CA Obamacare penalty to cost employers more than plan

May 7, 2013

By Katy Grimes

As more regulations are discovered in the 2010 Affordable Care Act, more people are realizing the impact of the legislation. And California looks as if the law could hit it hard.

CA medical claims will jump 62 percent 

According to the Society of Actuaries, financial risk analysts, nationally, medical claims will jump an average of 32 percent for Americans’ individual health care policies under President Barack Obama’s government health care plan.

For Californians, it will be even worse: 62 percent.

But even with clever private sector work-arounds, California lawmakers, led by a Democratic supermajority, are leaving nothing to chance, nor any flexibility for employers. This is a do-it-or-die deal.

California, the first state in the nation to establish an ObamaCare Health Exchange, is working apparently to set a new low in government-driven healthcare ideology with what some are referring to as “CaliCare.”

AB 880, by Assemblyman Richard Pan, D-Sacramento, is a bill which essentially would force large businesses to offer health insurance by fining them more than the average cost of providing coverage. Money raised by AB 880 is meant to increase Medi-Cal provider rates, and to subsidize state costs for it.

“AB 880’s monetary penalty is written purposely vague but sure to be painful to business,” health care expert and lawyer Craig Gottwals with BB&T-Liberty Benefit Insurance Services told me.

“The proposed penalty on employers is based on 110 percent of the average cost of health care coverage, including both the employer’s and employee’s share of the premium.”

Gottwals found:

“According to the Kaiser Family Foundation, the national average cost for individual health care coverage in 2012 was $5,615 and family coverage was $15,745. It is unclear whether AB 880 sets the penalty level at the individual or family level of health care coverage but even if it were set at the lower individual level it would be 110% of $5,615 or a cool $6,176.50 per employee in 2013. That is over three times the federal penalty for not providing healthcare to an employee under PPACA.”

According to the bill:

“The amount of the employer responsibility penalty shall be adjusted annually to reflect changes 
in the average cost of coverage provided by large employers to their employees.” 

The law would apply to private employers with 500 or more employees in California and for employees working as few as 8 hours per week.

AB 880 also exempts governments:

“‘large employer’ shall not include a state, 
city, county, city and county, district or any other governmental employer. … An employer responsibility penalty shall not be incurred by a state, county, city, city and county, district, or any other governmental entity.”

So the government, as it often does, exempted itself from the onerous burdens it’s placing on the private sector.

The many exemptions and exempted groups have been ignored by most of the media. The law reads:

 “HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.”

“The shared responsibility payment (IRS penalty) should not apply to any taxpayer for whom coverage is unaffordable, who has other good cause for going without coverage, or who goes without coverage for only a short time.”

IRS exemptions

The IRS’s allowable exemptions include nine categories of individuals who are exempt from the shared responsibility payment:

* Individuals who cannot afford coverage;

* Taxpayers with income below the federal filing threshold;

* Members of Indian tribes;

* Hardship;

* Individuals who experience short coverage gaps;

* Religious conscience;

* Members of a health-care sharing ministry;

* Incarcerated individuals; and

* Individuals who are not lawfully present.

These exemptions leave mainly the working middle class paying income tax to pick up the tab for most of the system.

We also are finding that

* Most of the middle class will not be able to afford the insurance, and their children will not be covered.

* The half of Americans who do not pay federal income taxes will not be required to pay the “mandatory” IRS fine if they do not buy government health insurance.

* Illegal immigrants will not be fined for not having insurance.

And just in case anyone else was missed the exemption list, the last paragraph was added to cover any other vulnerable group:

“The HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.”

“Healthcare costs have increased 170 percent over the past decade,” said Gottwals. “AB 880 will make for one steroid-induced penalty for state rulers to plunder in upcoming years. Perhaps we can take the Bullet Train to new state-funded clinics?”