How Healthcare Reform Affects You

As you know, the Patient Protection and Affordable Care Act was signed into law on March 23rd. Companion legislation, the Health Care and Education Affordability Reconciliation Act of 2010, passed on March 30th. Maco & Associates knows that you're probably wondering what these measures provide and how they will affect your healthcare plans and coverage now and in the future. We're bringing you this special bulletin to help clarify what these new pieces of legislation mean for you.
The Provisions...

The goal of these bills is a comprehensive overhaul of healthcare delivery, specifically to provide access to affordable healthcare for the vast majority of Americans. Key components of the new law include:
  • A mandate on individuals to have coverage, beginning in 2014, and financial penalties for failure to comply;
  • Insurance reforms aimed at preventing individuals from being denied coverage;

  • The establishment by 2014 of State-based Exchanges where individuals and small businesses can purchase coverage;

  • Financial penalties to be imposed on mid-size and larger employers that do not provide basic levels of coverage to their employees, also beginning in 2014; and

  • Financial help for less affluent individuals and small businesses in purchasing coverage under the Exchanges.
Below are some key details.
Individual Mandate...

Effective January 1, 2014, all U.S. citizens and legal residents must have health insurance coverage or pay a penalty. The penalty will be phased in according to the following schedule:Penalty
  • In 2014, the greater of $95 or 1% of taxable income;
  • In 2015, the greater of $325 or 2% of taxable income; and
  • In 2016, the greater of $695 or 2.5% of taxable income. After 2016, the penalty amount will be indexed for inflation.
Certain exemptions apply, including, but not limited to: financial hardship; individuals with income below the tax filing threshold; individuals without coverage for less than 3 months; and religious objection.
Small Businesses...

Premium subsidies are available to small employers. A small employer for purposes of government assistance has no more than 25 full-time equivalent employees and an average full-time annual wage of less than $50,000.

Small business employeesInitially (2010-2013), the government will provide for a tax credit of up to 35% of the employer's contribution toward health insurance coverage if the employer contributes at least 50% toward the cost. For tax-exempt entities, the tax credit is 25%.

Once the Exchanges are operational in 2014, a small employer who purchases health insurance coverage for employees this way may receive up to a 50% tax credit of the employer's contribution (assuming the employer contributes at least 50%). For tax-exempt entities the tax-credit is 35%. This credit is available for 2 years.

Individuals and small employers will be able to purchase insurance coverage through state-based Exchanges beginning in 2014. Initially, these Exchanges will be open to individuals and employer groups of 1-100 employees (however, some states may restrict access to the Exchange to employer groups with 1-50 employees through 2016).

Private carriers and Co-Ops will be allowed to sell coverage through these Exchanges.
Additional Items of Interest...
  • Post-College Coverage: In 2011, we will see the extension of coverage for adult children until age 26, unless the adult child is eligible to enroll in other employer-sponsored health plan coverage.

  • Pre-Existing Conditions: As of 2014, we will see no pre-existing condition exclusions.
    Out of Pocket
  • Out-of-Pocket Limitations: Effective in 2014, out-of-pocket limitations cannot exceed the limitations imposed on HSA qualified high deductible health plans ($5,950/single, $11,900/family for 2010). In the small group market, deductibles cannot exceed $2,000/individual, $4,000/family.

  • W-2 Reporting: Effective January 1, 2011, employers will be required to disclose the value of health coverage provided to the employee on the employee's W-2. This dollar amount does not include dental and vision benefits or health FSA contributions.

  • Health FSA Limitation: The annual health FSA contribution limit will be capped at $2,500 (adjusted for inflation) beginning in 2013.

  • Over-the-Counter Expenses and Tax-Favored Accounts: Beginning in 2011, over-the-counter products may not be reimbursed through a tax-favored account (e.g. health FSA, HRA, HSA), unless prescribed by a doctor.

  • HSA Distributions for Nonqualified Expenses: Distributions from an HSA for expenses other than qualified medical expenses will be assessed a 20% penalty beginning in 2011.
To pay for these initiatives, the bills implement a variety of taxes and penalties that may affect our clients:
  • There will be changes to health FSAs, HSAs and HRAs to reduce some of the tax protections afforded to these arrangements ( in 2011 and 2013);

  • Beginning in 2013, increases in the Medicare payroll tax for high-income individuals ($200,000 of adjusted gross income for a single filer and $250,000/joint) including an increase in the Hospital Insurance Tax part of FICA from 1.45% to 2.35% and the imposition of a 3.8% tax on passive investment income.
Maco & Associates will continue to keep you updated as this legislation is revised. We strive to keep you informed of legislation that affects you financially. As always, check out our blog for more frequent updates.

Give us a call at 610-489-7215 or send us an email any time you have questions or concerns throughout the year. We look forward to hearing from you.
- Maco & Associates