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CAPITOL PERSPECTIVES column LIFESCIENCELEADER.COM 10 By J. McManus TREASURY THREATENS SMALL BUSINESSES FOR PROVIDING HEALTH COVERAGE IN THE "WRONG WAY" MARCH 2015 J O H N M c M A N U S The McManus Group Treasury Threatens Small Businesses For Providing Health Coverage In The "Wrong Way" s if the challenge of providing healthcare coverage is not difficult enough for small businesses, the Department of Treasury is now threatening to penalize any employer who provides tax-preferred resources for their employees to purchase insurance coverage in the individual market with a $36,500 annual fee per employee. You read that right — the penalty for providing such assistance is $100 a day per employee — or more than 12 times the penalty for large employers failing to provide coverage as mandated by the Affordable Care Act (ACA)! A Small employers who are not even required to provide coverage are most likely to become ensnared in this punitive policy because they often do not have the sophistication, time, or resources to purchase group coverage for their employees. Rather, many fund tax-preferred Health Reimbursement Arrangements, which their employees use toward the purchase of coverage in the individual market or to simply pay for qualified health items and services, such as physician visits and prescrip- tion drugs. But the Department of Treasury issued a vexing regulation stating that such contributions violate the ACA's market reforms, specifically the requirement that insurance policies must provide unlimited catastrophic protection and free preventive care. The small business community met that regulation with bafflement and outrage. All were willing to stipulate that the discrete dollar contributions in themselves do not constitute an insur- ance policy. Those funds are resources to purchase an insurance policy in the individual market, which of course would be in compliance with the ACA requirements. A backlash is now fomenting on Capitol Hill as constituents seek redress. At a recent Senate Finance Committee markup, Senator Grassley (R-IA) read an excerpt from a letter from a dentist in Sioux City: "Help! I am a small business owner — seven employees. I have been help- ing to subsidize my employees' health insurance for 20 years. I just found out that the Market Reforms of the ACA have made that illegal … . Now all of my employees will have to pay taxes on the money I gave them for health insurance. They all live paycheck to paycheck and won't be able to come up with the taxes on this money. They also most likely won't qualify for the exchanges and any PENALTY FOR PROVIDING TAX-PREFERRED RESOURCES FOR THEIR EMPLOYEES TO PURCHASE INSURANCE More than 12x the penalty for large employers failing to provide coverage as mandated by the Affordable Care Act EACH DAY PER $$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$ $100 EMPLOYEE