As small business owners, farmers often need to purchase health insurance for themselves and their families. In addition to this coverage, they also are responsible for deciding which healthcare options they will offer to their employees. The Affordable Care Act (ACA) brought changes to the health care system, and these changes extend to farmers’ health insurance as well.
In the sixth episode of “Management Matters: Focus on Profitability,” Andy Biebl, agricultural tax specialist, CPA and principal at CliftonLarsonAllen LLP, explains the ACA’s impact on farmers, the available insurance options and how farmers can choose the best coverage for their operation.
- The Affordable Care Act affects both small and large employers.
- Some traditional, informal practices of assisting employees now violate the ACA. These practices fall into two categories:
- Unwritten agreements for the employer to reimburse up to a certain cap of employee premiums. In this arrangement employees purchase an individual tax-free policy and the employer makes tax deductible reimbursements.
- In Section 105 Plans, or health reimbursement arrangements, employers draft written plans with parameters and an annual cap through which employers reimburse out-of-pocket medical costs.
- If employers continue to use past reimbursement practices that now violate the ACA, they must pay a penalty of $100 per day per employee.
- For example, a producer assisting three employees by paying part of their premiums must pay $36,500 per employee per year.
- Under the ACA, all employers—regardless of size—have two options:
- Provide a full health insurance plan that conforms to the ACA.
- Assist employees financially through greater compensation.
- Farmers can decide whether to offer insurance by discussing options with employees and considering whether employees have other coverage options through a spouse.
Want to learn more? Read Andy’s column in The Progressive Farmer, and read our previous “Management Matters” posts for additional insights into farm profitability: