For business owners and individuals alike, sorting out the implications of the new Health Care Reform Bill can be overwhelming. The good news is most provisions don't begin until 2014, so you have some time to figure out how the changes will affect you and your business. As with any major changes, checking with your team of advisors is the best way to ensure you aren't caught off guard.
Important benefits kicking in during 2010 include:
- A temporary "reinsurance" program to help companies provide health benefits for early retirees who are not yet eligible for Medicare (ages 55 to 64).
- Employees will be able to keep dependent "children" on their plans until age 26.
- Lifetime caps on employer-sponsored insurance (typically $1 million) would be removed.
- Children with pre-existing conditions cannot be denied coverage by insurers (effective 2014 for adults.)
Come 2014, individuals are required to have qualified health care coverage; employers are not required to provide it, but will be heavily penalized if they do not. Business owners with more than 50 full-time employees (minimum 30 hours a week) must provide "affordable" health care coverage or be fined $2,000 per employee, per year, excluding the first 30 employees. Affordable means it cannot cost more than 9.5 percent of each employee's household income. If you provide health coverage that is deemed unaffordable, you can be assessed a $3,000 penalty per employee. The penalties are steep and may have companies limit hiring or wondering if it is cheaper to pay the penalties than provide the health care.
Some good news is that under the new tax law, there is an immediate Small Employer Health Insurance Tax Credit for employers with no more than 25 employees and with average annual wages of less than $50,000 per employee. Breaking it down further:
- 2010 through 2013: 35 percent credit for cost paid by employer.
- Employer must pay at least 50 percent of cost.
- Beginning in 2014, eligible employers that purchase insurance through a state exchange can receive a 50 percent credit for up to two years. The credit is phased out as you get closer to the 25 employee benchmark and $50,000 wage.
Another form of assistance to small business owners challenged by insurance costs will be the enactment of state based Small Business Health Options Programs (SHOP Exchanges). Small businesses (less than 100 full-time employees) will be able to come together and pool their risk to buy insurance at reduced costs, like larger corporations. States can limit the size to 50 or fewer employees until 2016, and it's also good to know that companies that grow beyond the employee limit will be grandfathered in. The SHOP Exchanges would have four benefit categories and a catastrophic plan available to those under 30.
The revenue generating provisions under the plan include:
- 40 percent excise tax on "Cadillac" insurance plans.
- Medicare tax increases for individuals earning more than $200,000 and married earning more than $250,000.
- 3.8 percent surtax on Investment income, $200,000 individual/$250,000 married.
- Increased floor on medical deductions.
Although these are not all of the provisions, it is a start to understanding what sort of changes are ahead. Take some time to learn the implications for you and your business and plan to minimize the impact to you and your business.