Starting in 2014, as part of the Affordable Care Act (ACA), health insurance coverage for individuals and small businesses will become available through new state health insurance marketplaces. Minnesota will offer a state-based exchange. The exchange will open in October 2013 (for coverage starting in January 2014) under the name MNsure (www.mn.gov/hix).

Yesterday, I wrote about Section 125 Premium-only-Plans (POP).  These plans allow employees to pay for their health insurance premiums tax-free. Traditionally, employers with group insurance plans offer a POP plan so that an employee can pay his or her portion of the group premium with tax-free dollars.  However, recent changes to federal law now allow employees to utilize Section 125 POPs to pay for their individual insurance premiums tax-free.  Subsequently, some states (e.g. Minnesota) are beginning to pass state laws mandating that employers offer Section 125 POP (for individual policies) to their employees. 

Beginning January 1, 2009, employees can use Section 125 POP plans to pay for their individual insurance premiums tax-free. 

Under IRC Section 1.125-1(m), employees are able to purchase individual health insurance policies with tax-free dollars.  This law-change presents a huge tax-savings opportunity for small businesses and their employees.  Now employees do not pay federal or state income tax on the amounts used to pay insurance premiums and the employee and employer do not pay FICA or FUTA (i.e. Medicare, Social Security, or unemployment insurance taxes) on these amounts.  The result is a reduction in the the cost of individual insurance policies by 30-50% depending on the tax-bracket.