W-2 in 2011 must include this cost on the W-2 starting in tax year 2012. The healthcare amounts reported on the W-2 will be strictly informational and not taxable to the employee.

• Healthcare Reform – The Supreme Court is expected to rule in 2012 on the constitutionality of the individual mandate provision in the Affordable Care Act.

• 401(k) – In 2012, 401(k) service providers will have to make additional fee disclosures to plan sponsors and plan sponsors will have to make additional fee disclosures to participants. Contribution limits will increase in 2012. Regulations will be enacted in 2012 or are under consideration to broaden the definition of a plan fiduciary, make investment advice more accessible to plan participants, and restrict the number of loans an employee can take from their 401(k).

• Job Creation – Congress passed legislation in 2011 to provide a tax credit for hiring veterans. The temporary reduction of employee payroll taxes was due to expire on December 31, 2011, but Congress extended the provision for two more months. A new recapture provision applies to employees who earn more than $18,350 during the two-month period.  The tax cut could extend through 2012, pending further negotiations. Congress is considering additional measures, such as earmarking funding for infrastructure projects and passing measures to help small businesses access capital.

• Worker Classification – IRS is allowing eligible employers to reclassify workers as employees in exchange for partial tax relief from past federal employment taxes. In late 2011, the Dept. of Labor agreed to work with the IRS and several states to coordinate enforcement. Legislation in several states to increase fines for worker misclassification may affect employers in 2012.

• Deficit Reduction – Proposed legislation focuses on reducing the deficit through spending reductions and tax increases. Many of the ideas involve reforming personal and business tax and closing of tax loopholes.

• Immigration – The federal government is conducting rigorous worksite enforcement and paperwork inspections of companies of all sizes to crack down on the employment of illegal immigrants. In 2012, state laws will require more private sector employers to use the federal E-verify system for employee verification. Also possible in 2012 are Congressional immigration reform proposals that may include additional federal employment verification obligations.

• Employment Law – Many states restrict employers from using an employee’s credit information in employment-related decisions or are considering these resrictions. The Dept. of Labor and many states have enacted or are considering regulations to provide greater transparency of pay checks. These regulations focus on how workers’ pay is calculated, especially as it relates to minimum wage and overtime requirements.

• Security and Privacy – Cybercrime and corporate bank account takeovers against small businesses are becoming more widespread. Employers should take security precautions, such as using stand-alone computers for online banking; not clicking on attachments or hyperlinks from unknown sources; and working with their bank to implement fraud detection tools on their accounts. Many states have enacted onerous privacy and security breach regulations.

• Dodd-Frank – The sweeping Dodd-Frank financial law is focused primarily on Wall Street reforms and consumer protection. However small businesses may face limited access to credit and higher costs of credit or other financial services because of the increased burden it places on some industries.

• Unemployment Insurance – Virtually all businesses will face higher unemployment insurance taxes if Congress reinstates the federal unemployment surtax. In many states, employers will see higher taxes because of the repayment of outstanding federal loans that were taken to continue paying benefits and replenish depleted state unemployment trust funds. Many states are cosidering additional employer reporting requirements to combat unemployment insurance fraud.

• Taxes – 2012 will bring a number of important tax changes including a higher Social Security wage base and changes to  assistance benefit limits. The accelerated depreciation benefits, which were in place in 2011, may expire or be scaled back in 2012. All employers will need to keep an eye on what are likely to be additional tax changes as the year progresses.