The Affordable Health Care Act and 2014
Come January 1st 2014, nearly all Americans will be required to have health insurance as mandated by the Affordable Care Act. But just what exactly does this mean for individuals and businesses?
Well, on June 28th Rice University’s Baker Institute for Public Policy hosted a presentation by Vivian Ho, Ph.D., a professor of economics at Rice University and a professor of health services research at Baylor College of Medicine. The presentation addressed some of the highlights of what is considered by many as a “very complex piece of legislation.” Below are some of the highlights.
THE UNINSURED
Those without health insurance are required to have it or buy it by Jan. 1, 2014, or face a penalty. The penalty will be $285 per family or 1 percent of income, whichever is greater. By 2016, the penalty increases to $2,085 per family or 2.5 percent of income.
According to the U.S. Census Bureau, more than 40 million Americans lack health insurance, often because they are part-time workers, unemployed or self-employed, or they are full-time employees whose employers don’t provide coverage.
All 50 states must create an exchange, which Ho says is like a big shopping mall, with individual insurance stores inside. Consumers “visit” each store, and compare all the different insurance plans offered through the exchange, then select the one that best suits their needs and the needs of their families.
“The exchanges will serve as an insurance marketplace, a one-stop-shop for those who do not have employer coverage and are looking for private coverage,” Ho said. All 50 state exchanges must be operational by Oct. 1, 2013 to begin open enrollment for the 2014 plan year.
The government will provide subsidies to low- and middle-income Americans to help them buy insurance through these health exchanges – the individual pays a part of the insurance premium, and the government pays the rest.
THE ALREADY INSURED
Under the Affordable Care Act, insurance companies are no longer allowed to set an individual’s premium cost based on gender or health status. The act also prohibits insurance companies from dropping coverage or capping coverage for people who develop long-term illnesses or disabilities – a measure that has already been in existence in some states, and now should offer peace of mind to many more, Ho said.
However, policies purchased through a health exchange are allowed, under the Affordable Care Act, to cost three times more for an older person than a younger person. “Currently, older individuals are charged about four or five times higher than younger people,” Ho said. “The new three-to-one ratio will likely cause premiums to go up for younger individuals.”
The new law also requires insurance companies to cover the children of insured parents up to age 26 – this provision went into effect in 2010, the year the act was signed into law.
PEOPLE WITH PRE-EXISTING CONDITIONS
Starting in 2014, the law makes it illegal for any health insurance plan to use pre-existing conditions to exclude, limit or set unrealistic premium rates on coverage for adults – the requirement to cover children under age 19 for pre-existing conditions began in 2010.
EMPLOYERS
Employers in the United States are not currently required by law to provide health insurance coverage to employees. However, the Affordable Care Act changes that, by requiring employers with 50 or more workers to provide those workers with affordable and adequate health coverage, or face fines.
That provision was set to go into effect Jan. 1, 2014, but on July 2, the Obama administration pushed it back by a year. The delay resulted from business groups’ complaints that the law was too complicated and they needed more time to update technology and to plan how they would offer health coverage to employees without yet knowing how much the coverage would cost. Like individuals, businesses can also purchase insurance policies through state exchanges for their employees, but not all state exchanges are in place yet.
Businesses with fewer than 50 workers will be exempt from providing health insurance to their employees, and those employees likely will look for private insurance on state exchanges.
When the delay concludes and employers must provide their employees with health coverage, larger employers won’t be affected as much, but middle-sized firms with 100 to 1,000 employees will likely experience a price increase in providing coverage for their employees, Ho said.
“This is mainly because many of these companies didn’t offer health insurance,” she explained, “or they offered health insurance that had extremely high deductibles and didn’t cover many standard services.”
Small firms with 100 or fewer employees will likely experience a decline in the amount spent on each employee’s coverage, she said.
“A lot of people don’t realize there are actually subsidies available for small employers – especially for those with 25 or fewer workers – to purchase health insurance,” Ho said, “and that will make it more affordable for these small companies.”
Starting Over When Your Business Fails
Sometimes the numbers just don’t work out. Every so often economic forces line up and work against you. Occasionally life happens and that perfect string of health you’ve had gets interrupted by a few weeks/months of illness. The point is this; sometimes even with the best planning, your new business can fail. It hurts. It stings. It can even leave you evaluating your intelligence and self worth. But we’re here to tell you something; you can start over IF you can muster the courage to try again.
We’ve all heard that Benjamin Franklin failed numerous times before he finally “discovered” electricity. While we hope you don’t have numerous failures as you attempt to start your dream business, we can say that you sometimes have to try more than once to achieve success. So if you’ve had some setback(s) in round one, here are some tips on making round two better:
Have a short pity party and then move on. The one thing that leads to achieving your goals in this world is action. Feeling sorry for yourself is acceptable, but you can’t let it get in the way of you moving forward. In sports, athletes are usually allowed a brief moment to reflect on a loss and then they must move on. One water bottle. One time out. One down. You get the point. So for the “failed” entrepreneur you get a brief minute to feel sorry for yourself. Once that minute is up, no more looking back okay? Simply focus on doing what it takes for you to become a “successful” entrepreneur.
