On it’s website, the IRS reminds us: “The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that are in effect and more that will be implemented during the next several years.” Just what provisions have taken effect, and what is to come? The following is a list of provisions for which the IRS or HHS has issued proposed and/or final guidance. It is provided here simply as a guide and a summary which hopefully will bring some perspective to the debate about what it contains.
1) Beginning in 2011, insurance companies were required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting a medical loss ratio (MLR) standard. Insurance companies that are not meeting the MLR standard will be required to provide rebates to their consumers beginning in 2012.
2) Reporting Employer Provided Health Coverage in Form W-2
The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement. The amount reported does not affect tax liability
3) Additional Medicare Tax
A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year.
4) Small Business Health Care Tax Credit
This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.
5) Health Flexible Spending Arrangements
Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. This standard applies only to purchases made on or after Jan. 1, 2011. A similar rule went into effect on Jan. 1, 2011, for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
6) Changes to Itemized Deduction for Medical Expenses
Beginning Jan. 1, 2013, you can claim deductions for medical expenses not covered by your health insurance when they reach 10 percent of your adjusted gross income. This change affects your 2013 tax return that you will file in 2014. There is a temporary exemption from Jan. 1, 2013, to Dec. 31, 2016, for individuals age 65 and older and their spouses
7) Health Coverage for Older Children
Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans.
8) Excise Tax on Indoor Tanning Services
A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. Payments are made along with Form 720, Quarterly Federal Excise Tax Return. The tax doesn't apply to phototherapy services performed by a licensed medical professional on his or her premises. There's also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.
9) Adoption Credit
For tax years 2010 and 2011, the Affordable Care Act raised the maximum adoption credit per child and the credit was refundable
10) Medicare Shared Savings Program
The Affordable Care Act establishes a Medicare shared savings program (MSSP) which encourages Accountable Care Organizations (ACOs) to facilitate cooperation among providers to improve the quality of care provided to Medicare beneficiaries and reduce unnecessary costs.
11) Qualified Therapeutic Discovery Project Program
This program was designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support U.S. jobs and increase U.S. competitiveness. Submission of certification applications began June 21, 2010, and applications had to be postmarked no later than July 21, 2010, to be considered for the program.
12) Medicare Part D Coverage Gap “donut hole” Rebate
The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS
13) Additional Requirements for Tax-Exempt Hospitals
The Affordable Care Act added new requirements for charitable hospitals. On June 22, 2012, the IRS issued proposed regulations which provide information on the requirements for charitable hospitals relating to financial assistance and emergency medical care policies, charges for emergency or medically necessary care provided to individuals eligible for financial assistance, and billing and collections.
On April 3, 2013, the IRS issued proposed regulations on the requirement that charitable hospitals conduct community health needs assessments (CHNAs) and adopt implementation strategies at least once every three years. The proposed regulations also discuss the related excise tax and reporting requirements for charitable hospitals and the consequences for failure to satisfy the requirements.
14) Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers
The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals.
15) Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers
The Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012.
16) Patient-Centered Outcomes Research Institute Fee
The Affordable Care Act imposes the Patient-Centered Outcomes Research Institute (PCORI) fee. Funded by the Patient-Centered Outcomes Research Trust Fund, the institute will assist patients, clinicians, purchasers and policy-makers in making informed health decisions by advancing clinical effectiveness research. The trust fund will be funded in part by fees paid by issuers of certain health insurance policies and sponsors of certain self-insured health plans
17) Retiree Drug Subsidies
Under § 139A of the Internal Revenue Code, certain special subsidy payments for retiree drug coverage made under the Social Security Act are not included in the gross income of plan sponsors. Plan sponsors receive these retiree drug subsidy payments based on the allowable retiree costs for certain qualified retiree prescription drug plans. For taxable years beginning on or after Jan. 1, 2013, new statutory rules affect the ability of plan sponsors to deduct costs that are reimbursed through these subsidies.
One of the things we tend to forget about the ACA is that many provisions will not take effect until 2014 or later, right up to 2020. So here are some of the important items that are yet to come, and presumably, Republican Radicals will want none of them to be realized!
Effective 2014 and beyond (thanks to Wikipedia, IRS, and other sources)
1) Health Insurance Premium Tax Credit
Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums.
2) Individual Shared Responsibility Provision
Starting in 2014, the Individual Shared Responsibility provision calls for each individual to either have minimum essential health coverage (minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. Notice 2013-42, issued on June 26, 2013, provides transition relief from the shared responsibility provision for employees and their families who are eligible to enroll in certain employer-sponsored health plans with a plan year other than a calendar year if the plan year begins in 2013 and ends in 2014.
Effective January 1, 2014
· Insurers are prohibited from discriminating against or charging higher rates for any individual based on pre-existing medical conditions or gender.
· Insurers are prohibited from establishing annual spending caps of dollar amounts on essential health benefits.
