The following are some of the ways the Patient Protection Act will affect individuals and businesses. The bill will cost $940 billion over 10 years and reduce the U.S. deficit by $143 billion over the same period.
All individuals not covered by a private or employer-subsidized insurance plan, Medicaid or Medicare will be required to obtain health-care coverage by 2014.
Individual penalties for failing to obtain coverage begin in 2014 and increase each year through 2016. In 2014, the penalty is $95 or 1 percent of income, whichever is higher. In 2015, the assessment is $325 or 2 percent of income. By 2016, the penalty is $695 or 2.5 percent of income. In subsequent years, the penalty is indexed to inflation. Those under the age of 18, or still in college, would be penalized at 50 percent of the formula.
Lower-income individuals and households may qualify for federal subsidies and vouchers to purchase insurance based on a sliding scale indexed to the federal poverty line (FPL). The legislation also expands Medicaid to cover those with extremely low incomes.
The legislation excludes undocumented immigrants from coverage. Exemptions include a “religious conscience” provision, members of Native American tribes and those in jail.
Dependents, as defined by the IRS, are allowed to remain on their family’s insurance plan until they turn 26 and cannot be removed by an insurance company prior to that age.
Uninsured Americans with pre-existing conditions will immediately have access to insurance, and insurance companies can no longer deny coverage to them. Insurers will also be prohibited from denying coverage or setting discriminatory premium rates based on gender, health status, claims history or genetic information.
To improve medical services in rural areas and under-served communities, the legislation will offer scholarship and loan-repayment programs to expand the health-care workforce. The bill also includes incentives intended to attract providers to under-served areas.
Although companies with fewer than 50 employees are exempt, other employers will face an additional tax of up to $2,000 per full-time employee if they choose not to offer a health-plan benefit.
The first 30 employees are exempt from the penalty calculation. A company with 100 full-time employees, for example, would be assessed up to a $2,000 penalty for 70 workers.
The tax is in effect for the duration of waiting-period restrictions for plan participation. If the cost of employer-offered health insurance exceeds 9.5 percent of the employee’s household income or has an actuarial value of less than 60 percent, the plan doesn’t qualify as the required minimal coverage.
Small businesses are eligible for a tax credit of up to 35 percent of the premiums paid for employee health insurance. They may also qualify to purchase insurance through state-based exchanges. These so-called Small Business Health Options will be designed to give otherwise separate entities improved buying power that comes from a more diverse risk pool.
The new act increases the required corporate estimated tax payments for corporations with assets of at least $1 billion.
CCH, a Wolters Kluwer business and tax consultant, issued an advisory to its clients today to detail its interpretation of the new legislation. Among the tax-related issues contained in the reform measure that it’s reviewing:
The Patient Protection Act includes a 40 percent excise tax on high-priced health-insurance plans, dubbed “Cadillac Plans,” starting in 2018. Those plans are defined as having annual premium payments that exceed $10,200 for individual coverage and $27,500 for family coverage beginning in 2018. Employees in professions deemed as “high risk,” such as coal miners, would have a higher threshold: $11,850 for individual coverage and $30,950 for family coverage. Retired individuals would also be eligible for higher thresholds. Employers will be required to disclose the value of employer-provided health insurance to employees annually on W-2 forms.
There will be an increase in Medicare payroll taxes starting in 2013. An additional 0.9 percent will be levied on earned income in excess of $200,000 for individuals ($250,000 for families). An unearned income Medicare contribution of 3.8 percent is attached to investment income for individuals with adjusted gross incomes above $200,000 ($250,000 AGI for joint filers). CCH says that “issues over how certain deferred compensation arrangements would be taxed are certain to arise.”
The Patient Protection Act raises the threshold for the itemized medical expense deduction from 7.5 percent of adjusted gross income to 10 percent for regular income tax purposes effective for tax years beginning after 2012. Those over age 65 would be exempt until 2017.
The legislation imposes a 2.3 percent excise tax on medical-device sales. Excluded are common consumer-purchased items such as eyeglasses, contact lenses and hearing aids. Other devices, ranging from oxygen tanks to bedpans, will be taxed.
A new 10 percent tax will be levied on indoor tanning services starting on July 1.
Author: Joe Mont, thestreet.com