Health-care reform: How does it affect you?
In June 2012 comprehensive health-care reform became the law of the land. Do you know how will it affect you? The major provisions will be effective in 2014.
How will health coverage change?
The health-care reform law contains provisions that expand benefits, improve access to health care, and protect the rights of consumers. Here are some of the changes that will apply to most health plans (although some will apply only to new, not existing, coverage).
- Plans must fully cover certain wellness and preventive care benefits (e.g., immunizations, cancer, diabetes, and heart disease screenings, smoking cessation programs)
- Plans can no longer charge more for out-of-network emergency care
- Plan can’t impose lifetime limits on health coverage (annual limits will be gradually phased out, and will be fully phased out by 2014)
- Children can remain on a parent’s health plan up to age 26
- Health coverage can’t be rescinded due to illness (only for fraud or intentional misrepresentation)
Changes to employer-sponsored high-deductible health spending accounts aren’t quite so favorable. For example, if you participate in a health flexible spending account, health reimbursement account, health savings account or Archer medical savings account, the cost of over-the-counter drugs not prescribed by your doctor will not be considered a qualified medical expense (an exception applies for insulin). And you’ll pay an increased penalty tax of 20 percent on money you take out of your HSA or Archer MSA that isn’t used for qualified medical expenses. And, beginning in 2013, contributions to health FSAs that are part of a cafeteria plan will be limited to $2,500 per year.
Questions for employers with less than 50 employees
- Do you know if the healthcare mandate applies to your business?
- Do you provide healthcare to these employees?
- Should you consider adding or modifying coverage?
- Do you qualify for the healthcare law’s new small business tax credit on health insurance?
- If so, how big is your credit?
- What is the most important advice for business owners? Why? Employers MUST distribute a Notice of Exchange Coverage Options document to all employees by Oct. 1, 2013.
How will Medicare be affected?
If you’re a Medicare beneficiary, you will also see some changes to your coverage. You’ll be covered for most preventive and wellness care expenses without co-payments beginning in 2011. In 2013, if your annual earnings are equal to or more than $200,000 ($250,000 for couples), your Medicare payroll tax will increase by 0.9 percent, and a Medicare tax of 3.8 percent will be applied to some types of investment income, such as rent, capital gains, and annuity payments.
What if you don’t have insurance?
By 2014 you’ll be required to have health insurance or face a tax penalty (some exceptions apply). However, if you don’t have insurance, or if it’s too expensive, the reforms may make it easier for you to get and keep health insurance. By 2014, insurers will have to accept you regardless of your health history, and premiums can only vary based on tobacco use and age, not on health status or gender. If you don’t have access to affordable health insurance through an employer, you’ll be able to purchase coverage through state-based American Health Benefit Exchange.
Premium and cost-sharing subsidies will be available to individuals and families with incomes at or below 400 percent of the Federal Poverty Level, which will help reduce the cost of insurance purchased through an exchange. In addition, Medicaid availability will be expanded to those under age 65 with incomes up to 133 percent of the Federal Poverty Level. Prior to 2014, if you haven’t been able to get insurance for at least six months due to a pre-existing condition, you will be able to purchase insurance through temporary high-risk pools.
Chris Torchiana founded Main Street Tax Advisory of Northern California, LLC, a full service Tax Preparation provider in El Dorado Hills. For more information visit taxplanningguy.com.