Health Care Reform: Client Impact
With the approval of the new health care bill, there has been a great deal of discussion, both positive and negative, about the proposed legislation. The Law Offices of Richard D. Seward would like to take a moment and attempt to summarize the content of the bill, and provide an easy understanding of the implications of the proposed legislation.
Proponents point out the following:
• The Congressional Budget Office, a non-partisan body, estimates that the new legislation will cut the deficit by $143 billion over the next 10 years by cutting government overspending and reigning in waste, fraud and abuse.
• Uninsured and self-employed will be able to purchase insurance though state-based exchanges with subsidies available to individuals and families whose income is between 133% and 400% of the poverty level.
• Though the bill will cost taxpayers $100 billion each year, the cost savings from altering the health care system are estimated by the CBO to be more than twice the yearly cost.
• Small businesses would receive a tax credit for up to 35% of the money they pay to purchase health insurance for their employees. By 2014, that percentage would increase to 50%.
• Under the plan, 95% of Americans will be insured.
• Insurance companies will no longer be able to deny coverage to individuals with pre-existing conditions.
• Health insurers can no longer cap coverage for individuals. This should reduce medical bankruptcy.
Opponents point out the following:
• Starting in 2014, everyone must purchase health insurance or face up to a $695 annual fine. There are some exceptions for low-income people.
• Employers with more than 50 employees must provide health insurance or pay a fine of $2,000 per worker, excluding the first 30, each year if any worker receives federal subsidies to purchase health insurance.
• Health care bill will cost the American taxpayers $100 billion each year.
• Government regulation of the health care industry and insurance industry. That government regulation will likely make it more expensive for insurers and health care providers to operate. That added cost will likely be passed on to the consumer.
• 0.9% increase in Medicare payroll taxes for Americans who earn more than $200,000 annually individually and $250,000 for couples. This amount will rise to 3.8% if reconciliation passes. It will also apply to investment income, estates, and trusts.
• Americans will be forced to buy a health insurance plan that is all inclusive, including services that might not be needed. Single men with no children must buy pediatric services. Women who can’t bear children must still buy coverage that includes maternity services.
Health care reform bill, HR 4872 is designed to take effect over a ten year period. The following timeline breaks down what we can expect to see each year if the health care reform bill is passed.
• Insurance companies will no longer be able to deny coverage to individuals with pre-existing illnesses.
• Children will be able to stay on their parent’s health plan until age 26.
• A 10% excise tax on indoor tanning will be put into effect.
• Small business with fewer than 25 employees that offer health insurance will be eligible for a tax credit of up to 35%.
• Nonprescription drugs cannot be reimbursed tax-free though a health savings account (HSA).
• Tax on HSA withdrawals for non-medical expenses will increase by 5-10%, raising the total tax to around 20%.
• Employers will have to start including the cost of health care on employee’s W-2 forms.
• Medicare payroll tax will rise from 1.45% to 2.35% for individuals earning more than $200,000 per year and married couples making more than $250,000 per year.
• The Medicare payroll tax expands – 3.8% tax on unearned income for families making over $250,000 in investment income.
• Annual contributions to tax-sheltered flexible spending accounts for medical expenses will be capped at $2,500
• 2.3% sales tax will apply to medical devices other than vision and hearing aids.
• Exchanges will be created. These exchanges will benefit individuals without employer-provided health care, so that a small business can shop for health care coverage.
• Insurance companies will be barred from denying people based on pre-existing conditions.
• Waiting periods for coverage will be limited to 90 days.
• Employers can offer employees rewards of up to 30% of the value of coverage for participating in wellness programs and meeting certain health-related standards.
• Plans cannot have annual dollar limits.
• Small business will receive a tax credit to help them provide coverage to their employees.
• Insurance companies will be required to pay an annual fee to help pay for the exchanges that will cover all citizens that cannot otherwise receive insurance.
• Mandates kick in this year: individuals who do not have insurance and cannot prove hardship will pay a $95 fine, which rises to $695 in 2016.
• Employers with more than 50 employees that have any employees enrolled in subsidized coverage will pay a penalty of $2,000 per employee (excluding the first 30 employees).
• Employers that offer coverage must offer low-income employees a “free choice voucher.” The employee can use the voucher to apply the value of the employer-provided coverage to the cost of enrolling in a state-based Health Benefit Exchange.
In 2016, 2017, and 2018:
• 2016: Penalty for individuals who do not purchase health insurance will rise to a $695 minimum.
• 2017: Businesses that have more than 100 employees will be allowed to participate in the state insurance exchanges.
• 2018: Excise tax on “Cadillac” health insurance plans: plans that provide more than $10,200 in coverage for an individual and $27,500 in coverage per family. Tax will be equivalent to 40% of the value of the plan that exceeds the threshold amount.
The Law Offices of Richard D. Seward invite you to contact our office with any questions about the how the changes in our health care system might affect you.