by Angela Chagnon
“This is ridiculously complicated,” said Robin Lunge, an attorney with the Department of Banking, Insurance, Securities and Healthcare Administration (BISHCA), shortly after she began trying to explain how the new national health care law works to the House Health Care Committee.
Lunge attempted to simplify the complicated presentation with several pages of relatively easy-to-read charts, but she still had difficulty explaining the extremely complex system of tax credits and penalties so that legislators could understand it.
Tax credits are available for businesses with fewer than 25 full-time employees with average wages of less than $50,000 per employee. Employers would get penalties for not offering insurance coverage, or who “offer unaffordable coverage and whose employees get a subsidy to buy an exchange health benefit plan.”
The system for determining if an employer would have to pay a penalty left legislators scratching their heads, and Lunge had difficulty answering many of the their questions.
When asked who would assess the penalty, Lunge said that the IRS would calculate the employer penalty to be paid. “That will be well received,” said Rep. Mark Larson (D-Burlington).
Lunge said that the employer penalty was similar to what is commonly referred to as “play or pay” — offer insurance or pay a penalty. But according to the new law, even employers who do offer insurance will be penalized starting in 2014 if that coverage doesn’t meet the federal government’s demands.
“Might be a good time to sell and get out,” remarked Rep. Jim Eckhardt (R-Rutland), who is also a founding member of the Rutland County Pro-Business Coalition.
Paul Poirier (I-Barre City) asked how the goal of decoupling health insurance from employment worked in the bill. Larson said that insurance was still tied to an employer under the federal plan. Eckhardt pointed out that even Vermont’s bill, Act 128, didn’t decouple insurance from an employer.
The average Vermont insurance premium for individuals under the new law would be $5,244, with families paying about $11,748 per year. The employee share, under the law, would be 8% to 9.5% of household income. Lunge said this was called the “affordability test”. The higher percentage is for those who make 400% of the poverty level. The current poverty level for a family of four is $22,050. Vermont’s median household income is $51,219 which means that a lot of Vermont families will be paying the higher percentage.
Individuals who don’t buy insurance are penalized in one of two ways (whichever amount is greater):
1. “1% of household income minus (standard deduction +
personal exemption)”. This amount is double for those who
are married and filing jointly. The penalty is increased to 2%
in 2016, then increased to 2.5% in 2016 “and after”, reads
2. Flat dollar amount on each taxpayer + family members
· $95 per person in 2014; $325 in 2015, $695 in 2016
· Dependents under 18 are ½ off
· Total family penalty capped at 300% of flat amount (for example, $95 x 300% = $285)
Lunge said that “unlawful immigrants” are exempt from the law, since they’re here illegally. However, they are still entitled to health care treatment. Other groups exempt from the law are those who can’t afford insurance (“hardship defined by secretary of HHS), those with an income of less than standard deduction + personal exemption ($9,350 in 2010), an individual whose contribution is greater than 8% of household income, religious groups (such as the Amish and Muslims), and those who are part of health sharing ministries (under IRS rules).