Brian Gilmore

Recent Posts From Brian Gilmore

Ted Cruz and Mike Lee Revive Efforts to Defund ObamaCare


Remember when Republicans took control of the House in the 2010 election by riding the anti-ObamaCare wave and pledging to repeal and/or defund it?  What happened to that?

As I wrote last week, the repeal efforts have largely fizzled.  Then on Wednesday, the House again voted for a CR that doesn’t even touch the funding for ObamaCare.  The bill (HR 933, dubbed the “Department of Defense, Military Construction and Veterans Affairs, and Full-Year Continuing Appropriations Act, 2013,” would extend federal government funding beyond March 27 through the end of FY 2013 on September 30, 2013.  Congratulations to the Boehner/Cantor/McCarthy gang for refusing to use the House’s power to originate appropriations bills to any meaningful effect.

The CR passed despite valiant effort by  Rep. Jim Bridenstine (R-OK) and Re. Tim Huelskamp (R-KS) to encourage Boehner and Cantor to support the defunding efforts.  The letter stated in part:

Sequestering ObamaCare’s Employer Mandate

Last week, Senators Orrin Hatch (R-UT) and Lamar Alexander (R-TN) introduced the American Job Protection Act to repeal the ObamaCare employer mandate (a.k.a. the pay or play rules, or the employer “shared responsibility” rules).  Companion legislation was also introduced in the House on the same day.  Full text of the bill is available here.

As FreedomWorks reignites the movement to defund ObamCare in the House as we near the end of the CR on March 27, the American Job Protection Act offers a strong second front against one of ObamaCare’s most damaging provisions.  Sadly, full repeal is not politically feasible right now.  But that doesn’t mean we can’t keep trying to chip away at its more unpopular provisions through bills like this.

It’s Been Done Already
Let’s not forget that we’ve already repealed some of the nastier programs and mandates in prior legislation.  As nicely summarized in this post on Forbes by Grace-Marie Turner, the law’s government takeover of the long-term care industry called the CLASS Act, a major piece in the original legislation, is now history.  Other chunks now out for scrap include the burdensome $600 1099 reporting requirement and the odd employee free choice voucher, which would have allowed certain employees to apply their employer health plan contribution to the cost of coverage on the ObamaCare exchange.

What to Expect When You’re Expecting ObamaCare

ObamaCare kills jobs

Imagine that in 2012 you quit your job and poured all your savings into opening a restaurant that had 18 full-time employees and 15 part-time employees.  The restaurant was a success.  In 2013, you opened a second restaurant based on the same model and with the same number of employees.  Another success.  Your restaurants were profitable enough for you to take a salary of $60,000 in 2013.  You decide to open a third restaurant in 2014.

Your third restaurant opens January 1, 2014 with the same number of employees as the first two.  Based on your track record of success, you expect to be able to take a salary of $90,000 in 2014.  But that was before you realized how ObamaCare can swallow your profits.


You’ve read and heard industry rumblings that ObamaCare’s employer “shared responsibility” rules require employers to provide coverage to full-time employees if you employed at least 50 full-time employees in the prior year.  You had only 36 full-time employees in 2013.  Regardless, you already offer coverage to your full-time employees, so you don’t worry about it.  You instead work long hours with very few days off to establish your new third restaurant.


You receive notice from the IRS that you are subject to an ObamaCare penalty excise tax of $5,000 for January.  Why?  You failed to account for your part-time employees in 2013 when determining whether you are an “applicable large employer” subject to the new employer mandate.  The rules require employers to aggregate all part-time employees into “full-time equivalents.”

IRS Re-Finalizes Regulations Forcing Obamacare Subsidies on Federal Exchanges

Seemingly in response to this letter from Chairmans Darrell Issa (R-CA) and Dave Camp (R-MI) on January 29 to the Treasury and IRS, on February 1, the IRS again finalized the Obamacare subsidy regulations that flagrantly deviate from the statutory authority.  This issue continues to simmer relatively under the radar since I last wrote about it in August. To refresh everyone’s memory, Obamacare’s core redistributionist provisions are its refundable premium tax credits and cost sharing subsidies available for individuals to purchase coverage on state exchanges starting in 2014.  The credits will be available to anyone with annual income under 400% of the federal poverty line who isn’t covered under an employer-sponsored plan.  To put that in perspective, a family of four today earning up to $92,200 per year would be eligible for the credits.