Figure out what went wrong. In the financial analysis world we often get to “geek out” on all the information at our disposal. This is good in that it provides a ton of insight into how a business operates and intersects different points. It can be bad if you let it lead to paralysis by analysis and never work to either 1) start your business or 2) truly address what is going wrong. So if your first attempt didn’t go as planned, we recommend talking a look at where it went off the tracks. Didn’t keep financials? Please make sure you do this second time around. But if you did, try and pinpoint what the downfall was (e.g. lack of adequate marketing, poor ordering habits, low pricing, etc) and make sure it doesn’t happen again.
Seek outside advice on what could be changed. When you create a company you are supposed to elect a board. Even if you are a company of me, myself and I, you should put together a panel of advisors that you can turn to for advice. These people, hopefully some who are familiar with your industry, can help guide you through some of those pitfalls and perils of starting up a company. Don’t have access to a board? Then put together a talented team of professionals (e.g. accountant, attorney, consultant) who can look at what is going on and give you recommendations. Hey, the advice of a GOOD professional is often worth their invoice a thousand times over in the long run.
Put together a new/realistic plan on how to start again. So once you’ve received the advice on what can be improved, you should sit down and create your plan for the next venture. Take a look at the original business plan you had and compare that to what actually happened. Look for gaps and figure out how to address them. For example, if you thought spending $4,500 in marketing a month would get you 100 new customers each month, but it only got you 65, then make sure you adjust your sales forecast in your new plan. The point is to make sure that your new plan is as closely aligned to reality as possible. This will then allow you to see if your new venture stands a chance at success AND when you should expect to see the signs that things are working.
Get going – this is the key to any failure. If at first you don’t succeed, try, try again. Okay. So you’ve figured out what went wrong, got some advice on what should/could be changed and have dusted your ego off. So now what? Get back out there and try again! We all can relate to being a kid and falling off our bike. What was the recommendation? Get back on as soon as possible; the longer you wait the more gun-shy you’ll become. The same goes for a failed venture. Once you’ve got yourself in a position to do it again, go ahead and pull the trigger. Delaying the date you start only delays how fast you get to success.
Guaranteed Installment Agreements
Whenever you see tax resolution firms advertise, you’ll usually see a qualifier in their ad that says something to the effect of, “If you owe the IRS at least $10,000, then give us a call.” The reason for this is that if you owe the IRS less than $10,000, there is a provision in the tax code that REQUIRES them to accept your proposal to pay them in monthly installments if you meet certain requirements. In fact, you don’t even need to provide them with financial statements to qualify.
To qualify for a guaranteed installment agreement, you must:
- Owe only income tax, not any other types of tax.
- Have properly filed and paid all tax returns during the 5 years prior to accumulating the tax debt.
- Not be able to pay the tax immediately out of savings or other means.
- Pay the tax fully within 3 years (e.g., the payment plan cannot exceed 36 months).
- File and pay all tax returns on time during the period of the installment agreement.
- Not have had an active installment agreement during the past five years.
- Owe less than $10,000 in TAX, not including penalties and interest.
Another beautiful thing about guaranteed installment agreements is that the normal legal minimum monthly payment of $25 per month does not apply. Yes, you can actually offer payments of $10 per month, and as long as that will fully pay the debt within 36 months, they have to grant you the request!
Lastly, guaranteed installment agreements can be granted by the lowest level collections employees of the IRS without managerial approval. All you have to do is make one phone call to the Automated Collection System (ACS), wait on hold for an hour, talk to a human for 10 minutes, and you’re DONE. If you’re not sure where to call, dial the number in the upper right hand corner of the notices you’ve been receiving and you’ll more than likely be connected to ACS. If you don’t want to talk to anyone, you might be able to do it online.
Do keep in mind, however, that penalties and interest continue to accrue during these – and all other – Installment Agreements, although they are guaranteed by law. Because of this, you may decide it is in your best interest to fully pay any balances due as soon as you possibly can.
Mining Your Businesses Acres of Diamonds
During the first few years in business entrepreneurs are typically in build mode. They are constantly scrambling to find new customers, prospects and events they can attend; anything they can do to bring in some money. But after a few months/years something funny starts to happen – customers start to seek you out. This can lead to an entrepreneur losing their “hustle” mentality, which if left unchecked, can lead to a possible stagnation or decline in new business. The solution? Mining your acres of diamonds.
