"HHS" Health and Human Services Issue Health Care Exchange Rules

WASHINGTON -- The Department of Health and Human Services has issued the final regulations for implementing the state health insurance exchanges mandated by the Affordable Care Act (ACA).

They allow states more flexibility in determining eligibility for the exchanges than was first given, according to Chiquita Brooks-LaSure, director of coverage policy in HHS' Office of Health Reform. That change was made after "a lot of input from states and stakeholders," she told reporters on a Monday afternoon conference call.

The setup of the exchanges "lets consumers easily determine their eligibility for enrollment and easily enroll in coverage that's right for them," said Brooks-LaSure. That includes using a single streamlined application so that consumers will get a "consistent eligibility determination" without needing to submit different information for the different plans offered.

Under the ACA, nearly everyone is required to have insurance starting in 2014, and the government will provide financial assistance to those who need it. People who earn less than 133% of the federal poverty level can enroll in Medicaid, and those who are between 133% and 400% of the poverty level will be eligible for tax credits from the federal government in order to buy insurance.

People can use the tax credit to buy health insurance through an exchange in their state. The exchanges will act as "one-stop shops" where people can compare different insurance plans.

For small employers -- such as small physician practices -- that want to provide health insurance for their employees, the exchanges also will offer a Small Business Health Options Program (SHOP).

SHOP will let small businesses choose among different levels of coverage, depending on what works for them and their budget. SHOP will allow these employers to offer coverage from a number of insurers, but still get one bill and write only one check, according to HHS.

The SHOP program also features tax credits to help make coverage easier for small businesses to afford.

According to HHS, starting in 2014, small employers purchasing coverage through SHOP may be eligible for a tax credit of up to 50% of their premium payments if they:
Have no more than 25 employees  
Pay employees an average annual   wage of less than $50,000
Offer all full-time employees   coverage
Pay at least 50% of the   premium

Spotlight on Key Business Legal Issues for 2012

It's a new year and with it comes change. With the upcoming presidential election and evolving technological advancements, there will be plenty of challenges ahead.

Here are eight issues that might result in legal issues for businesses during 2012:

1. Online piracy of intellectual property. Debate is heating up about the protection of intellectual property on the Internet.  After much protest, Congress has delayed hearings about two proposed laws, the Stop Online Piracy Act (SOPA) in the House and the Protect IP Act (PIPA) in the Senate.

SOPA and PIPA would criminalize certain Internet behavior such as streaming copyrighted content and enabling the sale of counterfeit goods.

The laws have vehement supporters (including entertainment companies, media businesses and the U.S. Chamber of Commerce) who argue that more policing the Internet is necessary to protect intellectual property, jobs, consumers and more. There are also plenty of fervent opponents (Google, Facebook, YouTube and other tech companies) who argue that passage of such laws will thwart entrepreneurs and stop the growth of the Internet. That, in turn, will hurt the economy and result in fewer jobs.

The Obama Administration announced that it opposes key elements of SOPA and PIPA, although it believes that "online piracy is a real problem." The announcement called for "sound legislation this year that provides prosecutors and rights holders new legal tools to combat online piracy originating beyond U.S. borders..." while maintaining the innovation and creativity of the Internet.

White House opposition of SOPA and PIPA makes passage in their current form improbable. Whether there will be new or revised laws introduced remains to be seen, but during 2012, you can count on more discussion of online piracy and Internet free speech as well as what constitutes fair use and parody.

2. Taxes will be an overriding theme in the upcoming  election. The uncertain federal tax law will be in the news and on the minds of business owners and executives. Many favorable tax provisions expired last year and Congress will have to vote to reinstate them. (The two percent payroll tax cut was only extended through February so lawmakers will soon decide whether to allow it for the rest of the year.)

Taxes will be heavily debated by presidential candidates and the outcome of the election will set the stage for 2013 when major tax hikes will kick in -- unless Congress acts. Among the changes:   Capital gains and dividend taxes are scheduled to go up. The estate tax exemption is scheduled to go down with the maximum estate tax rate going up. In addition, individual tax rates are set to go from 10, 15, 25, 33 and 35 percent to 15, 28, 31, 36 and 39.6 percent.

3. Privacy concerns will grow.   As we've learned in recent years, more technology leads to less privacy. Companies will continue to be challenged by complying with privacy laws and minimizing security risks. Data breaches of financial, heath and intellectual property information can be devastating for businesses, as well as their customers, clients, members, patients, etc.

4. Social media will continue to evolve.  The popularity of social networking sites is soaring with people posting a vast amount of personal information, images, videos and opinions.  Businesses routinely use Facebook, Twitter and YouTube sites to market their products and services. Not-for-profit organizations use them to help spread their missions.

The vast social media world has connected people like never before but it has also resulted in negative implications. Trade secrets and private memos are leaked.  Employees badmouth their bosses. Embarrassing photos are posted.

In many lawsuits, opposing attorneys increasingly seek discovery of Facebook, Twitter and other social media accounts (although some courts have ruled there must be a reason to believe the information is relevant before it is divulged). Businesses must continue to navigate the opportunities and the liabilities that social media creates.

5. More businesses will migrate more critical information to cloud computing platforms. Unfortunately, while this can reduce a company's IT costs, it can also inject considerable operational risk that may not be fully understood by business owners and executives.

For example, how will your organization respond if a third party or employee steals data or another type of data breach occurs? Do you have a backup in place in the event the cloud data center fails?

This year, we are likely to see companies attempting to gain more control over information stored in the cloud.

Keep in mind that moving to a cloud platform complicates the e-discovery process. Electronically stored information is routinely requested in civil and criminal proceedings. Before migrating data, there must be a clear understanding of the processes that the cloud computing company has in place to respond to e-discovery requests. In the event your company is required to produce information, the cloud company should provide data in a timely manner that creates no doubt that it is complete and accurate.

6. Mobile devices -- and the risks they create for businesses -- will be everywhere. Today's smart phones and tablet computers store massive quantities of data and can access corporate servers with ease. In fact, many of today's phones and tablets are able to store more information than earlier generation laptops. This increased capability brings increased risks. Information from phones and tablets, or the actual devices, can be stolen. While many companies collect, store, and transmit information on smart phones and tablets, they don't always take adequate steps to secure the devices or institute precautions when employees use their own devices for job-related functions.

In 2012, businesses will increase their awareness of mobile risks. More businesses may install security software on smart phones and tablets and require company-issued devices to be monitored in the same way they monitor desktop computers in the office.

7. Lawmakers will focus on the regulation of "crowd funding." One way for start-ups to raise seed money online is to go to certain Web sites to seek investors. They describe their ventures and solicit money. The problem: Technically, businesses engaging in crowd funding have to comply with SEC regulations or qualify for an exemption. This year, Congress is expected to resume discussion of laws that could allow entrepreneurs to use crowd funding to raise a small amount of money without violating securities laws. You will hear more debate in 2012 over the question: Should entrepreneurs be allowed to informally seek financing without taking the legal steps required to protect investors from potential fraudulent behavior?

8. Lawsuits and government actions against employers are likely to keep going up. For the last several years, the number of employees initiating illegal EEOC discrimination and harassment actions against their employers has been increasing. This trend is likely to continue in 2012. Today's employees are more aware of their rights and willing to file charges. In addition, the definition of disability was expanded in 2009 and the aging workforce means there are more employees able to file age discrimination claims. On top of these claims, employers may face Labor Department claims and lawsuits charging they are not in compliance with overtime and other wage laws.

These eight items are only some of the legal issues you will hear about in 2012. Businesses must comply with a myriad of complex, ever-changing laws and navigate an evolving technological landscape. Legal claims from customers, employees, vendors, competitors and the government can result in costly losses and harm your company's reputation. Becoming aware of potential legal dangers can help you effectively manage them.

As always, we encourage your comments.

Did you know?

Did you know Winthrop & Gray Company, sells Auto, Home and Commercial insurance to individuals and businesses? In fact we sell all forms of property and casualty insurance.