Federal Exchanges Excluded
Here’s the kicker: Obamacare specifically limits these credits and subsidies to individuals who purchase coverage on an exchange established by the state.  Below is the actual, unambiguous provision from PPACA [emphasis added]:

Know Your Consumer-Driven Health Care: HSA

This is the third and final post on the primary consumer-driven health care arrangements under the current Internal Revenue Code.

As stated in the prior posts discussing the health FSA and HRA, the ideal consumer-driven health care vehicle should strive to achieve three main objectives:

1) Provide incentive for the individual to spend less on health expenses;

2) Maximize the individual’s flexibility in contributions and ownership of all assets contributed; and

3) Limit the individual’s financial exposure by including an out-of-pocket maximum.

The HSA is the only vehicle to effectively meet all three.

What is an HSA?

The health savings account (HSA) is the closest thing to the holy grail when it comes to applying free market principles and consumerism to modern health coverage.  HSAs are governed by Section 223 of the Internal Revenue Code.  And it’s one powerful Code section.  HSAs are triple tax-advantaged: contributions are made on a pre-tax basis (by payroll deduction) or tax deductible (above the line), funds held in the account grow tax-free, and distributions for qualified medical expenses are tax-free.  That’s as good as it gets.  The HSA is not perfect, but it is a solid foundation for a true consumer-driven model of health reform.

The basic premise of the HSA is to provide a tax-advantaged account to pair with a high deductible health plan (HDHP).  The HDHP is structured to leave a risk corridor that you’re responsible for paying, and the HSA is structured as a way to fund that risk corridor.  The HDHP will pay for some basic preventive services, but everything else will be subject to the high deductible before it’s covered.  If you incur expenses up to the extent of the deductible, you can (but don’t have to) use your HSA reimburse those costs.  The HDHP also has an out-of-pocket maximum to limit your financial liability.

Know Your Consumer-Driven Health Care: HRA

This is the second of three posts on the primary consumer-driven health care arrangements under the current Internal Revenue Code.

The first post on consumer-driven health care discussed the health FSA, a useful but ultimately flawed vehicle hampered primarily by the use-it-or-lose it rule and ObamaCare limits.  This post discusses the HRA, a more dynamic arrangement that can be used in many creative and powerful ways - pending a number of ObamaCare changes that will dramatically limit the HRA’s versatility.

As stated in the first post, the ideal consumer-driven health care vehicle should strive to achieve three main objectives:

  1. Provide incentive for the individual to spend less on health expenses;
  2. Maximize the individual’s flexibility in contributions and ownership of all assets contributed; and
  3. Limit the individual’s financial exposure by including an out-of-pocket maximum

What is an HRA?

A health reimbursement arrangement (HRA) is a creature of Sections 105 and 106 of the Internal Revenue Code.  It’s an entirely employer funded account used to pay for health care expenses on a tax-free basis.  Employers can structure HRAs to offer many benefits, including:

  • Direct reimbursement for medical expenses as the primary form of health coverage;
  • A way to pay for deductibles and other out-of-pocket expenses from major medical coverage;
  • As an account to pay for the premiums for major medical coverage; or
  • Any combination of those purposes

This versatility, as well as a few other key advantages over the health FSA, have made the HRA a commonly used employer-sponsored plan since 2002 when IRS guidance first blessed the HRA concept.

The Good

Know Your Consumer-Driven Health Care: Health FSA

This is the first of three posts on the primary consumer-driven health care arrangements under the current Internal Revenue Code.

What is Consumer-Driven Health Care?

As with almost all political issues today, there are two factions in the health plan industry constantly in conflict over the best structure for covering the cost of health expenses.  On one side is the defined benefit-type philosophy.  Under this traditional approach, an individual or combination of employer/employee pays a relatively high premium to receive coverage for most health expenses that the participant might incur during the plan or policy year.  This style of coverage typically comes with negligible or non-existent cost-sharing requirements for the participant to access services (e.g., copays for doctor visits, coinsurance, deductibles).

