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Keep the Farm or Pay for Health Insurance? There’s a New Option


Health insurance costs have reached a desperation point for many farmers, with some premiums rising 60% to 200%. The choice for some comes down to keeping the farm together or paying for health insurance this year.

“In some cases, 25% to 30% of their total farm income is spent on health costs for their family alone,” said Michelle Smith, vice president of Human Capital for Family Farms Group, based in Brighton, Illinois.

Two weeks ago, the Trump administration announced a new option: association health plans that allow employer groups and associations to provide health coverage that does not have to be entirely Affordable Care Act (ACA, also known as or Obamacare) compliant.

These types of plans aren’t entirely new. They’ve been available since 1993 in Tennessee. “Our plans look like health plans prior to 2010,” explained Ryan Brown, general counsel with Farm Bureau Health Plans in Columbia, Tennessee.

“They are medically underwritten [people with increased health needs pay higher premiums] and have a pre-existing condition waiting period of six months. Also, some preventative measures are not covered in our plans,” Brown said.

In Iowa, the Iowa Farm Bureau will begin offering non-ACA-compliant health plans in 2019, after a state law passed this spring. “In a membership survey, health insurance cost is the No. 1 issue for our members,” said Andrew Wheeler, public relations coordinator with Iowa Farm Bureau.

Mark and Jeri Mueller, from Waverly, Iowa, have been able to keep their Farm Bureau-Blue Cross/Blue Shield policy that was grandfathered in, so it does not have to follow all the ACA requirements. “Grandfathered” plans are policies that were purchased before March 24, 2010. The Mueller’s annual health insurance premium for their family, including two children ages 21 and 24, is a reasonable $15,600 in 2018, a 12% increase from their 2016 premium cost.

But they may soon be out of luck — grandfathered health insurance plans are set to expire Dec. 31, 2018.

DRAWBACKS TO NON-ACA COMPLIANT PLANS

Non-compliant plans come with more restrictions. For many, you need to be healthy to qualify, and you can’t receive government premium subsidies. These plans also offer less coverage than ACA-compliant policies.

Regulations for the association health plans are now in the comment period. They’d still allow children up to age 26 to be on their parent’s plan. And while the rules say the plans cannot discriminate based on an individual’s medical condition, an association plan could charge different rates based on gender, age and location. They also don’t have to include all the benefits of an ACA-compliant plan, such as prescription drug coverage or rehabilitation services, mental health services, preventative medicine or maternity coverage if the employer has fewer than 15 employees.

HOW FARMERS ARE COPING NOW

Some farm employers are dropping health coverage for their employees, so each employee can buy subsidized individual coverage.

“In our farm teams, we’ve also seen spouses go off-farm to find jobs that offer family health insurance and college kids choose an off-farm career to find health insurance even if they originally had planned to come back to the farm,” Smith said.

Being aware of how compensation affects your employee’s or your health insurance premium is also important. In an example provided by Kristine Tidgren, director of the Center for Agricultural Law and Taxation at Iowa State University, a young family of four making $100,000 a year would pay $24,820 in premiums on the individual market in 2018. But if they earned just $3,000 less, qualifying for subsidized coverage, their annual premium would be only $9,500. A married 55-year-old, self-employed person with $66,000 in income would have an annual health insurance premium bill of $29,130 for 2018. However, if he earned $2,000 less, allowing him to qualify for subsidized coverage, his annual premium would drop to $6,200, a savings of $22,930.

Other farmers and ranchers are opting for private, self-insured Christian-based health plans, such as Medishare or Samaritan Ministries. These plans generally do not offer all the medical services required in an ACA-compliant plan. They also have certain lifestyle conditions or restrictions, such as regular church attendance and abstinence from tobacco and illegal drugs.

REIMBURSEMENT PLANS

There are also reimbursement plans that allow an employer to pay for medical expenses of their employees with pre-tax dollars. The main beneficiaries of these plans are employees who have ACA-compliant health plans but do not receive a subsidy.

With these Section 105 reimbursement plans, if your spouse is your only employee, 100% of the family’s medical expenses are exempt from state and federal income tax and from payroll taxes. Qualified expenses include prescription eyeglasses and dental expenses.

“However, if your spouse is your only employee and you qualify for a subsidized premium on the Marketplace/Exchange, your spouse can’t be reimbursed for the premium, but you can reimburse out-of-pocket medical expenses in pre-tax dollars,” explained Stacey Davis, a sales representative with BASE L.L.C. in Adel, Iowa. BASE is a private company that offers benefit administration services for the self-employed. “If your insurance premium is not subsidized based on income, you can get reimbursed for the premium in addition to out-of-pocket costs.”

The Muellers, who had some large, out-of-pocket dental bills, spent $26,000 on medical and dental expenses in 2017, including their premium. They saw $9,000 in tax savings through the BASE reimbursement program.

Employers with two to 49 employees may be eligible for a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) to get similar tax savings.

“Tax-advantaged reimbursements are capped at annual level of $10,250 for a family and $5,050 for an individual,” Davis said. And the QSEHRAs must be run through a third-party, like BASE or another similar provider, to verify that the costs are acceptable medical expenses.

Agribusiness consultant KCoe Isom developed a unique approach to help large farm/ranch operations reduce their health care costs. Employers who hire KCoe Isom to be their human resources department essentially join a Professional Employment Organization (PEO) and can get health insurance through Aetna at large group rates, said Danielle McCormick, a principal with KCoe Isom.

“Purchasing through a large group plan (like a PEO) typically will yield a 5% to 45% savings on comparable plans in the Exchange,” McCormick calculated.

But no matter what route farmers choose in 2019, they’re generally all looking for the same thing.

“Ultimately, what people are looking for is an option they can afford,” said Brown, with Tennessee’s Farm Bureau Health Plans.

Source: Elizabeth Williams, AgFax

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