A Columbus Dispatch editorial claimed the IRS was attempting to punish employers for sending their employees to Affordable Care Act (ACA) exchanges instead of providing employer-based insurance. However, the rule would ensure that employers don't get a special benefit for sending their employees to the exchanges, which they are still allowed to do, while preserving the employer-based health care system.
The May 30 editorial criticized an IRS rule first reported in the New York Times that claimed the rule meant that the IRS would stop "any wholesale move by employers to dump employees into the exchanges" by subjecting certain businesses to a tax penalty of $100 per day for each worker that is sent to the individual marketplace instead of provided insurance by the employer. The Dispatch, which has often used its editorial page to mislead about the ACA, extrapolated this claim to float the theory that "the move is an acknowledgement" by the administration that people don't like the exchanges and the law is making things worse for "millions of Americans":
In this context, a report in The New York Times over Memorial Day weekend takes on greater meaning. The story revealed that the Internal Revenue Service has issued a rule that punishes employers that end company-sponsored health plans and dump employees onto the new government health-care exchanges.
The move is an acknowledgement that many who have gone to the exchanges have found the policies more expensive and less desirable than expected. The law has made things worse for millions of Americans in the name of extending coverage to a relatively small number of people.
The Dispatch's theory that the new rule is an effort to shield people from the exchanges and the purported ill effects of the law is not accurate. The IRS rule is actually an effort to ensure that certain companies can't take advantage of a loophole allowing them to take tax deductions for moving their employees to the exchanges. As Modern Healthcare explained, the rule is intended to prevent companies from "double-dipping" by "threatening massive fines against companies that offer employees tax-advantaged money to help them buy federally subsidized health plans on the Obamacare insurance exchanges." The article continued:
The need for the new IRS rules came about because tax consultants have been aggressively hunting for ways to combine the tax write-offs that come with traditional group coverage with the federal subsidies available to buy individual coverage through an insurance exchange, said Joel Ario, a managing director at Manatt Health Solutions and a former HHS director over insurance exchanges.
"There are two mutually exclusive worlds, and there are people who keep trying to figure out how to use money from one in the other," Ario said. "That's what the IRS is trying to prevent."
The new rule still allows companies to move their employees to the exchanges, however now the penalty for doing so will be much higher. As NPR made clear, companies can still cancel their plans and move their workers onto the exchanges as long the company pays the relevant taxes and fees and companies can still give their employees raises to buy individual policies on the exchanges, again, as long as they pay relevant taxes and fees.
In addition, the editorial highlighted comments from former White House health care adviser Ezekiel Emanuel saying the law would eventually move everyone off employer-based insurance to the marketplace. However, this rule even further entrenches the employer-based system. As Rick Newman of Yahoo! Finance explained, the new rule "seems to shut the door on socialized medicine, while potentially strengthening the existing system of employer-provided health insurance" by increasing the incentive for companies to provide their workers with health insurance.