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‘Cadillac tax’ the next big Obamacare battle

A mix of business groups and labor unions are pushing to tee up the next big Obamacare fight: killing its so-called Cadillac tax.

It is, they say, the type of Obamacare “fix” that Republicans and Democrats can agree on — notwithstanding the problem of filling an $87 billion budget hole that nixing the levy would produce.

Many expect it to be the next protracted battle over Obamacare — one that threatens to become a headache for Democrats, many of whom never liked the tax despite supporting the law more generally.
It’s one of the last big parts of the Affordable Care Act to go into effect — lawmakers delayed the levy until 2018 in part because it is so controversial — but companies are wrestling with it now as they plan employee benefits. Some are already negotiating with unions over benefits that could spill into 2018.

“This is going to have a life of its own as the clock ticks closer to 2018,” said Rep. Joe Courtney (D-Conn.), a critic of the tax.

Though the nickname suggests it will apply to a select few, experts say a majority of employers could eventually face the prospect of imposing what will be the first-ever tax on health care benefits.

The IRS began last month spelling out the nitty-gritty of how exactly the tax will work, though it left out many of the details employers say they need.

At issue is a 40 percent excise tax on the health benefits companies provide their workers above a certain threshold. In 2018, the tax will hit insurance and related perks valued at more than $10,200 for singles and $27,500 for families. So for family benefits worth $30,000, the tax would apply to the $2,500 that’s above the limit.

Taxing those benefits represents a major shift in generations-old tax policy.

The government has encouraged companies to offer health insurance by letting them write off from their taxes the cost of providing workers with coverage for more than a half-century, a byproduct of World War II-era wage controls.

Eager to attract workers and unable to increase pay, companies turned to expanding fringe benefits such as health insurance. But economists of all stripes have long complained the open-ended tax break companies get for providing that coverage drives up health care costs while disproportionately benefiting the affluent.

Nonetheless, it’s a major reason why millions of Americans get coverage through their jobs. So for lawmakers, it’s long been all-but-politically untouchable. Ironically, Barack Obama as a presidential candidate attacked Sen. John McCain in 2008 for proposing to tax health benefits.

Unions, which often have generous health benefits and have opposed the tax since the law’s inception, say the looming levy is already becoming a factor in their contract negotiations.

“Employers are coming to the table asking for cuts in benefits based on their preliminary projections around the tax,” said Shaun O’Brien, assistant policy director for health and retirement at the AFL-CIO, which backs repeal.

The National Education Association, which is also demanding the tax be rescinded, issued a report Thursday complaining it would disproportionately hit women and older workers.

“We continue to support the Affordable Care Act,” said Kim Anderson, senior director of the group’s Center for Advocacy and Outreach. But “the excise tax on high-cost plans can randomly and unfairly cause hardship to American workers and their families” and “Congress must repeal the excise tax.”
The administration has long argued it is a modest step to get health care costs under control. It “will affect only a small portion of the very highest-cost health plans — a total of 3 percent of premiums in 2013,” Obama economic adviser Jason Furman wrote in a 2009 White House blog post.

The threshold at which the tax kicks in is higher than current average premium rates, according to the nonpartisan Kaiser Family Foundation. The typical family plan cost $16,834 last year, according to Kaiser, while the average individual plan cost $6,025.

But the tax is more onerous than it appears, experts say, in part because it hits more than just traditional health insurance.

It also applies to health savings and flexible spending accounts, including money workers now sock away tax-free for medical expenses. Supplemental insurance plans will also be included and, potentially, on-site clinics companies set up for their workers, the IRS said last month.

What’s more, even if a company ducks the tax in 2018 — and many have been trying to wring savings out of their plans in anticipation of the new rules — they may only get a temporary reprieve.

That’s because Congress pegged the tax threshold to a relatively slow measure of inflation.

It’s linked to the consumer price index plus 1 percent, even though medical costs typically grow much faster. Private health care spending per enrollee will grow by an average of 5.6 percent annually over the next decade, according to the Congressional Budget Office, while inflation will increase by 2 percent per year.

That means the tax will ensnare more companies over time, with some likening it to the alternative minimum tax, originally aimed at the very wealthy but which trickled to those further down the income ladder.

About one-third of employers will be hit by the tax in 2018 if they do nothing to change their plans, according to a March survey by Mercer, a benefits consulting firm. By 2022, almost 60 percent will be facing the levy.

“‘Cadillac tax’ is really a misnomer,” said Beth Umland, Mercer’s director of research for health and benefits. “Potentially any employer could be hit by this tax.”

Former Obamacare adviser Jonathan Gruber, in one of the now-infamous videos that emerged late last year, said rising medical costs ensure the Cadillac tax will eventually all but eliminate the break companies get for providing health insurance.

Economists in both parties have been pushing the idea for decades as a way to slow health care costs, because it amounts to a cap on benefits.

That’s a good thing, many say, because overly generous insurance shields beneficiaries from costs, which encourages them to use more services, driving up prices for everyone else. It’s also a matter of fairness, some say, because forgoing taxes on health care benefits amounts to a major break for those with jobs offering coverage.

“Capping the tax benefit for employer-sponsored health insurance, I think, is a great idea,” said Len Burman, head of the nonpartisan Tax Policy Center. “Providing an open-ended subsidy for health insurance, which encourages people to get plans that do less to restrain spending, contributes to rising health care costs. Most economists who’ve looked at health care spending have concluded that.”

The tax could eventually hit all health plans, “although you probably wouldn’t get policymakers to admit to that,” Burman siad. He added he doubts Congress will allow that to happen, saying lawmakers will come under substantial pressure to ease the tax.

It’s a big reason why Congress’ independent budget scorekeepers have said Obamacare won’t add to the deficit, and why the tax will be tough to repeal. The levy, which is projected to generate $87 billion over a decade, ramps up slowly, but is estimated to eventually produce so much money that it alone will cover the cost of providing insurance subsidies through the program’s exchanges.

“This provision is one of several in the ACA designed to promote fiscal responsibility and slow the growth of health care costs,” said White House spokeswoman Jessica Santillo.

But as the tax begins to loom larger, the criticism is getting louder.

Some say it will punish companies that have been trying to rein in costs.

Businesses have been pushing their workers out of high-cost plans and into ones with bigger deductibles while simultaneously offering them health savings accounts to help them cope with the increased costs. That may be for naught, because both would be subject to the levy.

“If employees participate in HSAs and FSAs through payroll deductions, which employers have been encouraging them to do — now it’s going to hurt the employers,” said Rick Grafmeyer, a tax lobbyist and former Republican tax aide. “So now they’re putting the employers in the position of having to say, ‘No, no, no, we don’t want you to participate as much in these things because it will likely cause us to pay the Cadillac tax.’ It’s crazy.”

Others complain the tax discriminates against those in the Northeast and West Coast, because health costs tend to be higher there than in the South or Midwest.

“You could have parts of the country where [they] have the most lavish coverage and not be subject to the tax,” while in other areas “people will get hammered and forced into some pretty bad choices,” said Courtney, the Connecticut lawmaker.

Republicans grouse about parts in the law providing higher thresholds for when the tax kicks in for those in high-risk professions, such as law enforcement and fire-fighting, which they call a sop to unions.
Last month, Rep. Frank Guinta (R-N.H.) introduced legislation to cancel the tax.

“It’s going to undermine the employer-sponsored system, and it’s going to do the exact opposite of what anyone’s vision of health reform would have done, which is to provide greater access to health care coverage,” said Katie Mahoney, director of health care policy at the U.S. Chamber of Commerce. “This is something that we are really trying to educate folks about.”

Read the original article on Politico.

