President Obama recently made a big deal about how his signature law – which many now call the worst law in U.S. history – is forcing insurance companies to rebate money to policyholders. Sounds great, until you scratch the surface. The amounts involved are trivial in relation to the family budget. The insurance companies will adjust their behavior to avoid rebates in the future. And most pernicious of all, the costs of administering the rebate render the entire exercise pointless except for political grandstanding. Consider what happened at one small business:
“Here is how this really works. The insurance company sent an $800 dollar rebate to my company to distribute to 30 people. The insurance company warned us to follow the DOL [U.S. Department of Labor] and HHS [U.S. Health & Human Services] rules for how to deal with the rebate, but offered no clear guidance as to what DOL and HHS required. DOL is involved because the group plan is covered under ERISA.”
“DOL guidelines stated the company was a fiduciary and that we basically had two choices: (1) distribute the employee’s share back to them; or (2) use the $800 to provide health benefits to the employees. The first one is not as easy as it sounds, our plan premiums are paid 80/20 (employer/employee) so the employees are due about 20 percent of the total amount of the rebate associated with their insurance. Additionally, this is a rebate of a pre-tax insurance contribution for health care and DOL says the rebate should be treated as taxable income for the employee. So we ended up having to run the $5.33 through payroll [$800 total, times .2, divided by 30]. This required a change to the payroll for one pay cycle to boost every eligible employee’s pre-tax pay, on average, $5.33 and make all the withholdings and then change the payroll back for the next pay cycle to make sure it was done right. (According to one source, we couldn’t just boost employee pay with a one-time bonus because, if we were audited, we had to be able to show a line item for the rebate and subject that to tax.) DOL’s other allowable alternative of reinvesting the rebate on employee care was also confusing as DOL failed to describe what that meant.”
“Between my time researching the issue, my HR person, and my payroll person, we easily had 20 man-hours into ObamaCare compliance to refund a total of $160. Just another way that ObamaCare burdens small businesses. Thats #theRealObamaCareinAction – #JobKiller – #EmployerBurdens.”
“The only consolation is that this mess will be a one-time thing – the insurance companies will be sure to spend the requisite 80 percent of premiums on care next year.”
Obamacare Truth Squad
July 23, 2013