Let me say first, I realize the ACA isn't perfect, but it's better than what we had before. I was very excited about some of the things the ACA did for small businesses. I am the business manager at a small non-profit. We struggle to make payroll and keep our benefits current. Yes, we're small, but apparently not small enough. I'll get to that in a minute.
When we started looking at options for health insurance for next year, we talked to a salesman who quoted us a decent price and reminded us that we were eligible for a 35% tax credit. We're in Iowa, and the plan we chose is a platinum plan. It was interesting to see that our 23-year-old employees will only cost us about $300 a month for a plan with a $500 deductible, $1000 maximum out of pocket. Our 60-year-old employees' coverage will cost over $800 a month. Still, the average cost is significantly better than what we were paying, which I still find amazing.
And then there's the tax credit. A 35% tax credit is very exciting. Then the other shoe dropped: we found out we will still have to pay the full premium. Uncle Sam will pay us back later. Maybe.
I'm starting to think the tax credit is a nice story but the substance isn't there. We've been getting the tax credit for the past couple years; in 2014, it is supposed to go up. What they don't tell you is, it's a sliding scale. We were supposed to get 25% for the past few years, but ended up getting about 10%. For 2014 and 2015, it will be as much as 35% for non-profits, but who knows what we'll actually get. Or if they will change the way it's figured. The devil is in the details, as they say.
Here's how it works, and let me tell you, it is a bear to calculate. We have about 19 FTE (Full Time Equivalent) employees. That means, you add up all the hours that everyone works all year, and divide by 2080 to get the number of FTEs. If you have more than 10 FTEs, you don't get the full credit. If your average wages are above a certain level, you don't get the full credit either, although that's not a problem for us. But when I filed last spring for the credit, we got a letter from the IRS saying that our refund would be reduced by 8.7% due to sequestration cuts.
That brings me to an important question. If small businesses and non-profits can lose a portion of their tax credit due to the sequester, what will happen to the individuals who are buying their insurance in the marketplace? Many individuals are counting on paying less in monthly premiums because they are getting the tax credit. Will they get an unwelcome surprise when they get their bill in January? Or will they be back-billed months later when the insurance companies don't get the full credit? Will the insurance companies be expected to eat it? Somehow I doubt that.
So, my fellow Kosians, can anyone enlighten me on this? You're a smart, well-read group. Does anyone know how the sequester will affect the ACA tax credits for individuals in the Marketplace? Or is that one of the things that Congress will be fighting over when they get back from their extended Christmas vacation?
