Lathrop And Gage

Is Dividing a Company the Way to Beat the Affordable Care Act?

That’s one notion that seems to be circulating among small-business owners and their advisers lately. Consultants at McKinsey & Company floated the suggestion as part of their controversial report on employer views of health insurance. And in The Times’s coverage of that report, Milt Freudenheim interviewed a small-business owner who said he was hoping to “game the system.” The owner, Gerry Harkins, who is also chairman of the National Federation of Independent Business’s Georgia State Leadership Council, said he might split his Atlanta-based construction company into two smaller companies to evade the overhaul’s employer mandate, specifically the penalties on companies that fail to offer affordable health insurance to employees.

Unfortunately for Mr. Harkins (who did not return a call from The Agenda seeking an elaboration of his comments), the authors of the Affordable Care Act are one step ahead of him, according to several tax and benefit lawyers contacted by The Agenda. The authors included a provision that basically adopts parts of the Employee Retirement Income Security Act of 1974 that say any group of companies under common control are to be treated as a single company. Common control is defined as the same five or fewer people owning at least 80 percent of the companies, according to Al Martin, a tax lawyer at the Kansas City law firm Lathrop & Gage. Spouses and children are generally considered one owner, according to Mr. Martin.

No doubt this will make it difficult for people like Mr. Harkins to game the system. “You’re going to wind up changing economic relationships if you avoid the rules,” he said. “You’ve got to change ownership structure.”

“The idea that that would be an easy thing to do would be hard for me to believe,” added Jon Staudt, a tax lawyer with Belin McCormick in Des Moines. “People have been trying to avoid the E.R.I.S.A. law so that they could have separate pension plans, for example, pretty unsuccessfully for 36 years.”

The McKinsey consultants, for their part, had other reasons for proposing a split. The thrust of their advice is to find ways to wean lower-wage employees off employer-sponsored coverage while keeping higher-wage employees, who won’t be eligible for subsidies, insured.

Until the Affordable Care Act, federal law was a bit schizophrenic when it came to group health insurance plans for 50 or more people. A company that funded its own health insurance plan — a strategy that often makes financial sense for companies with several hundred participants — was subject to an antidiscrimination law that punished those plans for offering looser eligibility requirements or better benefits to top executives.

Business Development Opportunity for Lathrop & Gage | Fired Up ...

Hey, fellas: You've already come up with creative, "dubious" and "strange" arguments for your Fox News lawsuit.  Why not ask CBS and Bob Schieffer if they want to sue some evil doers for this ad ?    I'm confident the self esteem and dignity of an actual journalist like Schieffer was just demolished when people saw him interviewing an elected representative on the teevee.  Seems ripe for the pickin' to me.

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