As the evolution of the new era of health care continues, it’s critical for us to evaluate the complexity of these new laws from a variety of tax perspectives: the insurance industry, small business, health care providers, employers and, of course, the consumer.
While implementation timeframes have been somewhat altered, let’s continue our analysis of the new health care laws a little bit at a time.
Let’s start with a series of highlights of major provisions of the law, and its impact on taxes:
- 2010: Provided a tax credit for small businesses for up to 35 percent of their contribution to purchasing health insurance for their employees
- 2011: The law imposed a pharmaceutical industry fee on sales of brand name pharmaceuticals for use in government health programs ($2.5 billion for 2011, $2.8 billion per year for 2012 and 2013, $3.0 billion per year for 2014 through 2016, $4 billion for 2017, $4.1 billion for 2018 and $2.8 billion for 2019 and thereafter)
- 2011: The law increases the additional tax for Health Savings Accounts withdrawals prior to age 65 that are not used for qualified medical expenses from 10 percent to 20 percent
- 2012-2013: An annual limitation on contributions to a health Flexible Spending Account, or FSA, to $2,500 per year begins
- 2013: 2.3 percent excise tax on medical device manufacturers begins. Estimated to raise $20 billion
- 2013: Increases the income threshold for claiming the itemized tax deduction for medical expenses from 7.5 percent to 10 percent. Individuals over 65 would be able to claim the itemized tax deduction for medical expenses at 7.5 percent of adjusted gross income through 2016
The law will increase the Medicare Part A hospital insurance tax rate by 0.9 percentage points on an individual taxpayer earning more than $200,000 ($250,000 for married filing jointly). It will expand the taxable base to include net investment income. This is a new category of income for Medicare taxation
- 2014: The law imposed a new insurance industry fee to small business. (The scheduled increase will be over years: $8 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017, $14.3 billion in 2018 and so on.)
- 2014-2015 (new date): The law requires people to obtain “acceptable” health insurance coverage or pay an annual penalty. Families will pay half the amount for children, up to a cap of $2,250 per family
- Currently scheduled for 2018: The law will impose a 40 percent excise tax on “high-value” or “Cadillac” health insurance plans. The threshold for the imposition of the new tax will be $10,200 for individual plans and $27,500 for family coverage; this is to be increased to $30,950 (family) and $11,850 (single) for retirees and employees in “high-risk” professions
Are you dazed and confused? Is health care only about money? Absolutely not.
Where are all of these tax dollars going exactly? Stay tuned for more information as we analyze how everyone is adapting to the new laws.
The more we know, the more we can understand, challenge and participate in the changing world around us. What’s the goal? Transitioning and adapting, so we can care for our families in the best possible way.