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Small Business Employee Benefits and HR Blog

Health Care Reform is Back on the States

health care reformWhile federal health care reform dominated the stage in Washington last year, state lawmakers adopted a wait-and-see approach to local health care reform.  As federal efforts take a backseat to "more important" issues, states are re-initiating their own reform discussions.

Most experts are saying that limited state budgets will make efforts to expand insurance coverage impossible.  Sound familiar?  I bet so. 

I do not understand why every state in the U.S. has not already followed Minnesota's lead:
Beginning on July 1, 2009, a new Minnesota law requires that certain small employers offer Section 125 POP plans for individual policies. Under Minnesota SF 3780, employers who have more than ten (10) full-time employees and who do not currently offer health benefits must establish and maintain a Section 125 plan to allow their employees to purchase individual health coverage with pre-tax dollars. 
Remember, all Section 125 POP contributions are excluded from an employee’s gross income and wages subject to FICA (7.65%). Similarly, employers deduct reimbursements as a business expense and exclude them from wages subject to FUTA (0.8%) and the employer portion of FICA (7.65%).  Thus, employers can expect to save nearly eight cents ($0.08) for every dollar ($1.00) their employees spend on individual health insurance (employees can to expect save 20-40 cents on every dollar).

Guess where these tax savings go? -- Right back into the state's economy when the employees use these savings to purchase more goods and services. Basically, everyone wins except the federal government.

In summary, Minnesota's legislation puts more money in an employer's bank account, more money in an employee's pay check and (eventually) more money in the state economy. 

What am I missing??

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