· Under the mandatory coverage provision, individuals who are not covered by an acceptable insurance policy will be charged an annual penalty of $95, or up to 1% of income over the filing minimum, whichever is greater; this will rise to a minimum of $695 ($2,085 for families), or 2.5% of income over the filing minimum, by 2016. The penalty is prorated. Exemptions are permitted. Those who aren't covered will be assessed the penalty on their Federal tax return. In the wording of the law, a taxpayer who fails to pay the penalty "shall not be subject to any criminal prosecution or penalty" and cannot have liens or levies placed on their property, but the IRS will be able to withhold future tax refunds from them.
· In participating states, Medicaid eligibility is expanded; all individuals with income up to 133% of the poverty line qualify for coverage, including adults without dependent children. The law also provides for a 5% "income disregard", making the effective income eligibility limit 138% of the poverty line. States may choose to increase the income eligibility limit beyond this minimum requirement.
· Health insurance exchanges are established, and subsides for insurance premiums are given to individuals who buy a plan from an exchange and have a household income between 133% and 400% of the poverty line. Section 1401(36B) of PPACA explains that each subsidy will be provided as an advanceable, refundable tax credit and gives a formula for its calculation
· Two federally regulated "multi-state plans" (MSP)—one of which must be offered by a non-profit insurer, and the other cannot cover abortion services—become available in some state health insurance exchanges. The MSPs must abide by the same federal regulations required of an individual state's qualified health plans on the exchanges, and must provide identical cover privileges and premiums in all states. MSPs will be phased in nationally, being available in 60% of all states in 2014, 70% in 2015, 85% in 2016, and 100% in 2017.
· Section 2708 to the Public Health Service Act becomes effective, which prohibits patient eligibility waiting periods in excess of 90 days for group health plan coverage. The 90-day rule applies to all grandfathered and non-grandfathered group health plans and group health insurance issuers, including multiemployer health plans and single-employer group health plans pursuant to collective bargaining arrangements
· Two years of tax credits will be offered to qualified small businesses. To receive the full benefit of a 50% premium subsidy, the small business must have an average payroll per full-time equivalent ("FTE") employee of no more than $50,000 and have no more than 25 FTEs.
· A $2,000 per employee penalty will be imposed on employers with more than 50 full-time employees who do not offer health insurance to their full-time workers (as amended by the reconciliation bill). In July 2013, the Obama administration announced this penalty would not be enforced until January 1, 2015.
· For employer-sponsored plans, a $2,000 maximum annual deductible is established for any plan covering a single individual or a $4,000 maximum annual deductible for any other plan (see 111HR3590ENR, section 1302). These limits can be increased under rules set in section 1302.
· To finance part of the new spending, spending and coverage cuts are made to Medicare Advantage, the growth of Medicare provider payments are slowed (in part through the creation of a new Independent Payment Advisory Board), Medicare and Medicaid drug reimbursement rates are decreased, and other Medicare and Medicaid spending is cut.
· Revenue is increased from a new $2,500 limit on tax-free contributions to flexible spending accounts (FSAs), which allow for payment of health costs.
· Members of Congress and their staff are only offered health care plans through the exchanges or plans otherwise established by the bill (instead of the Federal Employees Health Benefits Program that they currently use).
· A new excise tax goes into effect that is applicable to pharmaceutical companies and is based on the market share of the company; it is expected to create $2.5 billion in annual revenue.
· Health insurance companies become subject to a new excise tax based on their market share; the rate gradually rises between 2014 and 2018 and thereafter increases at the rate of inflation. The tax is expected to yield up to $14.3 billion in annual revenue.
· Consumer Operated and Oriented Plans (CO-OP), which are member-governed non-profit insurers, entitled to a 5-year federal loan, are permitted to start providing health care coverage.
· The Community Living Assistance Services and Supports Act (CLASS Act) provision would have created a voluntary long-term care insurance program, but in October 2011 the Department of Health and Human Services announced that the provision was unworkable and would be dropped. The CLASS Act was repealed January 1, 2013.
Effective October 1, 2014
Federal payments to disproportionate share hospitals, which are hospitals that treat large numbers of indigent patients, are reduced. The payments will subsequently be allowed rise based on the percentage of the population that is uninsured in each state
Effective January 1, 2015
CMS begins using the Medicare fee schedule to give larger payments to physicians who provide high-quality care compared with cost.
Effective October 1, 2015
States are allowed to shift children eligible for care under the Children's Health Insurance Program to health care plans sold on their exchanges, as long as HHS approves.
Effective January 1, 2016
States are permitted to form health care choice compacts and allows insurers to sell policies in any state participating in the compact.
The threshold for itemizing medical expenses increases from 7.5% of income to 10% for seniors.
