McHenry County’s Cadillac Health Care

The McHenry County Board has provided a really, really good health care program for its employees and themselves.

It is so good that the magazine Governing features McHenry County, along with Boston, in an article about the extra cost imposed by Obamacare on really, really good health care benefits.

Starting in 2018 there will be a new tax on benefits worth more than $10,200 for individuals and $27,500 for family coverage.

Here’s what is said about McHenry County government:

In McHenry County, Ill., which employs roughly 990 and insures about 2,500 taking dependents into account, the transitional reinsurance fee will cost about $160,000 a year, according to Robert Ivetic, the county director of human resources. Ivetic and his colleagues have been discussing the best way to fund this extra cost.

“Do we just put an excise tax on all people in the plan and say we’re collecting an extra $5 per month to help pay for it? Or is the county going to pay for the first year and then look for creative solutions down the road? It’s kind of a dilemma when you stop to think about how you fund this.” Adding to McHenry County’s struggle are 11 different union contracts that have no mention of the transitional reinsurance fee. “My guess is that [the unions] would want to negotiate it,” Ivetic says.

While $160,000 isn’t much to a larger municipality, if the cost fell entirely to McHenry County, it could have a significant impact. “If we do not come up with a way of at least having some cost-sharing with employees, it would come out of our reserve, which is not an ideal situation because when you’re self-funded, you need that for high claims.”

“They aren’t helping the cause of getting out good information because they aren’t giving it,” says Ivetic. “Everyone knew these fees were coming, but you can’t say ‘Hey, you’re going to be paying more, but we don’t know how much it is or when.’” Without having all of the proper information at hand when you speak to employees, Ivetic says, you run the risk of creating panic.


McHenry County’s Cadillac Health Care — 16 Comments

  1. Terminate all health plans and put everyone on ObamaCare.

    No more additional tax dollars for our bloated county government.

  2. Funny, Rick Mack, Mayor-Czar of Ringwood, claims that the County healthcare coverage is poor and ought to be upgraded!

  3. “Hello, Hello, is Donna Kurtz anywhere to be found???”

    I voted for her because she was a ‘stand up’ woman, so I thought?

    I don’t like it when politicians make fools out of their constituents.

    They begin by opening their mouths and stand up against the wrong, ‘evil doer’ local politicians while on a local ‘board’ of sorts.

    Donna Kurtz was a super star of the MCC board.

    She did just as stated above and saved us from a baseball field catastrophe.

    Then, we elect them (politicians) to a higher office based on their past performance and they suddenly lose their courage and strength.

    Donna, you are making a fool out of many of us!

    Can we see a bit of the original Donna Kurtz please?

  4. The County has no business paying this.

    It’s a tax, therefore it should be paid by the person getting the benefit.

  5. It will be a 40% excise tax (not deductible to payer).

    How do we citizens exert force on school contract negotiations, insisting upon this new tax burden to be paid by recipients?

    (If recipients are faced with reality of high costs, recipients may themselves insist upon shopping around for more affordable insurance options).

    And I do agree that Illinois law does not protect the right of public employees to have all taxes on benefits paid on their behalf (behalf’s?) (behalves?).

  6. The article referenced is from September 2013.

    Ivetic retired from McHenry County in September 2014.

    Details re ACA implementation have been tweaked since 2013.

    This does not take into account any possible influence any tweaks may have and it does not give current information as to what the county is considering now in August 2015.

    What is the current situation re health insurance for employees at the county?

  7. Aca requires Cadillac health plan excise tax as stated.

    County and local government and schools health care policies will either be high enoughto incur excise tax penalties or not.

    If they do incur excise tax penalties, the argument is thatsuch a tax is not a ‘benefit’ which is protected by Illinois Constitution.

    It is atax, and citizens are responsible to pay their own taxes.

    Actually, even if the excise tax is paid “on the employees’behalf”, wouldn’t that payments in itself be considered a taxable payment to the employees?