A while back one of our colleagues recanted the “Acres of Diamonds” story to us. Acres of Diamonds originated as a speech which Russell Conwell is said to have been delivered over 6,000 times around the world. It was first published in 1890 by the John Y. Huber Company of Philadelphia. The central idea of the work is that one need not look elsewhere for opportunity, achievement, or fortune – the resources to achieve all good things are present in one’s own community.
This theme is developed by an introductory anecdote, told to Conwell by an Arab guideabout a man who wanted to find diamonds so badly that he sold his property and went off in futile search for them. The purchaser of his home discovered that a rich diamond mine was located right there on the property. Conwell elaborates on the theme through examples of success, genius, service, or other virtues involving ordinary Americans contemporary to his audience. The overarching advice is “dig in your own backyard!”
If you are a business that has lasted 2-5 years and you are wondering what you can do to continue your growth trajectory, here are some tips on how to dig in your own backyard:
Pay attention to your customers. Often times a company will struggle when they start to take their eyes off what their customer wants. To combat this, make sure that you track what matters to them and engage them on a regular basis. This is as simple as sending out a customer satisfaction survey periodically and having a social media presence on platforms such as Twitter and Facebook. By engaging with your customers regularly, you can adjust your services and offerings to address what is important to them. If done correctly, you’ll wind up with a complimentary advertisement system/sales force via the referrals they send you.
Track your marketing. We do tons of marketing efforts each year. One of the questions we often ask a prospective or new client shortly after they contact us is “how did you hear about us?” This gives us some insight into which marketing initiatives are bringing us business and which might need to be adjusted or scrapped. Once you know what is working, increase your spending in that area and you should see your sales escalate over time.
Always look for ways to recapture lost customers. Just because a customer left you for a competitor doesn’t mean that they didn’t like what you had to offer. Sometimes customers leave because of price, convenience or just simply because someone touted an offer that just sounded better than yours. However, some customers find that the grass isn’t greener on the other side, but it’s sometimes hard to return to your former provider without feeling embarrassed. Thus, if you send out advertising to your old customers offering them a discount or telling them to give you another chance, they might just do so. Sometimes all it takes is you making them feel welcome for them to come back home.
Remind your customers that you are ALWAYS there for them. People often only think of you when they have a need, especially in service businesses such as ours. If your business is seasonal in nature, your customers might only think of you once a year! Needless to say, that’s not good for your business or your bottom line. One way we tackle this is through a customer touch program. The essence of this program is to send out a series of customer communications that are designed to engage with them. These can range from tweets, to Facebook posts, to blog posts, to monthly newsletters to a simple customer phone call. The goal of each interaction isn’t sales oriented (per se) but more so to remind your customers that you are 1) thinking of them, 2) there to service their needs and 3) remind them of what you offer. Point three is pretty important, especially when you add new services to your menu.
Appeals Division: Your Best Friend At The IRS (Possibly)
Last week we negotiated a client’s back taxes into an IRS status referred to as Currently Not Collectible (CNC). The conversation went rather smoothly as we had all the necessary paperwork and we worked with a representative who was fairly amicable. But what happens when your experience isn’t so pleasant or doesn’t go in your favor? Fortunately for many people with a tax debt, the IRS has an administrative Appeals Division (Appeals) to which most collections actions taken by the agency can be appealed.
Appeals is one of the IRS’ best kept secrets. Why? In our experience, Appeals personnel appear to be under less pressure to collect tax revenue than Revenue Officers. This is likely due to different criteria for personnel reviews. In addition, Appeals personnel are simply more pleasant to deal with in general, usually lacking the snappy attitude and air of arrogance that is unfortunately common amongst Revenue Officers.
So what is the primary purpose of Appeals? Well, their functional mandate from on high is, effectively, to prevent cases from going to court (thus saving the government the expense of litigation). This is done by offering a “fresh look” at situations that have already had some interaction with the IRS at another level. Appeals, however, is still an administrative function and is not a court in any way itself.
Appeals works in a very formulaic manner, just like any other IRS division. When you file any sort of IRS appeal, you’ll receive a letter notifying you that your case has been assigned to a Settlement Officer (SO). Sometimes, this first letter will include your hearing date but sometimes it won’t.
The initial contact from appeals via mail will usually include a request for financial documentation, if this information wasn’t already in your file when it was passed to Appeals from Collections. If your Appeal in any way mentions a “resolution alternative” (such as an Installment Agreement, CNC, or Offer in Compromise) then you will be requested to provide the financial documentation necessary to reach that resolution alternative.
Many different types of Collection actions taken against you can be appealed. Aggressive collections actions such as bank account levies and wage garnishments are commonly appealed, but so are proposed garnishment actions, and even denials of payment plans. If the IRS takes any adverse action against you, make sure to carefully review the notices they send you, which will always explain your appeals rights. If you need assistance protecting your legal right to an appeal, such an action by the IRS, be sure to contact a tax professional experienced in representing taxpayers with such tax issues.
Until next time…
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