The 4 Pillars of Prosperity All Entrepreneurs Should Attend To

Many entrepreneurs are wealthy and powerful in the business aspects of life but poor in the others. Some feel fulfilled in a work context but hollow in a personal one. “Is this all there is?” is the question that gnaws at them.

We too have ridden the business roller coaster. Josh, for instance, says that he once asked himself, “What do I need to be 100 percent authentic and put 100 percent into each aspect of my life every day?” From this question sprang the four pillars. We’ve listed them below in order of importance — and their order will probably surprise you.

The pillars are your foundation for living a harmonious life in contrast to one in which you’re attempting to cobble together pieces from four different puzzles.

1. Health
Without you, there is no business, so you have to put the pillar of health first. You can only achieve your best productivity and vision for your business when your wellness score is close to 100 percent. At one point, Joshua says, he was spending so much time on his business that he ballooned to more than 40 pounds overweight. And that weight gain had a toll: He felt he was operating at about 60 percent.

One cause of this was convenience foods. These may be “convenient” in terms of time and price, but they make you look tired. They hamper your creativity. Eating energy-rich foods, in contrast, makes you look and feel good. Your energy “pops,” and people notice. They feel confident doing business with you because most view staying healthy while running your own business as a Herculean feat they themselves want to emulate.

So, how do you achieve good health? One simple change is to make a habit of moving your body the first five minutes at the top of each hour.

2. Vision
Vision is next on the list because of the morning ritual it involves and the importance of launching your day in the right way. It’s about tapping into universal creativity so you can solve the problems that arise.

Here’s a brief overview of a useful four-phase, 20-minute meditation we learned from life coach Jesse Elder. You can set up iTunes to change music at the end of each five-minute segment so you know to move into the next phase.

Phase 1 entails concentrating on your breath. Breathe in power. Breathe out energy. Phase 2 is about feeling full of gratitude because of what you’ve accomplished. Visualize an event or time when you felt overjoyed. Phase 3 is “pre-paving” where you project getting to in the future.

The one rule is that this vision should make you feel good. Go to this future point where you have what you desire, then move backwards step-by-step to understand how you got there.

Phase 4 is allowing all the information and experience from phases 2 and 3 to sink in. Then write those ideas down on a legal pad or in your idea journal so you have a road map for the rest of your day.

3. Relationships
Relationships are your support system. They can include your family and/or spouse and/or a peer group(s) you choose. These are the people who pick you up when you fall. They hold you accountable to be better today than you were yesterday.

Relationships are mandatory for success because so many entrepreneurs take on the woes of the world along with their businesses. They feel the need to protect those around them.

That’s a fine objective, but so is disclosure. Disclosure is usually the best policy with those closest to you. These are people who may well have insights that help you solve problems.Having social interactions with no business agenda is key to creating harmony in your life. After all, you schedule business meetings, right? So, why not schedule personal meetings so your relationships don’t slip through the cracks?

4. Business
Why is business the fourth pillar? Nobody we know wants his or her business to be a “favorite child.” The other three pillars provide a stable foundation and fuel for ideas and business breakthroughs.

Add in a vision tool
A journal is a great tool to provide clarity. It allows you to see where you’re going, in the larger sense, as well as to see the specific things you’re looking to accomplish in the near-term. A journal helps you focus your thinking “on your business” instead of “in your business.” The big 5X or 10X opportunities leap out at you like the Aurora Borealis. Your mind can then make the short hop needed to the relationships you can activate or ramp-up to transform those opportunities into big profits.

Without the other three pillars, yours will likely be weak business teetering on the brink. It’s like straining to reach that Golden Apple from a ladder that’s too short and has only one or two legs. As our mentor, Jesse Elder, says, “Life is not a knockout punch. It’s a combination.” The combination of these four pillars is how you knock out challenges and live the stand out life you desire, in order to leave a positive and lasting legacy.

Read the original article on Entrepreneur.