    (Like perquisites that the IRS consider as taxable income?)

  8. Susan makes an excellent point: “(Like perquisites that the IRS consider as taxable income?)”

    Eliminate benefits for elected officials.

    When a person is elected to office by the voters, they are GUARANTEED a pay check for the entire term of the office unless they are removed from office via quo warranto.

    That in itself is a enough benefit.

    What other job has a guaranteed pay check for a set period of time?

    I often wonder if the poor voter / taxpayer representation on school boards is due to the fact that those office holders get paid NOTHING even though they are responsible for the greatest impact on your property taxes!

  9. Irs document 49801 addresses excise tax on Cadillac health plans.
    Employers are required to pay this tax on behalf of employees.

    Because it is an excise tax (nondeductible) there is a formula to pay additional tax on deductions taken(income tax refunds).

    There is no explicit guidance as to whether the excise tax paid on behalf of employees will be considered a “taxable fringe benefit”.

    Sounds like this will become a big lawsuit; if employees take the free benefit of excise taxes paid on their behalf and it turns out to be decided that is indeed a taxable fringe benefit, employees will owe years of back taxes plus interest.

  10. This makes no mention of the insurance coverage or the cost of premiums paid by employees.

    It also does not state that residents will be saddled with this extra cost.

    In fact, it talks about the employees paying the fee in higher premiums.

    I don’t understand why this should cause any outrage among McHenry County citizens.

  11. No, health Care coverage is provided to governmentemployeess as a benefit, and taxpayers pay the bill.

    The excise tax will be an additional cost to taxpayers.
    because the plan sponsor must pay the excise tax, it becomes an additional benefit to employees.

    The question us, is that additional benefit considered a ‘taxable fringe benefit’.

  12. I stand corrected on my earlier comment.

    The penalty is an excise tax and is the responsibility of the employer or the plan administrator, not the employee.

    The Cadillac tax applies to “applicable employer sponsored coverage.”

    Applicable employer-sponsored coverage is, “with respect to any employee, coverage under any group health plan made available to the employee by the employer, which is excludable from the employee’s gross income under Code section 106 (which excludes from income all premiums paid by an employer for employee sponsored health care). The term ’employee’ includes any former employee, surviving spouse or other primary insured individual”.

    The intent of the Cadillac tax was to drive employees into lower cost insurance, which appears to collide head-on with the Constitutional requirement that benefits shall not be diminished or impaired.

    This could set up a very interesting conversation about amending the Illinois Constitution to get rid of the employee plan guarantee.

  13. I think, the excise tax paid on behalf of employees could legitimately be considered a ‘taxable fringe benefit’.

    If so, the employee/recipients themselves would be the ones to insist on obtaining more reasonably priced healthcare benefits, rather than themselves incurring a new, several thousand dollar a year phantom income on which they would owe taxes.

    Also, it would be a duplicative tax: the employer/sponsor has to pay excise tax (with public taxpayer money) , then, the employees would pay taxes on that excise tax amount as ‘fringe benefit’?


  14. The sentence in the Illinois State Constitution refers to retiree healthcare benefits and pensions, not benefits for current workers.

    Illinois State Constitution

    Approved by voters at special election on December 15, 1970 (following the 1970 constitutional convention).

    Article XIII – General Provisions

    Section 5 – Pension and retirement rights

    Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

  15. The rules on taxable fringe benefit exclusions only exempt employees up to a point.

    For example, employers may give a fringe benefit of life insurance, but I believe the amount is limited to $50,000.

    Beyond the exclusion point ( the dollar amount determined by IRS to be fair value for that fringe benefit) that benefit is considered taxable, and must be reported as a fringe benefit to employee, and even payroll taxes must be withheld.

    (IRS publication 15-b)

  16. Fringe benefit taxability is not limited to current employees.

    Retirees, family and friends who receive value (this would include family covered under health plans) must declare this as taxable income.

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