• ACA – Employers
• ACA – Individuals
• ACA – Seniors
• ACA – Myth from Fact

The Patient Protection and Affordable Care Act (ACA) has arrived with fanfare, challenges and no small degree of uncertainty. As we get closer to the March 31 mandatory enrollment deadline and implementation of the ACA continues, individual and business clients will naturally have questions going forward. Most of us are concerned or unsure about what to do mainly because of the difficulties that have marked the rollout of the new health care law.

Following, are some basics of what the ACA is all about, including coverage requirements and individual and employer mandates.

What Is the ACA?
The ACA opened the door for all Americans to have access to health insurance. The exchange created by the ACA is the platform for the sale and purchase of health insurance from private insurance companies, such as Blue Cross Blue Shield, United Health, AETNA and others.

The online portal to this new marketplace can be found at www.Healthcare.gov. The six-month window from October 1, 2013 to March 31, 2014 is the first open enrollment period for coverage under the ACA.

The ACA establishes a number of important changes to health insurance in the United States…

• no annual lifetime limits to benefits
• insurance companies can no longer deny coverage based on pre-existing conditions
• changes for employers: a 90-day maximum waiting period for employees to qualify for employer-provided coverage.

In addition to expanding benefits, ACA…

• limits how much a family or individual will spend out of pocket on expenses each year
• most plans must meet new ACA standards for minimum coverage, and only those plans that are maintained in their original form are grandfathered, therefore, many current plans will not be continued.

Four basic plan levels…
Each plan will have their own various levels of premium costs, deductibles and amounts paid by the insurance company and the consumer.

• Bronze
• Silver
• Gold
• Platinum

A fifth catastrophic plan covers the minimum requirements with the maximum high deductible and the same out-of-pocket limits as a health savings account: $6,350 in 2014. Note: this is available only to people under 30 years of age.

To encourage participation in the health insurance marketplace, the ACA institutes a series of penalties, tax credits and subsidies.The ACA has also set a number of requirements for employers.

Our firm can assist business and individual clients regarding these issues and the changes impacting your unique health care issues.

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Health-Care Reform Changes Affecting Employers

The following is an overview of some of the ACA provisions that employers should be aware of.

SMALL EMPLOYER TAX CREDIT

If you employ fewer than 25 full-time equivalent employees (FTEs) with average annual wages of less than $50,000, and you contribute at least 50% toward the cost of your employees’ health insurance, you may qualify for a small employer tax credit.

Through 2013

• Credit is up to 35% (25% for qualified charitable employers) of the lesser of your actual cost for health insurance coverage, or the amount of contributions you would have made during the taxable year if each employee had enrolled in coverage based on a benchmark premium.
• Full credit is available if you have 10 or fewer FTEs with average annual wages below $25,000.
• The credit is reduced if you have more than 10 FTEs (but less than 25 FTEs) and/or pay average annual wages greater than $25,000 (but less than $50,000).

Beginning with 2014 [taxable years]

• Maximum credit increases to 50% (35% for qualified charitable employers), but only if you purchasehealth insurance through a state-sponsored health insurance Exchange
• This is only available for two consecutive years thereafter.

LARGE EMPLOYER – PLAY OR PAY

While employers are generally not required to offer health insurance to employees…

Effective January 1, 2015:

Not offering health insurance:

• You maybe required to pay a monthly fee of $166.67 ($2,000 per year) per full-time employee (excluding the first 30 employees) for any month coverage is not offered.
• The fee applies if at least 1 of your full-time employees enrolls in a state-sponsored health insurance Exchange and qualifies for a premium tax credit or cost-sharing reduction.
• Part-time employees are included when determining if you have 50 employees, based on the total hours worked per month divided by 120.

If you do offer coverage:

• You’ll be assessed a fee for each month that at least 1 full-time employee enrolls in an Exchange and qualifies for a premium tax credit or cost-sharing reduction, because your plan’s share of total cost is less than 60%, or as a result of the coverage you provide being considered unaffordable for that employee.
• In this case, the monthly fee is equal to the lesser of $250 ($3,000 per year) per full-time employee receiving a credit or reduction, but no more than the fee you would be subject to if you offered no health-care insurance at all.