Our purpose is to provide the very best protection that covers all of your needs.

Business and commercial insurance includes contractor liability, workers comp, commercial auto, business interruption, garage liability, general liability, disability, rental, restaurants and convenience stores.

We provide personal insurance that includes homeowners, automobiles, boats, flood and wind storm, life and disability.

For your vehicles we have auto, SUV, pick-ups, vans, boats, jet skis, RV's and motorcycles.

This includes liability, PIP/PD full coverage, collision, comprehensive and discounts for safe drivers.

We strive to develop a professional and personal relationship that best meets the needs of yourself, your family, and/or your business.

Winthrop & Gray Company can provide you with the insurance that you need for peace of mind if the unexpected happens, 800-258-1598.

Call us today for more information.  Our friendly staff will be waiting to assist you.  Always a free quote.  Call today at 800-258-1598.  We will handle all of your insurance needs.

Payroll Deduction IRAs Are a No-Cost Benefit

If you've considered setting up a retirement plan for your employees and decided it was too costly, or too much trouble, there is an alternative. No matter how big or small your business is, your employees can participate in a Payroll Deduction IRA, at virtually no cost to you.

Here's how a Payroll Deduction IRA works:

 Each employee who wants to participate establishes a traditional or a Roth IRA with his or her own bank, and authorizes you, the employer, to make payroll deductions. Your only responsibility is to forward the money withheld to the financial institution.

Sound easy? It is. In fact, it is the simplest retirement plan available for businesses to institute. There are no plan documents to adopt and no reports to file.

There is little difference between the Payroll Deduction IRA and an IRA that an employee might establish and contribute to on his own. The real benefit is for staff members who need to save for retirement but find it hard to set aside the money for regular contributions on their own.

Employees are responsible for establishing their own IRAs with their own financial institutions.

Only the employee contributes to the account through payroll deduction.

Employers make no contributions and have no filing requirements.

The employer receives no tax deductions.

Participant loans are not permitted.

Assets may not be used as collateral.

Withdrawals are subject to income tax and a 10 percent   penalty if the participant is under age 59 1/2.

Eventually, your business may decide to establish a retirement plan that includes employer contributions and discontinue the Payroll Deduction IRA. If that day comes, Winthrop & Gray Company can help you make that switch.

The IRS Announces Tax Relief for Misclassified Workers

On September 21, 2011, The IRS announced a new voluntary compliance program that will allow employers to reclassify workers on a prospective basis with reduced penalties and back payroll taxes. This program, the Voluntary Classification Settlement Program (VCSP), was designed to limit fines for employers who had previously classified workers as independent contractors, rather than employees.






The Problem

• There are many reasons that employees are misclassified as independent contractors. These include:
• The worker is being hired on an infrequent or trial   basis
• The worker is being hired for a one time   occurrence
• The worker is being paid a flat fee
• The worker chooses to be treated as an independent   contractor
• The employer believes it is too   expensive to treat the worker as an employee

Unfortunately, the above excuses do not justify misclassifying workers. Correcting the misclassification is very costly, and can cause employers to continue on an incorrect path, rather than reclassifying workers.

The Solution

The IRS's new program will allow an employer to properly classify a worker as an employee for future tax periods for a very small payment. The VCSP is offered to tax-exempt organizations, private employers, and government entities. To be qualified for the program, an applicant must:
Consistently have treated the workers in the past as   nonemployees;

Have filed all 1099s for all independent contractors for the   previous three years; and

Not currently be under audit by the IRS, the Department of   Labor, or a state agency concerning the classification of the workers under   consideration.
According to IRS Commissioner Doug Shulman, "This settlement program provides certainty and relief to employers in an important area. This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations."

How to Apply

Employers apply by filing Form 8952, Application for Voluntary Classification Settlement Program. The new form must be completed at least 60 days before the employer want to begin treating the workers as employees. The two-page form asks for basic information about the employer and a description of the workers. In addition, a calculation on the form assesses the amount due on the reclassification. This number is derived from the wages received during the most recent tax year and is the equivalent of roughly 1.3% of the wages paid, a huge savings over the previous options before this program. After the form is completed, the IRS will first verify the taxpayer's eligibility. If eligible, the IRS will contact the taxpayer or its representative to complete the process. The IRS retains the right to reject any taxpayer from the VCSP, including taxpayers that otherwise meet the basic eligibility criteria.