Consumer-driven health care, on the other hand, generally attempts to reduce the cost of health coverage by empowering individuals to control their health expenses.  Under this defined contribution-type approach, an individual or employer/employee combination contributes to an account or arrangement that can be used to cover health expenses.  The individual therefore has an incentive to limit health expenses that does not exist under traditional health coverage.

In my opinion, the ideal consumer-driven health care vehicle should strive to achieve three main objectives:

Recapping 2012: The Roberts Reversal — SCOTUS Upholds ObamaCare

In retrospect, we probably should have seen it coming.  After Roberts’ first term, Jeffrey Rosen interviewed the new Chief Justice and wrote a long piece in The Atlantic analyzing his motivations.

Roberts’ stated focus was not his commitment to originalism or his oath to the Constitution, but pulling the Court to the middle to convey unanimity:

“A justice is not like a law professor, who might say, ‘This is my theory … and this is what I’m going to be faithful to and consistent with,’ and in twenty years will look back and say, ‘I had a consistent theory of the First Amendment as applied to a particular area,’” he explained. Instead of nine justices moving in nine separate directions, Roberts said, “it would be good to have a commitment on the part of the Court to acting as a Court, rather than being more concerned about the consistency and coherency of an individual judicial record.”

“You do have to [help people] appreciate, from their own point of view, having the Court acquire more legitimacy, credibility; [show them] that they will benefit, from the shared commitment to unanimity, in a way that they wouldn’t otherwise,” he said. Roberts added that in some ways he considered his situation—overseeing a Court that is evenly divided on important issues—to be ideal. “You do need some fluidity in the middle, [if you are going] to develop a commitment to a different way of deciding things.” In other words, on a divided Court where neither camp can be confident that it will win in the most controversial cases, both sides have an incentive to work toward unanimity, to achieve a kind of bilateral disarmament.

401(k) Plans Teeter on the Fiscal Cliff

Among the many tax “loopholes” on the chopping block in the fiscal cliff negotiations are the 401(k) contribution limits.  Liberals like to refer to tax deductions, deferrals, and exemptions as “spending through the tax code,” or “tax expenditures.”  Of course, there are certain tax subsidies and credits that might best be described as spending (e.g., subsidized coverage on the Obamacare exchanges).

But conservatives and libertarians recognize that private property rights are at the foundation of individual liberty, and that any just government must be dedicated to protecting the individual’s right to the fruits of his labor.  Treating a legitimate tax deduction as government spending presumes that the government has a right to those fruits by default - that we are privileged to retain any such fruits, and the government spends its funds in permitting it.  This confiscatory mindset is foreign to our founding and inconsistent with our nature.

The proposed changes to 401(k) contribution limits are a good example of the threats to economic liberty we face as the revenue hawks continue to scour the tax code for backhanded tax increases.

What is a 401(k) Plan?

The traditional 401(k) plan is a method of tax deferral.  You contribute with pre-tax dollars, the account grows tax-free, and you pay ordinary income tax on the distributions when you retire.  If your employer offers a Roth option, you can contribute with after-tax dollars, and both the gains and distributions will be tax-free.  In 2012, employees can elect to contribute up to $17,000, and the total employer/employee combined contribution limit is $50,000.

What’s Being Proposed?

The Road to 2014: Obamacare Regulations Ramp Up

We are now only a month into the President Obama lame duck-era, yet the post-election deluge of Obamacare regulations is already well underway. Clearly, these regulations were completed prior to the election, withheld to prevent any political blowback. This should come as no surprise. Here’s a quick rundown of the latest expansive entries into the Federal Register:

Essential Health Benefits (77 FR 70644, November 26, 2012)

Obamacare lists ten broad categories of health benefits as essential health benefits (EHB), to be defined in detail by the Secretary of Health and Human Services (HHS). Secretary Kathleen Sebelius has instead put this burden on the states. States are to choose a benchmark plan to serve as the framework for EHB in that state. The states that refuse will have a default benchmark plan assigned to them. Individual health policies sold on state or federally facilitated exchanges (referred to as qualified health plans, or QHP) must actually provide these EHB. For employer sponsored group health plans, only non-grandfathered plans that are insured in the small group market must provide EHB. Any grandfathered, large market, or self-funded group health plan does not need to provide EHB, but they cannot impose any lifetime or annual limits on the dollar value of EHB. Welcome to Obamacare.

Brian Gilmore


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