Also beginning in 2014, employers with more than 200 full-time employees that offer health insurance must automatically enroll new full-time employees, subject to a waiting period of no longer than 90 days.

OTHER EMPLOYER INCENTIVES

In an effort to promote wellness and decrease health insurance costs

Beginning in 2014:

• Employers will be able to offer employees rewards, such as premium discounts and added benefits, for participating in wellness programs and meeting certain health-related standards.
• The value of the rewards can equal as much as 30% of the cost of coverage and may even reach 50% in some cases.

For retired employees – 55 or older – but no yet eligible for Medicare:

• May receive reimbursement for 80% of retiree claims between $15,000 and $90,000.
• This temporary reinsurance program is available until 2014.

Employers who currently receive a tax deduction for Medicare Part D drug subsidy payments will see that deduction eliminated in 2013.

GROUP HEALTH PLAN COVERAGE REQUIREMENTS

Group health plan requirements under the health-care legislation directly apply to insurers.

However, most of these provisions are incorporated by reference into ERISA and the Internal Revenue Code,extending their application to employers offering group health insurance.

Beginning in 2010, some important group health plan requirements include:

• As of 2010, group plans that offer coverage for dependent children must extend the age for dependent coverage to age 26. For plans in existence prior to March 23, 2010 (the date of legislative enactment), the extension of dependent coverage applies only if an adult child is not eligible to enroll in any other eligible employer-sponsored health plan.
• As of 2010, coverage for a plan participant cannot be rescinded except for fraud or intentional misrepresentation, and plans may not impose pre-existing condition exclusions with respect to children under age 19.
• As of 2010, plans may not impose lifetime limits on the dollar value of essential health benefits for plan participants and beneficiaries. Essential health benefits are intended to include those benefits customarily provided under a typical employer health plan, as defined by the Secretary of Health and Human Services. Beginning in 2014, plans cannot impose annual coverage limits for essential health benefits.
• Most preventive care services and immunizations recommended by the U.S. Preventive Services Task Force will not be subject to deductibles, co-pays, and co-insurance. (Plans in existence on or before March 23, 2010, are exempt from this provision.)
• By 2012, most employers must meet certain reporting and disclosure requirements, which include providing a summary of plan benefits and annual reports to participants; reporting annual enrollment and claims practices to the Secretary of Health and Human Services; and providing premium and coverage information to the IRS.
• For plan years beginning on or after January 1, 2014, plans may not impose pre-existing conditions on any plan participant or beneficiary.

TAX PROVISIONS

For taxable years beginning January 1, 2011:

• You must include the aggregate cost of group health plan benefits (with some exclusions) provided to employees on Form W-2.
• Effective January 1, 2013, employers will be responsible for collecting and reporting an increase of 0.9% in FICA taxes on wages above $200,000.
• The increase applies only to the employee-paid portion of FICA taxes.

If you sponsor a group health plan:

• You may be assessed a tax of two dollars or more per average number of insured lives beginning in 2012. The tax is intended to finance a comparative effectiveness research program measuring the value of various medical interventions.
• The tax is scheduled to sunset after September 30, 2019.

Health-care legislation makes changes to health savings accounts (HSAs), Archer medical savings accounts (MSAs), flexible spending accounts (FSAs), and health reimbursement accounts (HRAs) that affect both plan participants and employers.

• Beginning January 1, 2011, over-the-counter drugs no longer qualify for distributions/reimbursements under HSAs, Archer MSAs, health FSAs, and HRAs.
• In addition, the tax on nonqualified distributions from HSAs or Archer MSAs increases to 20% in 2011.
• Beginning in 2013, contributions to health FSAs are limited to $2,500 per year.

In 2018, a 40% excise tax is imposed on certain group health plans (excluding long-term care, vision, and dental plans) if the annual cost exceeds $10,200 for single coverage and $27,500 for family coverage, indexed for inflation.

Contact our office for further assistance on what is required for your business regarding these matters.