A taxpayer participating in the VCSP agrees to treat the workers as employees for all future tax periods. In exchange, the taxpayer will pay approximately 1.3% of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

To read more about the Voluntary Classification Settlement Program click here.

Re-enforcement

The Department of Labor, the IRS, and several state governments have launched a joint enforcement effort to identify and crack down on employers misclassifying employees as independent contractors. By collaborating and sharing information of suspected misclassification, the joint enforcement effort increases the risk of substantial fines.
In the past, a state agency would penalize the employer for misclassifying employees. Under the joint enforcement effort, the state will share the findings with the IRS and Labor Department. These agencies can then go after the employer for fines and penalties for federal wage violations.
The following states have already signed onto the joint enforcement effort: Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah, and Washington. New York and Illinois have also indicated they will join the effort.

Questions Answered on the Smoker Surcharge

Question:

My client wants to encourage its employees to quit smoking.  For 2012, he wants to charge smokers a greater premium for health coverage.  Is it possible to charge smokers a greater premium without violating the requirements of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA")?

Answer: 

Yes. HIPAA generally prohibits a plan from discriminating among similarly situated individuals based on their health status. This means, among other things, that plans usually cannot charge individuals different premiums or impose different costs (i.e., through deductibles or co-pays) based on the presence or absence of a health factor. However, HIPAA also affirmatively recognizes that the nondiscrimination provisions were not meant to prevent a group health plan or an insurer from establishing premium discounts, surcharges  or reduced co-payments or deductibles in return for "adherence to programs of health promotion and disease prevention," as provided under Code §9802(b)(2); ERISA §702(b)(2); PHSA §2705(b)(2). Thus, certain programs of health promotion or disease prevention (referred to as "wellness programs") are an exception to HIPAA's general nondiscrimination requirement.

In order to penalize smokers, any surcharge must be provided under a standard-based wellness program. Standard-based wellness programs that condition eligibility for a reward upon a participant's ability to meet a standard related to a health factor are permissible only if they meet the specific requirements set forth in 71 Fed. Reg. 75014 (Dec. 13, 2006).

Standard-based wellness programs must satisfy each of the following five requirements:

·       The reward or penalty must be no more than 20% of the cost of coverage (30% starting in 2014);

·       The program must be designed to promote health or prevent disease;

·       The program must give individuals an opportunity to qualify for the reward at least once a year;

·       The reward must be available to all similarly situated individuals; and

·       The plan must disclose that alternative standards (or waivers) are available.

For a full explanation of each of the requirements, please review Field Assistance Bulletin No. 2008-02.  A link to this bulletin is provided by clicking here

News in the Health Care Reform Law

The Obama administration and challengers of the Affordable Care Act (ACA) have accelerated their filings to the U.S. Supreme Court and are submitting preliminary arguments ahead of formal deadlines, making it even more likely the justices will take up the case this term. Twenty-six states and the National Federation of Independent Business are among those who have filed lawsuits claiming the health care reform law is unconstitutional, chiefly because of the individual mandate to buy insurance.

With federal court decisions on the constitutionality of the law split, the Supreme Court is expected to decide the issue. It is possible, however, that the Supreme Court could "punt" or put off a decision for years if it determines that the Anti-Injunction Act, which says that Americans have to pay a tax before it can be challenged in court, applies to the health law.


The Court could decide in just a matter of weeks whether to add the case to the agenda for the current term, which ends in June 2012. In court papers filed last week, the administration is asking the Court to limit its review of the health care overhaul and not consider two of the issues raised by the states -- expansion of Medicaid and penalties for failing to offer adequate insurance. While the Justice Department wants the high court to uphold the constitutionality of the health care law, the states and NFIB want the court to strike down the entire law, not just the individual mandate.