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Small Business Employee Benefits and HR Blog

What CPA's Need to Know About Health Care Reform

The Affordable Care Act (ACA) requires CPAs, Tax Advisors, and Accountants to be experts on the key provisions of health care reform. As a result, CPA's are becoming one of the "go-to" professionals for health insurance decisions.CPAs_Need_to_Know_About_Health_Reform

For example, because the ACA introduces new tax penalties and credits/subsidies, CPAs are required to help clients consider whether it is more valuable to go to a state Health Insurance Exchange or a private insurer based on how many FTEs they have.

What CPAs Need to Know About Health Care Reform

Here are six (6) aspects of health care reform CPA's need to know to help their clients make the right tax decisions.

If you want more details at the end of the article, check out this free eBook: The CPA's Guide to Health Care Reform.

1. Key Provisions of the ACA

CPA's should be familiar with the key provisions of health care reform, including the reforms to health insurance policies (ex: guaranteed-issue), the Individual Mandate, the phase-in schedule for the Employer Mandate, and new fees and reporting requirements for companies of different sizes.

2. State Health Exchanges

The state Health Insurance Exchanges are up and running in all states. CPA's should be familiar with the basics of the Individual Health Insurance Exchanges and Small Business SHOP Exchanges (ex: What are they? What are the advantages of using them for individuals and small businesses? How are they similar and different to private exchanges?).

3. Health Reform Tax Penalties

The ACA introduced tax penalties for both individuals and employers. Most individuals face a tax penalty if they do not have health insurance coverage. Larger businesses face a tax penalty if they do not offer health insurance coverage to full-time employees. These are called the individual shared responsibility fee and employer shared responsibility fee, respectively.

CPA's should be able to explain these new penalties, evaluate which clients they impact, and calculate the amount of the penalties.

4. Health Reform Tax Credits & Subsidies

The ACA introduces new tax credits and subsidies for both individuals and employers. Individuals now have access to significant discounts on individual health insurance premiums (for plans purchased via their state Health Insurance Exchange). And, some small businesses have access to health care tax credits (for plans purchased via the SHOP Exchanges).

CPA's should be able to explain these new tax credits and subsidies, evaluate which clients can benefit from them, and calculate the amount of the credit and/or subsidy.

5. Trends in Health Insurance – Businesses Dropping Coverage

Industry research suggests that while employers will drop health insurance, they are not dropping health benefits all together. Instead, they are adjusting how they offer health benefits.

Many of these employers are expected to adopt Defined Contribution Health Models. A recent employer survey found that 47% of employers report moving to Defined Contribution, with another quarter of employers considering it.

CPA's should be familiar with these trends, and understand that employer-sponsored health insurance is undergoing a major shift.

6. Defined Contribution & Health Reform

The general concept of a Defined Contribution Health Plan is that a company gives each employee a fixed dollar amount (a "Defined Contribution") that the employees choose how to spend. Employees are allowed to use their Defined Contribution to reimburse themselves for individual health insurance.

Because of the shift toward Defined Contribution, CPA's should be familiar with how Defined Contribution Health Plans are set up, administered, and reported. CPA's should also be knowledgeable about comparing the tax (and financial) advantages of Defined Contribution vs. traditional employer-sponsored health insurance.

If you're a CPA or Accounting Professional, what questions do you have about health care reform?