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Tax Changes for Individuals

The health-care reform legislation contained a number of tax changes. Some of these changes take effect immediately; others won’t have an impact for a few years. Here’s a year-by-year breakdown of some of the changes worth taking note:

2010

• A 10 percent tax assessed on amounts paid for indoor tanning services after July 1, 2010.

Adoptive parents

• Maximum tax credit for qualified adoption expenses, and the maximum amount of employer-provided adoption assistance that can be excluded from income is $12,650 in 2012.
• The Federal Adoptive Tax Credit is set to expire at the end of 2012.
• In 2013, the maximum adoption tax credit is $6,000 and only pertains to families adopting children with special needs.
• The tax credit is  non-refundable.

Tax health coverage benefits extended to children

• Covered by an employer health plan, associated with the health coverage and any reimbursements you receive for medical care expenses are extended to children who have not reached age 27 by the end of the year.
• Self-employed individuals can deduct the costs associated with health-care coverage for any child who doesn’t reach age 27 by year-end.

2011 through 2013

Over the counter medications
If you have a flexible spending arrangement (FSA), health reimbursement arrangement (HRA), health savings account (HSA), or Archer medical savings account (Archer MSA)

• Over-the-counter medications (except for insulin and medications that are prescribed by a physician) will no longer a qualified medical expense for purposes of reimbursement and tax-free distributions.
• Starting in 2011, the additional tax that applies to HSA and Archer MSA distributions that aren’t made for qualifying expenses increases to 20 percent.
• In 2013, health FSAs that are part of a cafeteria plan will be capped at a $2,500 reimbursement limit.

Do you itemize your deductions on Schedule A?

• 2013 unreimbursed medical expenses will be deductible on Schedule A only to the extent that they exceed 10 percent of adjusted gross income (AGI), instead of the 7.5 percent threshold that applies now.
• Until 2017, however, if you or your spouse turns age 65 before the end of the taxable year, the 7.5 percent AGI threshold will continue to apply.
• Beginning in 2017, the 10 percent AGI threshold will apply to individuals who have reached age 65 as well.

2013 Medicare taxes

You probably have some familiarity with the Federal Insurance Contributions Act (FICA) employment tax.

• The old age, survivors, and disability insurance (OASDI) portion of this FICA tax is equal to 6.2 percent of covered wages.
• The hospital insurance (HI) portion of the tax (commonly referred to as the Medicare payroll tax) is equal to 1.45 percent of covered wages, and is not subject to a wage cap.
• FICA tax is assessed on both employers and employees (that is, an employer is subject to the 6.2 percent OASDI tax and the 1.45 percent HI tax, and each employee is subject to the 6.2 percent OASDI tax and the 1.45 percent HI tax on wages as well), with employers responsible for collecting and remitting the employees’ portions of the tax.

Self-employed individuals

• Responsible for paying an amount equivalent to the combined employer and employee rates on net self-employment income (12.4 percent OASDI tax on net self-employment income up to the taxable wage base, and 2.9 percent HI tax on all net self-employment income), but are able to take a deduction for one-half of self-employment taxes paid.

Beginning in 2013

• Health-care reform legislation increases the HI tax on high-wage individuals by 0.9 percent (to 2.35 percent).
• Married and filing joint federal income tax return, the additional HI tax will apply to the extent that the combined wages of you and your spouse exceed $250,000.
• Married but file a separate return, the additional tax will apply to wages that exceed $125,000.
• All others, the threshold is $200,000 of wages.
• In 2013, a single individual with wages of $230,000 will owe HI tax at a rate of 1.45 percent on the first $200,000 of wages, and HI tax at a rate of 2.35 percent on the remaining $30,000 of wages for the year.

Employers will be responsible for:

• collecting and remitting the additional tax on wages that exceed $200,000. (Employers will not factor in the wages of a married employee’s spouse.)
• You’ll be responsible for the additional tax if the amount withheld from your wages is insufficient.
• The employer portion of the HI tax remains unchanged (at 1.45 percent).

Self-employed:

• Additional 0.9 percent tax applies to self-employment income that exceeds the dollar amounts above (reduced, though, by any wages subject to FICA tax).
• If you’re self-employed, you won’t be able to deduct any portion of the additional tax.

