Ever since Obamacare reared its ugly little head my blood has been boiling at the idea that our federal government is involved in the dispensing of health care.
I am not sure that this responsibility was ever designated to the federal government by the people that crafted the Constitution.
While there may be some hope that the new individual coverage health reimbursement arrangement (IHRA) regulations could lead to good things for brokers, I believe the new ICHRA regulations are anything but good news for brokers.
News articles suggesting that the regulations could be good for brokers are either very naive or deliberately rosy.
The first question to be asked is…why is the federal government suddenly pushing ICHRA plans?
The answer is pretty simple: By allowing and encouraging a tax deductible employer contribution of $1,800, the federal government could be potentially reducing the huge loss of taxes that it currently sustains for a 100% tax deductible premium an employer pays on behalf of an employee for group health insurance.
Benefits and taxes
Ever since George Bush 1 uttered the words, “Read my lips: NO NEW TAXES!,” politicians on both sides of the political world have been wrestling with a dilemma…
Raising taxes is never popular with the electorate, and there is just so much fat in the federal budget to be trimmed and redirected to other priorities before unintended consequences start to show their face.
For example if you cut funding for police, there is very likely to be an increase in crime. Cut funding for the military and some other country might be tempted to test us in a way we do not want to be tested.
So, while raising funds is difficult, and requires unpopular methods to do so, if you want to fund and grow government programs, you have to figure out clever and sometimes shady methods of doing so.
For many years the wonks in Washington have focused on the 100% tax-deductible group health premiums paid by businesses as a potential loophole to be plugged or at least reduced greatly. The fact is, of the roughly 325 million people in this country, roughly 155 million people are covered under some form of employer paid health insurance plan. This represents a lot of votes.
Under Obamacare the wonks in Washington created a “Cadillac tax” on plans the Obama administration deemed to be too rich.
(Related: Kleinbard to Congress: The Cows Must Die)
As you know, the Cadillac plan tax was met with lots of anger. Ultimately, the government went away with its tail between its legs.
Amazingly, it was the unions with their very rich benefit plans that screamed the most about the Cadillac plan tax, and not the uber wealthy attorneys; stock brokers; or other high-wage earners that complained about the Cadillac plan tax. It was the carpenter; police officer; fireman; and teacher that protested.
These union benefit plans were fought for years ago. They make up a significant part of employee compensation.
At the time, the folks from government were trying to make it sound like the high-wage earning strata were benefiting from very rich health insurance plans that were being paid for by 100% tax deductible business funds.
In fact, the people that benefited most from the ultra plush health insurance plans were middle income earners.
An employer has a choice – raise a person’s salary (with tax deductible compensation) and say to the employee, “Now, you go out and do what you want, but we are shutting our health insurance plan,” and accept the possibility that the employee might choose to buy health insurance or do something else in a responsible manner, or that the employee might blow the extra earnings on toys and parties.
Now, a short time later, the government suddenly creates a new “flexible” set of HRA rules that (to the untrained eye) give the impression that the federal government is trying to encourage employers that don’t currently provide plans to offer employees up to $1,800, so that the individual employee can go shopping for their own individual coverage.
The HRA v. theTraditional Health Coverage
The fact is, in the downstate New York state area, the average monthly premium for a gold-level individual plan would eat up $1,300 of the annual $1,800 in cash payments.