Health
Care Reform - How It Affects You
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On March 23, President Obama signed the Patient Protection and Affordable Care Act into law. A companion bill passed by Congress, the Health Care and Education Reconciliation Act, will be signed by the President today. These wide-ranging changes are intended to extend health insurance to millions of people not currently covered. Within a few months of enactment, insurers may no longer deny coverage for pre-existing conditions in children (and all others in 2014), may not rescind coverage once a person becomes ill, may not set lifetime caps on coverage, and must cover children on their parents' policies until age 26.
The implementation and enforcement of the new mandates, and the $400 billion of "revenue-raisers" and new taxes enacted to pay for them, will have far-reaching effects on individuals and businesses. The tax and financial impact of the legislation include:
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A 3.8% Medicare tax on investment income for higher-income taxpayers starting in 2013. Investment income includes interest, dividends, capital gains, rents, royalties, annuities, capital gains, and passive activity income.
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An addition of 0.9% to the employee portion of the Medicare tax on earned income, also for higher-income taxpayers beginning in 2013. These first two provisions will apply to joint taxpayers with income over $250,000 ($200,000 for single persons)
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A 40-percent excise tax on high-dollar health insurance plans, beginning in 2018.
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New nondeductible fees on health-related industries.
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Financial penalties on individuals without adequate insurance policies, starting in 2014.
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Coverage subsidies, in the form of tax credits and cost sharing, for lower-income individuals and families starting in 2014.
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Penalties, up to $2,000 per employee, on large employers who fail to offer adequate medical insurance benefits beginning in 2014.
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Automatic enrollment in employer health insurance plans starting in 2014 (employees not desiring coverage must opt out).
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Information return reporting by employers regarding the medical coverage they provide.
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Tax credits for small employers to offset up to 35% of their medical insurance costs, starting in 2011. These credits will increase in 2014 if certain conditions are met.
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Capping healthcare Flexible Spending Account contributions at $2,500, starting in 2013.
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Doubling the penalty on nonqualified distributions from Health Savings Accounts, starting in 2013.
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Excluding over-the-counter drugs from FSA and HSA reimbursement.
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An increase in the medical expense deduction threshold from 7.5% to 10% of adjusted gross income. This will apply most people in 2013, and to seniors in 2017.
This sweeping social legislation may have historic impact on the way health care is provided in this country. In the meantime, its provisions have immediate day-to-day practical implications for American taxpayers and businesses.
Please do not hesitate to contact us if we may assist you in understanding and responding to these changes.
DDK & Company LLP
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