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My husband and I are sole proprietors with two children,

Customer Question
My husband and I...

My husband and I are sole proprietors with two children, each of us have our own company. My company provides direct locums or contracted services for healthcare. He is a fly-fishing guide. This past year we were fully compliant with the ACA, a 1035.27 HSA compliant monthly plan before dental and vision. This year the cost to have a HSA compliant plan goes up to 1400-1500 range due to the manipulation of out of pocket cost numbers and IRS rules. We decided to inquire about obtaining insurance as business owners, but we are not allowed due to federal law stating a spouse can not be employed. I understand that, but I do handle all the administrative and website/financing structure, as basic as that might be for my husband's business, it's is still work. For myself, despite being a W-2 contracted employee with the VHA, they refuse to give me a 1099 and refuse to provide health insurance or any other benefits. This punishes me on the investment side since I make too much money. Also, I have to go on the open market, but there is no market for direct locums/healthcare providers. At this point, we are backed into a corner and essentially feel forced out of the market. What legal grounds for a suit against the government and BCBS do I have in this matter?

Lawyer's Assistant: Because laws vary from state to state, can you tell me where the business is located?

We are both in Texas, Cameron County, near South Padre Island

Lawyer's Assistant: Has anything been filed or reported?

Everyone is obese and has diabetes. We do not have significant health care problems or costs, such as medications. Thus, we want a low premium, HDHP, that is HSA compliant

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

No. Just asking questions due to my frustration

Submitted: 6 months ago.Category: Employment Law
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Customer reply replied 6 months ago
I was asked if I had made a claim or filed anything. I did make a complaint to the Texas Department of Insurance and provided the documentation that BCBS sent to me in a booklet. Basically four pages that were the most pertinent. I also went to the FCC and shared my complaint even though it really does not apply to healthcare. Of course, with skyrocketing healthcare costs, we will not be able to afford television or internet costs, so maybe the FCC would like to consider how healthcare premiums might affect their business.
Customer reply replied 6 months ago
Should I speak to an employment law attorney related to my work contract and how it ultimately affects me related to health care and IRA exclusions due to rules as applied to my financial situation?
Customer reply replied 6 months ago
I tried to upload documents, but was unable to due to size or it does not show if it went through. I can send by email if that will help.
Customer reply replied 6 months ago
I'm glad someone is working on this, however, I have some errands to run, so please call me when you are ready to respond.
Customer reply replied 6 months ago
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Customer reply replied 6 months ago
Let me know if you need more information, or send me the service offer(s) so we can proceed.
Customer reply replied 6 months ago
I also contacted the IRS advocacy center and got a letter stating they do not have authority to respond to health care questions, yet the IRS sets the out of pocket maximum limits that disqualify most of the HDHP's from being HSA compliant, so I see them as partly responsible, along with the insurance companies.
Answered in 11 hours by:
11/29/2017
Employment Lawyer: taxmanrog,
 replied 6 months ago
taxmanrog
Category: Employment Law
Satisfied Customers: 1,109
Verified

Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

I am not comfortable answering legal questions (I am a CPA with 32+ years' experience, not a lawyer). But I did want to make a comment. Who told you that you could not be an employee of your husband's Sch C business? Who said there was a federal law prohibiting this? It is simply not true. I have had over the years MANY clients who employed spouses and children in Sch C businesses. In fact, if you employ children in a Sch C business, they are exempt from FICA tax. This is a good planning opportunity for kids under 18. You can start an IRA, and shift income from high tax brackets to low or zero tax brackets.

The IRS' own website states that "A spouse is considered an employee if there is an employer/employee type of relationship, i.e., the first spouse substantially controls the business in terms of management decisions and the second spouse is under the direction and control of the first spouse. If such a relationship exists, then the second spouse is an employee subject to income tax and FICA (Social Security and Medicare) withholding. However, if the second spouse has an equal say in the affairs of the business, provides substantially equal services to the business, and contributes capital to the business, then a partnership type of relationship exists and the business's income should be reported on a Form 1065 Partnership tax return."

So, if you are just doing admin work under your husband's direction, and are not an equal partner, you ARE an employee.

Good luck with this!

Roger

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Customer reply replied 6 months ago
I’m curious as to why they would only direct my question to a cpa, rather than an attorney. I still would like to speak to an attorney.
I think I was unclear on my explanation of the federal regulation prohibiting husband and wife businesses from purchasing health insurance as a business. A insurance representative informed me of this. The healthcare plans offered to employers are more reasonably priced and have much better coverage. The ACA and IRS regulatory structure combined with insurance pricing effectively discriminates against self employed individuals and family businesses. It’s a sad day for American entrepreneurs.
Customer reply replied 6 months ago
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call.
Customer reply replied 6 months ago
Let me know if you need more information, or send me the service offer(s) so we can proceed.
Employment Lawyer: Law Educator, Esq., Attorney replied 6 months ago
Law Educator, Esq.
Category: Employment Law
Satisfied Customers: 125,292
Experience: 20+ Years of Employment Law Experience
Verified

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

BCBS is incorrect that you cannot be a W-2 employee of your spouse's business. It may be their contract terms that they will not allow a spouse to be on a separate policy with them and can make you join the same plan with your spouse.

You should not go on the open market, you and your spouse can be covered under the same plan as a family plan.

Please do not forget to leave positive feedback by clicking on the 5 stars at the top of your page, as the experts are not employees of the site and get no credit for spending time with customers unless they leave positive feedback. Thank you.

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Customer reply replied 6 months ago
I spoke with two different insurance representatives today, each one telling me something different, however, both acknowledge a federal law prohibiting BUSINESS health insurance plans for two person businesses when the persons are married. One agent states Humana does not check and won't care as long as you have your LLC certificate. The other agent states that is not true about Humana, and that BCBS does cover businesses with two spouses, as long as you provide your quarterly tax statements, etc. In other words, BCBS has a heavier red tape requirement. Since I do everything for free, yet essentially am the administrator of my spouse's LLC, we are going to have a difficult time. This means we will have double to triple premium rates and a lower quality product. If we want to continue an HSA compatible plan, there is only one choice, and the premium is higher than any of the non-HSA plans. There are also no SHOP options in our region on the market place, and if I was told I could not get business health insurance as a PLLC, but I could go under my spouses LLC.
Customer reply replied 6 months ago
The matter with my contracted status as a federal W-2 employee and no health insurance or benefits is another issue. It is not clear why I do not receive a 1099.
Employment Lawyer: Law Educator, Esq., Attorney replied 6 months ago

Thank you for your reply.

There is no federal law prohibiting this, it is insurance industry rules they impose on their policies. However, as I said above, the way these work in general is there is one policy on your spouse and you would be under that policy as family member, not two separate policies. That is how we have seen them done by BCBS.

If you are owner of the LLC in general you should receive a 1099, as owners of an LLC are not supposed to be employees according to IRS regulations. You could be an owner and employee of an S-Corp or a C-corp you own, but an LLC you are not supposed to be an owner and employee UNLESS your LLC is treated in taxation as a corporation (check the box). If your LLC is taxed as a corporation, owners an be employees and receive a W-2.

Please do not forget to leave positive feedback by clicking on the 5 stars at the top of your page, as the experts are not employees of the site and get no credit for spending time with customers unless they leave positive feedback. Thank you.

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