Preparing for Health Care Reform
On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act (PPACA), and its companion law, the Health Care and Education Reconciliation Act of 2010. As part of its primary purpose to facilitate health care reform, the PPACA includes key tax provisions that affect individuals and businesses. Now that the Supreme Court has ruled, all must prepare to comply with the requirements under PPACA. Some requirements are already in effect, while other provisions apply starting in 2013 or later. As your CPA firm, we are here to help you plan for the future.
What Does Healthcare Reform Mean For Me and My Business?
One of the key components of PPACA is a shared responsibility requirement for individuals. This has come to be known as the individual mandate. Broadly, this provision requires individuals to obtain minimum essential health coverage or pay a penalty starting in 2014. The individual mandate is a controversial linchpin to health care reform. However, the Supreme Court has determined that the individual mandate is a proper exercise of Congressional taxing power.
Some individuals are exempt from the individual mandate. These include individuals covered by Medicare and Medicaid, individuals with coverage under military health plans, undocumented individuals and others. The PPACA also imposes no penalty on individuals who cannot afford coverage. In addition, individuals with employer-provided coverage generally are treated as having minimum essential coverage and are exempt from penalty unless the coverage is deemed unaffordable.
Along with the individual mandate, the provisions under PPACA affecting individuals are summarized in order of the effective dates as follows:
- Medical benefits for children under 27 years of age (effective 3/30/10)
- Dependent coverage until age 26 (for the first plan year beginning on, or after, 9/23/10)
- Tanning excise tax (after 6/30/10)
- Increased tax on HSA/MSA distributions not used for medical expenses (distributions made after 12/31/10)
- Increased medical deduction threshold (after 12/31/12)
- Additional Medicare tax (after 12/31/12)
- Medicare tax on investment income (after 12/31/12)
- Premium Assistance Tax Credit (after 12/31/13)
Highlights of the provisions affecting businesses are summarized below:
- Small employer health insurance credit (2010 – 2013)
- Enhanced simple cafeteria plan rules for small businesses (after 12/31/10)
- Limitation on deduction for employee remuneration for health insurance providers (after 12/31/12)
- Changes to retiree prescription drug subsidy (after 12/31/12)
- Shared responsibility payment for employers regarding health coverage (after 12/31/13)
- Excise tax on high-cost health care coverage (after 12/31/17)
Many businesses and employers have waited to fully implement these provisions until the Supreme Court determined the fate of the health care reform law. Now, however, businesses must prepare to comply with the rules under PPACA. In addition, employers will have to comply with the following reporting requirements.
- Disclosure of cost of employer-sponsored coverage on Form W-2 (mandatory after 2011)
- Reporting requirements for sponsors of health care coverage (after 12/31/13)
Individuals and employers must prepare for the sweeping changes in health care in coming years. The Supreme Court’s upholding of the PPACA clears the way for implementation of the new law. We can assist you in the steps you need to take in the coming months and years. If you have any question on healthcare reform or the Supreme Court’s decision, please contact our office.