Rising Health-Care Costs Fuel Demand for Corporate Wellness Services

More business owners are investing in corporate wellness, a market that continues to show strong growth, according to a recent report, “Corporate Wellness Services in the U.S.,” by IBISWorld. Over the next five years, corporate wellness industry revenue is forecast to grow by 8.4 percent annually to $12.1 billion.

Fitness facility operators could benefit from that growth. Seventy-nine percent of companies with lifestyle management programs are providing nutritional and weight counseling, and 72 percent are offering fitness-related services. IBISWorld forecast that nutrition/weight management could account for about 17.4 percent of industry revenue, and fitness-related services may comprise about 15.9 percent.

“Typically, corporate wellness companies may help businesses develop on-site fitness facilities that garner a high rate of employee participation,” the report states. “In addition, some corporate wellness companies may use their large size as leverage to secure low-cost gym memberships, effectively passing these cost savings to businesses in the form of lower prices for subsidized employee gym memberships.”

IBISWorld healthcare analyst Sarah Turk, the author of the report, said, “Businesses are realizing that they can have a high return on investment for disease management services, with each dollar allocated toward these programs resulting in a $3.80 ROI.”

Seventy-two percent of employers purchased screening services to identify employees’ health risks or intervention services to promote healthy lifestyle choices, according to RAND, a research corporation. For example, companies are collecting employees’ biometric data, such as their height, weight, blood pressure and blood glucose levels, so they can target high-risk employees for intervention programs.

A recent study from Fidelity Investments and the National Business Group on Health found that employers will pay each employee an average of $693 this year as an incentive to participate in wellness programs. That’s an increase from $430 five years ago. The report also found that 47 percent of employees participate in the wellness programs that their employers offer.

Read the original article at Club Industry.

Planet Fitness’ Surging Expansion Highlights Huge U.S. Economic Trends

Gym chain Planet Fitness continues to surge in popularity in the United States. The secret sauce of the company has been its low-cost gym membership and inviting workout environments. Now, the company is starting to take its show on the road, with an entry into Canada in 2015. But, Planet Fitness’ rise to the top in the highly fragmented gym industry sheds light on two huge trends in the U.S. The first is the growing number of fast food chains, which are packing on the pounds on a nation that is battling with robust levels of obesity. Second, the uprooting of physical retail due to more mobile consumption, as seen hundreds of store closures, continues to afford Planet Fitness access to attractive real estate assets. Brian Sozzi talks with Planet Fitness CEO Chris Rondeau to discuss.

To read the original article, please click here.

Indoor Tanning Tax Final Regulations Issued

Sally P. Schreiber wrote in the Journal of Accountancy that:

IRSOn Monday, the IRS issued final regulations on the 10% excise tax that has been in effect for amounts paid for indoor tanning services since July 1, 2010 (T.D. 9621). The regulations, which apply to amounts paid on or after June 11, 2013, finalize proposed rules issued in 2010 when the tax first became effective and withdraw the temporary regulations issued at the same time (T.D. 9486; REG-112841-10). The final rules are slightly different from the proposed rules.

The regulations provide that “amount paid” includes all amounts paid to a tanning services provider for indoor tanning services, including any amount paid by insurance. Tans that are received as redemptions of “bonus points” in a loyalty program or “free” tans received after having a certain number of tans are not subject to the tax. Because many tanning salons sell other goods and services in addition to tanning services, the regulations provide rules for determining the tax when the provider charges for various goods and services in addition to the tanning services.

She went on to report:

The regulations carve out an exception for “qualified physical fitness facilities” that include access to indoor tanning facilities as part of a membership fee. The IRS has determined that where that access is incidental to a physical fitness facility’s predominant business, the amount attributable to the indoor tanning access is difficult to determine. Thus, amounts paid to qualified physical fitness facilities are not subject to the 10% tax. The regulations narrowly define “qualified physical fitness facility” to exclude businesses that predominantly engage in indoor tanning or other cosmetic services. Despite a number of commenters’ objections to this exception, the IRS retained these rules intact from the proposed regulations.

Read more at the Journal of Accountancy