Historic Health Care Reform Signed into Law

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On March 23, 2010 President Obama signed legislation into law to make health insurance reform a reality. The law is known as the Patient Protection and Affordable Care Act (PPACA). The Senate quickly addressed a package of fixes and reconciliations that refine the law and returned them to President Obama. On March 30, 2010 those revision known as the Health Care and Education Reconciliation Act of 2010 was signed into law.

The PPACA will affect virtually every individual and/or business in this country – we will highlight some of the changes affecting businesses, individuals and families and when the changes will take effect.

For Business

• • Beginning now:
    • • Small businesses with less than 25 full-time equivalent employees will get a tax cut to assist with paying for health insurance. The credit will amount to a maximum of 35% of the amount they spend on premiums. The credit will increase over time, eventually amounting to 50% of premiums when the Insurance Exchanges go into effect.
      • A credit equal to 100% of the contribution made for health insurance for employers who pay an average annual wage of $25,000 to their ten or fewer workers.

• • For tax years beginning after 2011:
    • • The new law requires employers to report the value of their employer-sponsored health insurance coverage on their worker’s W-2 forms.
      • Unrelated to health care – the PPACA imposes new information reporting requirements. Forms 1099 will need to be sent to all vendors whom (incorporated and unincorporated) provides property and services for any amount greater than $600 paid to them during the year.
  • Starting in 2014:
    • • Mid and large sized business, 50 or more workers, who do not provide minimum essential health insurance coverage, will be liable for an additional tax.

For Individuals and Families

• • Starting right now:
    • • Senior citizens who are affected by the gap in current Medicare coverage will qualify for a $250 rebate to help pay for their prescription medicines.
      • Community Health Centers will be funded by the federal government to provide care to people who need it most. Over the next five years, $11 billion will be invested to expand access to health centers to 25 million more people in 10,000 communities across the country.

• • Beginning in June 2010:
    • • Individuals with pre-existing conditions will be able to access a special fund set up to cover them until the Insurance Exchanges are setup and operating.
      • A new federal re-insurance program for early retiree health plans will help to lower premiums.

• • Beginning in September 2010:
    • • All newhealth plans will be required to:
        • • Provide free preventive care with no co-pays or deductibles.
          • Allow you to pick your own primary care physician.
          • Allow consumers to appeal insurance company denials of coverage
      • All health plans will be:
        • • Prohibited from canceling coverage when a patient reaches a lifetime limit on coverage OR if a patient gets sick and files several claims.
          • Banned from denying coverage or care to children because of ‘pre-existing’ conditions.
          • Will allow young adults to stay on their parents health insurance plan until they reach age 26

• • Changes taking affect on January 1, 2011:
    • • Medicare patients will be eligible to make an appointment for a free annual wellness checkup with their doctor – no co-pays or deductibles will apply
      • All health insurance plans will be required to spend at least 80-85% of their revenues on medical care for its participants. If too much is spent on wasteful overhead, such as executive salaries and advertising, they will be required to give their customers a rebate.

• • By 2014, all persons not covered by Medicaid or Medicare will be required to acquire health insurance coverage or pay penalties.
  • For lower and middle class income families, the law provides “premium assistance credits” to be used to help purchase health insurance through state-run insurance exchanges.

How will we pay for this reform?

The Patient Protection and Affordable Care Act includes provisions for raising tax revenue to fund it, here are some of the key offsets:

• • A 40% excise tax on “Cadillac” health insurance plans will begin in 2018.
  • In 2013, an increase in Medicare payroll taxes on taxpayers in the $200,00 plus income category ($250,000 for joint filers) to a total of 3.8%. A .9% increase over today’s rate.
  • Also effective in 2013, Imposing an unearned income Medicare contribution of 3.8% on investment income for individuals with an AGI above $200,000 ($250,000 for joint filers)
  • New excise taxes on certain health-related industries, such as medical device sales
  • Medical expense deduction on Form 1040 will increase from the current 7.5% of AGI to 10% of AGI for regular income tax purposes effective for tax years beginning January 1, 2013.
  • Additionally, several other “revenue-raisers” like the Biofuel Credit, the Economic Substance Doctrine and requirements for increased amounts of corporate estimated tax payments round out the funding line up.