Also beginning in 2013:

• A new 3.8 percent Medicare contribution tax will be imposed on the unearned income of high-income individuals (the new tax is also imposed on estates and trusts, although slightly different rules apply).
• The tax is equal to 3.8 percent of the lesser of your net investment income (generally, net income from interest, dividends, annuities, royalties and rents, and capital gains, as well as income from a business that is considered a passive activity or a business that trades financial instruments or commodities), or your modified adjusted gross income (basically, your adjusted gross income increased by any foreign earned income exclusion) that exceeds $200,000 ($250,000 if married filing a joint federal income tax return, $125,000 if married filing a separate return).

You will only be subject to the additional 3.8 percent tax if your adjusted gross income exceeds the dollar thresholds listed above.

Interest on tax-exempt bonds, veterans’ benefits, and excluded gain from the sale of a principal residence that are excluded from gross income are not considered net investment income for purposes of the additional tax. Qualified retirement plan and IRA distributions are also not considered investment income.

Together, these two new Medicare-related taxes are expected to provide a major source of revenue to finance other parts of health-care reform.

2014

A new premium assistance tax credit will help eligible individuals purchase health-care insurance through one of the newly established state exchanges. If you qualify for the credit, it will be paid directly to the exchange insurance plan that you join.

Who qualifies?

• Individuals with household income between 100 percent and 400 percent of the federal poverty level will qualify, with the exact amount of the credit based on income level.
• Individuals who are offered coverage through an employer health plan won’t qualify for the credit unless the employer health plan doesn’t cover an adequate share of benefits (60 percent), or it’s considered “unaffordable” (the employee portion of the premium is 9.5 percent or more of the employee’s household income).

In addition to a premium assistance tax credit:

• Those with household income between 100 percent and 400 percent of the federal poverty level may qualify for a cost-sharing subsidy to help cover out-of-pocket costs, like co-payments and deductibles, when they buy health insurance through an exchange.
• Like the tax credit, the subsidy will be paid directly to the plan.

Beginning in 2014 – 

• You’re a U.S. citizen or legal resident, you are required to have adequate health-care coverage.
• A penalty tax will be imposed for non coverage.
• 2014, the tax will equal the greater of 1 percent of the amount of your household income that exceeds a specific amount (generally, the standard deduction plus personal exemption amounts you’re entitled to for the year)
• or $95 per uninsured adult (half that for uninsured family members under age 18), with a maximum household penalty of $285.
• By 2016, the percentage rate increases to 2.5 percent, the dollar amount per uninsured adult increases to $695, and the maximum household penalty increases to $2,085.

To assist you in understanding these new questions regarding these and other health tax related issues, contact us today for an appointment.

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Health-Care Reform Changes Affecting Seniors

The Patient Protection and Affordable Care Act, enacted in 2010, contains some provisions that directly affect our nation’s elder population. If you’re a retiree or a senior, you may be concerned about how these reforms may affect your access to health care and insurance benefits. The following is an overview of health-care reform legislation provisions you should be aware of.

MEDICARE SPENDING CUTS

There are two goals of the health-care legislation:

1. To slow the increasing cost of Medicare premiums paid by beneficiaries
2. To ensure that Medicare will not run out of funds.

To help achieve these goals, cuts in Medicare spending will occur over a ten-year period, which began in 2011, particularly targeting Medicare Advantage programs.

If you participate in a Medicare Advantage plan, these cuts could reduce or eliminate some of the extra benefits your plan may offer, such as dental or vision care, and your premiums may increase.

Medicare Advantage plans cannot reduce primary Medicare benefits, nor can they impose deductibles and co-payments that are greater than what is allowed under the traditional Medicare program for comparable benefits.

BENEFITS ADDED TO MEDICARE

The legislation also improves some traditional Medicare benefits. Beginning in 2011:

• Free annual wellness exams
• Preventive care tests such as screenings for high blood pressure, diabetes, and certain forms of cancer
• Personalized prevention assessment and plan to address particular health risk factors you may encounter.

