The IRS Back Door to the Obamacare Employer Mandate

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Posted by Ryan Ellis on Tuesday, June 30th, 2015, 6:53 PM PERMALINK

Both the NFIB and the Galen Institute remind us today that the IRS has begun implementing a regulatory fine on small employers which is nowhere to be found in the text of the Obamacare law.

No, they were not having a little gallows humor in the wake of King v. Burwell.

Up until now, an employer could reimburse an employee for the latter's purchase of health insurance (or direct health expenses) for her and her family. This was a tax-free reimbursement, free of federal and state income tax and all payroll taxes.

Many small employers, who could not or didn't want to provide group health insurance, took advantage of this option so that their employees could get the same tax treatment on health insurance as their larger business competitors could offer.

Not anymore. 

The IRS has said that any employer participating in such a program can be fined up to $100 per day, or $36,500 per year per employee. This even applies to employers who are not required to offer health insurance under the employer mandate (long delayed, but technically applying to firms with 50 or more employees). This regulation was not called for anywhere in the Obamacare statute.

Why would the IRS do this? Very simply, the goal here is to destroy individual market health insurance, and the employer reimbursement was one of the very few things keeping it alive. It's also a way to bully very small employers (those with fewer than 50 employees and not subject to mandate) to purchase Obamacare group insurance coverage anyway. It's a regulation in search of statutory basis, but the will to power is obvious.

Someone should take this to the Supreme Court...oh wait.

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