Effective January 1, 2017
A state may apply to the Secretary of Health and Human Services for a "waiver for state innovation" provided that the state passes legislation implementing an alternative health care plan meeting certain criteria. The decision of whether to grant the waiver is up to the Secretary (who must annually report to Congress on the waiver process) after a public comment period. A state receiving the waiver would be exempt from some of the central requirements of the ACA, including the individual mandate, the creation by the state of an insurance exchange, and the penalty for certain employers not providing coverage. The state would also receive compensation equal to the aggregate amount of any federal subsidies and tax credits for which its residents and employers would have been eligible under the ACA plan. To qualify for the waiver, the state plan must provide insurance at least as comprehensive and as affordable as that required by the ACA, must cover at least as many residents as the ACA plan would, and cannot increase the federal deficit. The coverage must continue to meet the consumer protection requirements of the ACA, such as the prohibition on increasing premiums because of pre-existing conditions. A bipartisan bill sponsored by Senators Ron Wyden and Scott Brown, and supported by President Obama, proposes making waivers available in 2014 rather than 2017.
The two federally regulated "multi-state plans" (MSPs) that began being phased into state health insurance exchanges on January 1, 2014, become available in every state
Effective January 1, 2018
All existing health insurance plans must cover approved preventive care and checkups without co-payment.
A 40% excise tax on high cost ("Cadillac") insurance plans is introduced. The tax (as amended by the reconciliation bill) is on insurance premiums in excess of $27,500 (family plans) and $10,200 (individual plans), and it is increased to $30,950 (family) and $11,850 (individual) for retirees and employees in high risk professions.
Effective January 1, 2019
Medicaid extends coverage to former foster care youths who were in foster care for at least six months and are under 25 years old.
Effective January 1, 2020
The Medicare Part D coverage gap (commonly called the "donut hole") will be completely phased out and hence closed.
Wikipedia offers the following conclusion:
“The plan that ultimately became the Patient Protection and Affordable Care Act consists of a combination of measures to control health care costs and an insurance expansion through public insurance (expanded Medicaid eligibility and Medicare coverage) and subsidized, regulated private insurance. The latter of these ideas forms the core of the law's insurance expansion, and it has been included in bipartisan reform proposals in the past. In particular, the idea of an individual mandate coupled with subsidies for private insurance, as an alternative to public insurance, was considered a way to get Universal Health Insurance that could win the support of the Senate. Many healthcare policy experts have pointed out that the individual mandate requirement to buy health insurance was contained in many previous proposals by Republicans for healthcare legislation, going back as far as 1989, when it was initially proposed by the politically conservative Heritage Foundation as an alternative to single-payer health care. The idea of an individual mandate was championed by Republican politicians as a market-based approach to health-care reform, on the basis of individual responsibility.”
The “combination of measures” that make up this ACT are less clear if one simply listens to commentators, or reads biased summaries, or hears cherry-picked portions of the ACT only. Something does not add up. According to the non-partisan IRS analysis, there is a combination of fees and fines and taxes, most of which are meant to pay for newly-minted subsidies, closing gaps like the “donut hole” and providing tax breaks and rebates for those most in need of health care insurance. Then there are measures to control health care costs, expansion of public insurance and subsidized and regulated private insurance. But none of these appear as onerous as Republicans have claimed. Indeed, we find that Republicans actually have supported universal health insurance and an individual mandate for coverage. In other words, this ACT is a balanced approach to health care reform, not the socialistic, taxing debacle, threat to businesses, and attack on Medicare benefits that it has been made out to be (albeit, there is room for improvement as with any major legislation). As usual, the prevaricating Republican radicals have led us astray and attempted to make baboons (bamboozled) of us all.
Republican radicals are now entirely focused on destroying all of these provisions in the ACA. Why? It is not simply because they oppose health care, although they do oppose the expansion of government programs (Medicare and Medicaid), and they oppose the individual mandate (which many Republicans previously proposed) as socialistic. It is not simply because they hate the fact that President Obama achieved this landmark legislation in his first term, although they do want to destroy any legacy with which he might be credited. All that is probably true, but too simple.
The real reasons they have tried at least 40 times to repeal this Act is, one, because they do not want the richest 2%, and business interests, having to bear any additional tax burdens to help pay for a program that benefits the middle class and the poor. A second real reason is because they do not want a national health care program on the books at all. They are not in the business of enhancing the spread or influence of the national government. They are all about diminishing, weakening, and actually destroying the power and reach of the national government in favor of a confederation of individual states that provide for each of their citizens only, unless there may be a reason for cooperation in a regional construct of some kind. These radical conservatives do not want a strong central government, and they do not want broad-based central national programs for “undeserving” people who should take responsibility for taking care of themselves, and they do not want any interference with state laws or individual lives.
The ACA is a fitting target because it encompasses all these elements and more. It is fair game for their nihilistic platform. And, above all, don’t forget, if they somehow pull off this one repeal, they will be emboldened to go after other major programs, including Social Security and Medicare, as well as Food Stamps (already on the chopping block), WIC (ditto), Head Start (ditto again), the ADA, NPR, and Planned Parenthood; and then add in: abortion choice, labor unions, separation of church and state, graduated (or progressive) income tax and gay marriages. If you don’t see the connections here, you have missed the point of their vehement opposition! These anarchists, these nihilists, these states’ rights Regressives are not after just one Act for repeal. They are after the national government that provides for and protects all our nation’s citizens. Be forewarned!