Cancellation of policy

Posted: Sat Apr 21, 2012 10:31 pm Post Subject:

You asked this in another thread and I responded there.

Until 1-1-2014, the answer is this is not "unlawful" but it does raise some serious tax issues. You will have to count any contribution by your employer toward your personal health insurance premiums as INCOME, and pay tax on the value of that money.

Likewise, your employer cannot deduct what he pays toward your personal insurance in the same way he may deduct the cost of group benefits. He would be able to deduct it as an increased amount of salary, but he will have to pay FUTA taxes on that money, which he is not currently doing. There is more downside to your employer than upside here.

You may also find that you cannot get the same level of benefits in the individual market that groups obtain. And you may find that your cost of insurance is higher than it currently is. And what assurance do you have that your employer will pay those premiums in whole or in part? Do you have it in writing?

There are a number of inherent problems with this proposal by your employer. He has not done enough research into the available plans in your area. He needs to work with a good agent or possibly join a Multiple Employer Trust to obtain more advantageous group premiums.

Virginia may not have passed legislation limiting premium increases or Dept of Insurance review of rate increases. Most states have already done this to be in compliance with the PPACA. I would be surprised if the Commonwealth of Virginia has not. Check with your Dept of Insurance to see if they have authorized such an increase.

But, mostly, talk to your employer and ask him what he has done to look for other solutions. Tell him that if he has not yet talked to his accountant about this, he had better do so quickly.