What Does the New Health Care Bill Do For Me?

03 May 2010

For the last several months we’ve all been bombarded in the media with unlimited “reports” and opinions ranging from how we’re all about to be “saved” by the new Patient Protection and Affordable Care Act (signed into law on March 23, 2010 and commonly referred to as the Health Care Bill), to how the new law is totally unaffordable and it’s going to wreck the future of the country.  Many of our clients have asked us about the new law, and how it will affect their pocketbooks and lives. 

Living up to its billing, the new law is complex and multi-layered.  Time will tell which, or if any, of the commentators were correct.  For now, we’ll have to settle on a summary that highlights some of the law’s key provisions and the year that they are scheduled to be implemented:

2010

• Immediate access to insurance coverage for the uninsured with pre-existing conditions takes effect 90 days after enactment.
• The “pre-existing condition” exclusion for children under 19 takes effect six months after enactment on existing coverage and will apply to everyone in
  2014.
• Unless there is fraud or a misrepresentation of a material fact, health insurance companies will be prohibited from cancelling existing policies when a
  person gets sick.
• Health insurance policies will no longer have “lifetime limits” or have restrictions on the use of “annual limits” starting with plan years beginning six
  months after enactment.  In 2014, “annual limits” will be banned for new plans.
• Dependent Coverage to age 26 takes effect six months after enactment.
• Small businesses will receive a Small Business Tax Credit of up to 35% of premiums they pay for their health care coverage.  In 2014 when the
  Exchanges (see below) are in place the tax credits will be up to 50% of premiums.  This credit is calculated based on number of employees and
  average annual wages.

2011

• New long-term care insurance will be available and by voluntary payroll deductions.
• The tax on withdrawals from HSA and Medical Savings Accounts for non-medical expenses will be increased to 20%.

2013

• The Medicare payroll tax will be increased to 2.35% for taxpayers with wages and earnings over $200,000 ($250,000 for married filing jointly).
• Net investment income will be taxed at 3.8% for taxpayers with Adjusted Gross Income greater than $200,000 ($250,000 for married filing jointly).
• Flexible Savings Account (FSA) contributions will be limited to $2,500/per year (indexed for inflation).
• The itemized deduction threshold for medical expenses will be increased from 7.5% to 10%.

2014

• Each State is to establish a Health Insurance Exchange.
• Most individuals will be required to have health insurance coverage or pay a penalty of $95 for 2014, $325 for 2015, and from $695 to 2.5% of income
  for 2016.
• Employers with 50 or more full time employees that do not provide health care coverage will be subject to a new fee.
• Annual Coverage Limits will be eliminated.

2018

• The “Cadillac Plan” Excise Tax takes effect on the amount of premium in excess of the threshold of $10,200 for an individual’s plan and $27,500 for family plans.

Stay tuned.  Based on “major reforms” in the past, we can likely expect more confusion and controversy before we all feel comfortable that we understand what this all means to each of us.

Sources
Deloitte.  Tax provision in the Patient Protection and Affordable Care Act (www.deoitte.com)
The Henry J. Kaiser Family Foundation.  Focus on Health Reform.  Health Reform Implementation Timeline (www.kff.org)