Congress came to an agreement last Wednesday which pulled the country from the brink of debt default and ended the two-week government shutdown. It's a temporary fix, however. Wednesday's deal funds the federal government only through January 15th and extends the federal government's borrowing authority through February 7th. A true, long-term budget deal has not been realized. Nonetheless, the show goes on – for now. Here's what you need to know.
Though several tax items related to Obamacare were proposed for delay (the annual fee on health insurance providers and the medical device excise tax among them), in the end, Wednesday's deal contained only one minor tax provision related to Obamacare. This provision sets up a new requirement that the income of people who receive cost-sharing reductions or the health insurance premium tax credit actually be verified by state exchanges. HHS is charged with ensuring that income is being verified and must report to Congress by January 1, 2014 what procedures exchanges are using to verify eligibility. Previously, income verification was not part of Obamacare.
To be eligible for the credit, a taxpayer must:
have household income between 100% and 400% of the federal poverty line (FPL) amount for his or her family size (starting in 2014, persons with income below 133% of the FPL are eligible for Medicaid),
not be claimed as a dependent by another taxpayer, and
if married, file a joint return.
The credit amount is the sum of "premium assistance amounts" for each month the taxpayer or any family member is covered by a qualified health plan purchased through a state exchange. The premium assistance amount is the lesser of (1) the premium amount or (2) the result of a formula based on a "benchmark plan" and the taxpayer's household income.
A separate part of the agreement, not included in the bill but made in a separate Senate motion, will create a framework for formal budget negotiations. These will be scheduled to conclude by December 13, 2013, and negotiators must make recommendations for long-term budget and deficit reduction goals.
So, virtually nothing about Obamacare has changed as a result of the shutdown. The exchanges are open and registering participants, and employers must be aware of the laws and penalties associated with non-compliance. Wednesday's deal to raise the debt ceiling does have implications for your business, however. Access to credit, particularly to SBA-backed loans, is at least temporarily secure, and that is good news for small businesses. We will continue to monitor the events in Washington as they unfold. I have no doubt we have an exciting few months ahead.