Maryland law allows small employer income tax credit for paid sick leave

Recently enacted legislation (SB 134, Chapter 571) provides an income tax credit to certain employers with less than 15 employees which provide paid sick and safe leave to their employees. The legislation is effective July 1, 2018.

As we previously reported, effective February 11, 2018, employers of 15 or more employees are required to provide paid sick and safe leave to their employees. Employers with less than 15 employees must at least provide unpaidsick and safe leave to their employees.

Small employers offering paid sick leave may take state income tax credit

Effective July 1, 2018, certain employers of less than 15 employees that provide paid sick and safe leave to their employees may apply for a refundable credit against Maryland state income tax. In order for the employer to be eligible for the tax credit, the employer must have provided paid sick and safe leave to a qualified employee who earns 250% or less of the annual federal poverty guidelines for a single-person household (According to the bill's analysis, in 2018, 250% of the annual federal poverty guidelines for a single-person household is $30,350.)

The credit is equal to the lesser of $500 for each qualified employee or the total amount of qualified employer benefits accrued by qualified employees. A business must apply for and receive a tax certificate from the Maryland Department of Commerce to claim the credit. The Department will within 45 days approve or deny all applications that qualify for the credit on a first-come, first-served basis. The Department may issue tax certificates not exceeding $5 million annually.

SB 134 takes effect July 1, 2018, and applies to tax year 2018 and beyond.

Excerpt from Earnst and Young Article dated 7-27-2018

Maryland Individual Health Insurance Plans Poised for First Rate Reduction

Maryland individuals who purchase health insurance through the state's five-year-old Affordable Care Act exchange are poised to see the first decrease in their premium costs in 2019.

Following federal approval of a program that aims to stabilize the ACA-born insurance market, Kaiser Permanente and CareFirst BlueCross BlueShield are seeking price decreases for their individual market plans. The drop follows four consecutive years of double-digit percentage hikes. Consumer advocacy groups present at a public hearing on Monday lauded insurance officials' efforts around lowering prices, and said the decreases will be a welcome relief for residents who do not qualify for employer-based coverage and must purchase plans through the state's exchange.

The effort was initiated by a piece of bipartisan legislation passed in the Maryland General Assembly earlier this year. Maryland will put hundreds of millions of dollars behind a reinsurance program, which will allow the state's lone two carriers in the individual market to see major cost savings and stave off the need to again increase premium prices in 2019.

The Maryland Insurance Administration said during the hearing it is still finalizing details with the insurers, and plans to release the final 2019 rates later this week. Pending any major adjustments, the rates will look close to this:

CareFirst's individual HMO members will see about a 22.3 percent premium decrease, and a $104 monthly price decrease compared to 2018 rates.

Kaiser's individual HMO members will see about a 6.3 percent premium decrease, about a $23 per month swing from 2018.

CareFirst's individual PPO members — they are generally the sickest and most costly members in the market overall — will see about a 17.7 percent premium increase, which would result in an average price increase of about $121 per month compared to last year's rates.

Prior to the approval of Maryland's reinsurance plan, requested 2019 rates ranged between 18 percent to more than 90 percent increases. Now, insurers are seeking an average 13.9 decrease overall.

Peter Berry, chief actuary at CareFirst, the state's dominant health insurer, said he's scanned through the company's rate trends for the past 20 years. If the decrease is cleared, he said it would mark this first time in that period that some CareFirst members would see a year-over-year decrease in premiums.

"For the first time since I’ve been looking at health insurance since 1985, I’m speechless in a very good way," said Beth Sammis, president of advocacy group Consumer Health First. "This is a good day for consumers."

Sammis said next, industry officials need to put their efforts behind making sure that Maryland individual consumers understand their new options, and actually purchase these plans for the coming year.

Insurance Commissioner Al Redmer said part of the goal of the reinsurance program is to lure consumers who have opted to go without insurance the last few years due to unaffordability back to the market. The more people who pay into in a given insurance risk pool, the greater the price stability for everyone in the pool.

