Health Care Update – An overview for business owners …………
The Patient Protection and Affordable Care Act was enacted on the March 23, 2010, and was amended on March 30, 2010 by the Health Care and Education Reconciliation Act of 2010.
Important effective dates are staggered from the enactment date to January 2014. It’s important to note that new health care plans must comply with all requirements. Grandfathered plans are exempt from some of these requirements.
What is a Grandfathered Plan?
Plans that were in existence on the enactment date, March 23, 2010, and have not made changes to the plan. Caution must be exercised for grandfathered plans because changes to the plans may cause a loss of status. Although specific guidance has not been issued, changes to coverage, employee contribution or cost should be avoided.
Key Points to the New Plan
- Health Insurers cannot deny coverage to children with pre-existing conditions now and cannot deny adults with pre-existing conditions in 2014.
- A temporary high risk pool will be established to cover adults with pre-existing conditions until 2014.
- Businesses with fewer than 50 full time employees will get tax credits covering up to 50% of employee premiums.
- Children of covered adults can be included in their parents health insurance until age 26, unless they are eligible to enroll in their employer sponsored plan.
- Checkups and preventative care must be covered without a co-pay by all new plans and all plans by 2018.
- New plans must implement an appeals process for coverage determinations and claims.
January 1, 2010
- For informational purposes only, employers must include cost of employee’s health care on each employee’s W-2. The cost is not included in employee’s taxable wages. This mandatory reporting requirement has now been delayed until 2013 (2012 if employment is terminated in 2012.) Reporting for the 2011 tax year will be optional.
- Nondiscrimination requirements expanded to include fully-insured plans (eliminating this discriminatory executive perk)
- No reimbursement for non-prescription drugs for Flex Spending Accounts
January 1, 2013
- Required notice to employees of coverage options
- Salary reduction contributions limited to $2,500 for Health Flexible Spending arrangements
- 10% floor for itemized deductions for health expenses
January 1, 2014
- Employers offering minimal essential coverage must offer free choice vouchers to eligible employees
- An employee is an “eligible employee” if premiums paid are between 8% and 9.8% of employee’s household income, and such income does not exceed 400% of the poverty line, and employee does not participate in the plan
- Amount of voucher must be the highest cost for single coverage
- Vouchers must be paid to an established health care Exchange (Exchanges will be set up on a State or Federal level to provide coverage)
- Voucher is non-taxable to the extent it’s used to pay for coverage under the Exchange and are deductible by the employer.
- Employers offering vouchers avoid penalties.
January 1, 2018
- Excise tax on employer-sponsored high cost plans. Tax is equal to 40% of “excess benefit”
- Who pays the tax?
- Health Insurance Issuer – Group health plans
- Employers – Health savings accounts, and medical savings accounts
- Plan Administrator – Any other type of coverage
- Excess benefit calculation
Total annual cost of coverage MINUS $10,200 for single and $27,500 for family
Call us with questions, or to make sure your business realizes the full benefit of new and existing tax planning opportunities. (1-888-WE-TAXPLAN)
The Business Wealth Preservation Group is a professional services firm dedicated to providing superior individualized and custom service to individuals and their businesses in the areas of asset protection, tax planning, exit strategies, and wealth building. Simply put – we want to educate you on all relevant opportunities to put more dollars into your pocket, your business and your future.