Ag and Obamacare; distrust and taxes

News
Jul 8, 2013

The impending implementation of the Affordable Care Act (ACA)—colloquially called “Obamacare” in many circles—has inspired many emotions, chief among them being distrust and concern, particularly among rural communities. Though a reprieve was recently granted, extending the dates of implementation, bringing with it some relief to those affected, the level of distrust isn’t hard to understand.

The 18th annual University of Nebraska-Lincoln (UNL) Nebraska Rural Poll was released Tuesday, July 2 and the results showed extreme lack of confidence in Nebraska’s rural communities about the value of ACA. Conducted between March and April of 2013 and sampling 6,320 households in Nebraska’s 84 nonmetropolitan counties, the poll found that 54 percent of the poll respondents believe the country will be worse off under ACA, compared to just 9 percent who believe it will be better off. In the heavily ag state of Nebraska, over half the respondents (52 percent) opined that self-employed individuals will be worse off, as opposed to 8 percent who think they will be better off.

Cheryl Burkhart-Kreisel, UNL Extension specialist in entrepreneurship/business development, said that respondents’ skepticism is not surprising, particularly considering the law came from a Democrat president and members of Congress, “and we’re polling a very conservative red state.”

Aside from potential ideological opposition, much of this distrust also stems from an admitted lack of knowledge and understanding about ACA. Only 5 percent of respondents reported that they understand the law “very well,” while over 40 percent say they don’t understand it at all and almost one-third say not too well.

Also, according to a recent Kaiser Family Foundation poll, 40 percent of polled respondents were unaware if ACA was still the law of the land (it is). Additionally, roughly 10 percent thought Congress had repealed ACA. Though frequent efforts have been made to overturn it, the Supreme Court ultimately ruled in a 5-4 decision at the end of last June that its requirement that most Americans obtain insurance or pay a penalty was authorized by Congress’ power to levy taxes.

“There’s a lot of learning and education that needs to take place,” Burkhart-Kreisel said.

“There’s a lack of trust in the entire system,” added Randy Cantrell, rural sociologist with the Rural Futures Institute.

Postponement

Also on Tuesday, July 2, the Obama administration granted employers an extra year to comply with ACA’s mandatory health insurance coverage rules. Instead of taking effect Jan. 1, 2014, ACA will now go into effect for employers on Jan. 1, 2015.

“For most of our farmers, this law would not apply, however many of our orchards, vineyard and related operations may have been dramatically affected by this mandate,” Paul Neiffer, a Pacific Northwest CPA who specializes in agriculture, posted in his CliftonLarsonAllen LLC blog and reported by DTN’s Marcia Zarley Taylor.

Long-running and even officially-reported delays in creating, let alone beta-testing and implementing, the infrastructure for ACA have had a large hand in the postponement.

Sen. Max Baucus, D-MT, who was one of the leaders in spearheading ACA’s creation, went on record as saying, “I just see a huge train wreck coming down,” regarding the problematic implementation efforts.

According to a DTN report, the widespread regulatory delays and employer and insurer confusion made the Jan. 1, 2014, employer insurance mandate impractical, Mark Mazur, the assistant secretary for tax policy at the Department of Treasury, announced in an official blog July 2.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mazur wrote. “We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so.”

New regulations detailing IRS guidelines will be issued later this week, Mazur said.

Frank Gasperini, executive vice president of the National Council of Agricultural Employers, welcomed the relief. “The ‘backstory’ seems to be that the hardware and software that could implement the complicated reporting, implementation, and enforcement information between employers, state insurance marketplaces, and the IRS is simply not ready so that employers will not be able to understand the reporting requirements in time nor would the states and the IRS be able to implement,” he said.

“Obamacare is not over, but we all have another year to understand and prepare for the requirements—and more importantly to lobby for rational treatment of seasonal and migrant industries,” Gasperini added.

Taxes

Compared to earlier rhetoric from the White House claiming ACA is not a tax and would not increase health insurance costs or health care costs, the Supreme Court ruling seems to imply it is a tax and several watchdog and consumer groups have pointed out how and where consumers will be paying more.

DTN’s tax columnist, Andy Biebl, pointed out in his mid-June column two areas where new ACA-related costs—taxes, fees, or whatever term is preferred—will easily impact agricultural business owners: the $2 Excise Tax and the Reinsurance Program Fee. He called the two things “sleeper taxes” that will potentially result in farmers and ranchers spending more to comply than they will pay in actual taxes.

“Employers who provide a medical reimbursement plan (MRP) will need to remit an annual excise tax return of $2 per covered individual,” he said. “That’s not $2 per employee, but rather based on family size if the MRP covers spouse and dependents.”

Biebl referred readers to Internal Revenue Code Sec. 4376 for more details.

Regarding the Reinsurance Program Fee, Biebl had more colorful words, eventually bemoaning the fact ACA was initially signed before being fully read.

“The ACA also requires an employer with a selfinsured group health plan to remit a fee to help stabilize premiums for coverage of high-cost individuals,” he said. “For the first year, the tax is $63 per enrollee in the plan. Again, this translates to paying the tax for each family member who is participating in the MRP. See ACA sec. 1341 for more details.”

Biebl pointed out, however, that U.S. Department of Health and Human Services had not, when he analyzed the “sleeper taxes” in his column, provided details on how to submit enrollment counts or payments.

This, among so many other elements, very likely played a part in the administration’s postponement of implementation.

Bieble also explained that neither the Excise Tax nor the Reinsurance Program Fee has any de minimis exemption for small employers, meaning all small business owners would be affected, no matter how small their business. Given the recent reprieve, producers, including agricultural interests, may have time to work on details like that. — Kerry Halladay, WLJ Editor

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