MEDICARE PART D DRUG PROGRAM CHANGES

• Beginning in 2013, a reduction in co-payments for brand-name drugs will be phased in.
• By 2020, a combination of federal subsidies and a reduction in co-payments will reduce your out-of-pocket costs for medications in the gap from 100% to 25%.
• Individuals with annual incomes greater than $85,000 and couples with incomes exceeding $170,000, will see their Part D premiums increase as the federal subsidy offsetting some of the cost of Medicare Part D premiums is reduced.

COVERAGE FOR THOSE UNDER 65

You may be between the ages of 55 and 65 and do not have health insurance provided by your employer, or if covered, find that your cost for insurance is substantial. If you’re in this predicament, the health-care legislation provides you with opportunities for affordable health insurance.

By 2014, state-based American Health Benefit Exchanges will be created, through which you can purchase affordable health insurance coverage.

• The Exchanges will serve as a conduit for health insurance providers to offer health plans with different benefits, co-insurance limits, and premium costs.

You can then compare the costs of various plans and benefits. If you can’t afford an Exchange plan, you may be eligible for a government subsidy based on income and family size.

INCREASED ACCESS TO HOME-BASED CARE

The health-care reform law provides for programs and incentives for greater access to in-home care.

• The Community First Choice Option is available for states to add to their Medicaid programs. This option provides benefits to Medicaid-eligible individuals for community-based care instead of placement in a nursing home.
• State Balancing Incentive Program, running through October 2015, provides increased federal funds to qualifying states that offer Medicaid benefits to disabled individuals seeking long-term care services at home, or in the community, instead of in a nursing home.

These programs must meet state eligibility requirements. Ask your financial advisor about these programs for your area.

NURSING HOME TRANSPARENCY

The Independence at Home demonstration program, available in 2012, is a test program that provides Medicare beneficiaries with chronic conditions the opportunity to receive primary care services at home. This is intended to reduce costs associated with emergency room visits and hospital readmissions, and generally improve the efficiency of care.

While in-home care may be a preference, often a nursing facility is the better or only alternative. The health-care legislation addresses the need for more transparency regarding nursing facilities. For example, nursing homes are required to disclose their owners, operators, and financers. The government will also collect and report information about how well a particular nursing home is staffed, including the number of hours of nursing care residents receive, staff turnover rates, and how much facilities spend on wages and benefits.

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ACA – Myth from Fact

The Patient Protection and Affordable Care Act (ACA) passed in 2010 is incredibly broad in scope, so it’s probably not surprising that there’s a good deal of confusion about it, and a number of inaccurate and misleading claims that have been circulated. Here’s some information to help separate fact from fiction.

Myth: The health-care law cuts basic Medicare benefits and services

Fact:
The ACA mandates that no guaranteed Medicare benefits are cut.

The ACA expands Medicare benefits to include a free annual wellness assessment.

Many important preventive screenings and vaccines are now offered free of charge, including screenings for colorectal cancer, cholesterol, and diabetes; mammograms, flu and pneumonia vaccines; and counseling for smoking cessation and nutrition therapy.

The ACA also attempts to slow the increasing cost of Medicare premiums and ensure that Medicare will not run out of funds.
To help achieve these goals, the health-care reform law specifically targets Medicare fraud and wasteful overpayments to insurance companies, coupled with some cuts in Medicare spending.

If you’re a participant in the Medicare Part D (prescription drug) plan click here for more information.

Myth: You’ll have to give up your current health insurance

Fact:
The ACA provides that health insurance plans in existence on March 23, 2010 that haven’t been materially changed and that include certain minimum benefits are considered grandfathered.

If you have a grandfathered health plan, you don’t have to replace it with new insurance that otherwise meets all of the ACA’s coverage requirements.

Your insurance company may cancel your plan if that plan doesn’t meet the ACA’s coverage requirements.

If your plan is grandfathered, you can keep it–unless your insurer decides to cancel it.

Myth: All small businesses have to provide insurance to their employees

Fact:
If you are a small business owner (meaning you employ fewer than 50 full-time equivalent employees), you are not required to provide health insurance to your employees. The “insurance mandate” applies only to large employers having at least 50 full-time employees.

On the other hand, if you’re a small employer and you do offer health insurance coverage to your employees,you may be eligible for a tax credit.