In an excerpt by Morgan Eichensehr  – Reporter, Baltimore Business Journal
Sep 17, 2018, 2:53pm

Congress Eliminates the Insurer Tax for 2019 but Maryland Adds It Back

Lawmakers pass bill to generate $380 million with a 2019 tax on insurers

In April 2018, Gov. Hogan also signed SB387/HB1782 which will implement a 2.75 percent tax on insurers in the state in 2019. The fee will apply to insurers in all markets (ie, not just the individual market), including Medicaid managed care insurers, and will be used, in part, to provide the state’s portion of the funding for the reinsurance program. The ACA implemented a similar fee at the federal level, although there was a moratorium on the fee in 2017. The fee does apply in 2018, but in January 2018, Congress imposed another moratorium on collection of the fee for 2019. So the idea behind SB387 is to recoup the money that insurers would have otherwise paid if Congress hadn’t suspended the provider fee for 2019.
The measure is expected to generate $380 million ($365 million, according to the state’s draft 1332 waiver) for the Maryland Health Benefit Exchange fund. The money will be used to lower premiums, but it’s only a temporary fix, described as “a Band-Aid” by Senator Thomas Middleton, who sponsored the legislation.
Using the money generated from the insurer fee, the exchange will establish and oversee a “health care access program” that will be “designed to mitigate the impact of high-risk individuals on rates for health benefit plans in the individual market in the state, both inside and outside the exchange.” The money will be used to provide reinsurance and additional premium subsidies, contingent on approval of a 1332 waiver from the federal government.
SB387/HB1782 also limits short-term plans to no more than three months in duration, and prevents them from being renewed at the end of the policy term. The federal government has proposed regulatory reforms that would return to the definition of short-term plans that was used before 2017 (ie, a plan that lasts no more than 364 days). But states can implement more restrictive rules. State-based restrictions on short-term plans will be especially important starting in 2019, when there will no longer be a federal individual mandate penalty for people who rely on short-term insurance.
SB387/HB1782 also places restrictions on association health plans (which the Trump Administration is working to expand), clarifying that association health plans sold in the state will be subject to state regulations.

Source: https://www.healthinsurance.org/maryland-state-health-insurance-exchange/#premiumtax

Maryland Sick and Safe Leave Law-FAQ and Model Policy Notice Guidance

Maryland Healthy Working Families Act Additional Guidance: Model Policies and Updated FAQs small.business@maryland.gov On February 11, 2018, the Maryland Healthy Working Families Act went into effect. To date, the Office of Small Business Regulatory Assistance has received more than 2,000 emails from employers and employees with specific questions about complying with the law. The most common of these questions have been compiled into a Frequently Asked Questions (FAQs) document, available at www.dllr.maryland.gov/paidleave. As employers delve deeper into implementation, new questions are being asked. Today’s revised FAQ provides answers to these questions, as well as revisions to the previous FAQ document. In addition to the updated FAQs, the department has provided an updated employee notice poster for your place of business, and model policies for your employee handbook or other employee benefits documents. These resources are also available on the paid leave website. Today's documents will assist employers with compliance as well as facilitating a discussion with employees regarding their rights under the law. Responses are preliminary and subject to change. Please note that the department cannot provide legal advice regarding specific employer leave policies or employee exemptions under the law. These documents are for informational purposes and are intended to provide general guidance to employers and employees about the requirements of the law. The Department of Labor continues to encourage stakeholders to provide input on these documents. Final guidance documents will be released based on your continued feedback, as well as changes to the law during the General Assembly session. Governor Larry Hogan issued Executive Order 01.01.2018.04 creating the Office of Small Business Regulatory Assistance to assist small businesses in complying with the Maryland Healthy Working Families Act. Questions can be sent to this office at small.business@maryland.gov.

Efforts to Delay Maryland Paid Sick Leave Law Fail

Attempts to delay the Maryland Sick and Safe Leave Lay failed.  Efforts were being made to delay the law until July to give employers more time to prepare.  However those efforts failed in the General Assembly.  Many Democrats were not in favor of this delay as they believe it would give Republicans more time to have the law amended.  

The Maryland Department of Labor, Licensing and Regulation on Friday issued a draft sample employee notice poster to be displayed in workplaces across the state. The agency said it is also developing sample policies that will be available on its website at www.dllr.maryland.gov.  A copy of the poster can be found here.  

Maryland Sick Leave Law Compliance

More stress is being placed on the business community in Maryland through passage of the new Sick Leave Law.  It seems that the general feeling is that lawmakers are in a big push to extend the effective date of the law to allow employers more time to comply.  Below is a link to the Maryland Chamber of Commerce regarding guideline on implementation of the law.  There are notices required to be given to employees and a Model Notice is being developed but not available yet.  Please take a look below at guidance on the law.

https://mdchamber.org/what-next-a-primer-on-hb-1-compliance-from-shawe-rosenthal/

Thanks,

Ben