A Brighter Way
A Brighter Way
President Obama signed the Patient Protection and Affordable Care Act as well as its companion piece, the House Reconciliation Act. So what's next and how does it impact your business?
Here are some of the key provisions:
All individuals not covered by Medicaid or Medicare would be required to obtain healthcare coverage or pay penalties. Employer-provided coverage would generally satisfy the universal coverage requirements. Although the Patient Protection Act would not require employers to provide health insurance coverage, those that don't will be liable for an additional tax. The Act also requires automatic enrollment in health insurance plans sponsored by large and mid-sized employers.
Small employers, generally those with less than 25 employees and wages of less than $40,000 will receive a temporary sliding-scale tax credit to help offset the cost of employer-provided coverage. Employers may qualify for up to 35 percent of their contribution toward the employee's health insurance premium from 2011-2013. Once the state exchanges are in place in 2014 and beyond, employers who purchase coverage through a state-based exchange may qualify for a credit of up to 50 percent of their contribution.
Beginning in 2013, an additional 0.09 percent tax will be imposed on individuals who earn more than $200,000 and families with incomes of more than $250,000. In addition, the reconciliation bill creates a new 3.8 percent Medicare tax on certain types of unearned income (primarily investment income) for taxpayers with income levels as listed above. The new tax would not apply to the employer portion of the Medicare tax.
The health care package caps health flexible spending account contributions at $2,500 per year after 2012 and will be indexed annually for inflation after 2013. In addition, over-the-counter medications prescribed by health care providers will no longer be included as qualified medical expenses for health savings accounts. Instead, the HSA qualified expenses will match the tax code's definition for itemized medical expense deductions.
Group insurers whose annual premium payments exceed $10,200 per individual or $27,500 for family coverage will receive a 40 percent nonrefundable excise tax beginning in 2018. Employers will be required to disclose the value of employer-provided health insurance to employees annually on Form W-2. The insurer calculates and pays the tax to the IRS.
There are several other provisions to the more than 2,700 page Act, that include nondeductible fees on health-related industries and increases to the threshold for itemized medical deductions.
This article was originally published in Facts & Figures, March 31, 2010 issue.
Note: This content is accurate as of the published date above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