The credit is available to employers that have 25 or fewer full-time equivalent employees with annual wages averaging less than $50,000 per employee, and that pay at least 50% of the health plan costs.

Myth: The ACA provides subsidies to illegal immigrants

Fact:
The ACA specifically defines who is eligible for federal payments, credits, and subsidies.

Only U.S. citizens or nationals, and aliens lawfully present in the United States may receive federal payments, credits, or cost-sharing reductions applicable toward the purchase of health insurance.

Undocumented immigrants in the United States may not acquire insurance through a state-based Exchange or Medicaid, nor are they eligible for federal subsidies for health insurance.

Myth: Individuals have to pay taxes on their health benefits

Fact:
Nothing in the health-care law requires individuals to pay income taxes on their health-care benefits.

Starting in 2018, an excise tax is assessed to insurers of high-cost, employer-sponsored health plans with aggregate expenses exceeding $10,200 for individual coverage and $27,500 for family coverage.

The tax does not apply to insured plan participants.

Other taxes that are part of the ACA include:

• A tax of 10% on the amount paid for indoor tanning services
• A 20% tax (increased from 10%) on distributions from a health savings account or an Archer medical savings account that are not used for qualified medical expenses
• An increase in the Medicare Part A tax rate on wages by 0.9% (from 1.45% to 2.35%) on high-income individuals
• An excise tax of 2.3% on the sale of certain medical devices
• A tax on large employers (more than 50 full-time equivalent employees) that do not offer affordable health insurance to employees, and
• A tax on individuals who do not have qualifying health insurance (many exceptions apply)

Myth: The ACA promotes end-of-life decisions for seniors

Fact:
While early drafts of the law allowed Medicare to reimburse doctors for talking to older patients about advance-care planning, no such provisions made it into the final version of the law.

Nothing in the ACA forces seniors to have consultations about end-of-life choices.

On the other hand, the Medicare Modernization Act of 2003 allows Medicare to pay for doctor’s visits with seniors in the first year of joining the program, during which time patients may voluntarily discuss end-of-life planning as part of their visit.

The ACA does provide Medicare participants with free annual wellness visits and personalized prevention plan services. These provisions afford Medicare participants an opportunity to discuss important issues such as hospice, home care, and additional services available to seniors.

However, the ACA does not mandate these discussions, nor does it tell doctors what options to discuss with their patients.

Myth: The ACA taxes all real estate sales

Fact:
Beginning in 2013, the ACA imposes a tax of 3.8% on certain net investment income of individuals, estates, and trusts that have income above the statutory amounts.

As it relates specifically to home sales, the tax applies only if you have modified adjusted gross income over $200,000 (individual), or $250,000 (married filing jointly), or $125,000 (married filing separately), and it would apply only to any taxable gain that results from the sale of your home.

Since most people are able to exclude $250,000 ($500,000 in the case of a married couple) in gain from the sale of a personal residence, the application of the tax is limited.

Myth: The health-care law will lead to government takeover of health care

Fact:
While provisions of the health-care law place some responsibility on the government to ensure that qualified insurance is available to most individuals, there is nothing in the law that directly promotes government takeover of our health-care system.

For instance, many mistakenly believe that state-based health insurance Exchanges sponsor only government-provided health insurance.

In fact, these Exchanges are intended to provide a marketplace that brings together consumers looking to buy health insurance with insurance companies looking to sell health insurance.

Beware of health-care scams

Probably due to the complexity of the law, many unscrupulous individuals are trying to scam people based on the uncertainty of some of the law’s provisions.

For instance, you may get a call, e-mail, or visit from someone claiming that if you don’t have health insurance, you’ll go to jail.

These same scammers may claim to be government officials and offer to sell you qualifying health insurance. Their goal is to get unsuspecting and frightened individuals, particularly seniors, to divulge personal information.

To protect yourself, never buy insurance without checking with your state insurance department to be sure the seller is licensed and the policy is legitimate.

Don’t give out your credit card or bank card information, and don’t give your Social Security number to anyone you don’t know.

Contact our office to clarify any questions or concerns you may have in regards to the issues stated here.

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