subject: Your paying for Health Insurance Reform [print this page] Your paying for Health Insurance Reform
Effective 2010
Indoor tanning services are subjected to a 10 percent service tax.
Effective January 2011
n Pre-tax dollars from health savings accounts (HSA), flexible spending accounts (FSA) or health reimbursement accounts (HRA) can not be used to buy over-the-counter, non-prescription medicines. Easy To Insure ME
n Increase the tax from 10 percent to 20 percent for non-medical early withdrawals from a health savings account for those under age 65.
n Impose an annual cap of $2,500 on contributions to flexible spending accounts, which are now unlimited; the cap is indexed for inflation.
n Premiums for Part D Medicare drug benefits for high-income senior citizens will increase in income tiers like the ones used for Part B benefits. An average Part D premium is about $35-40 per person per month, so this provision will add about a 1 percent marginal tax impact. Like Part B, the higher Part D premium will be determined based on a two-year look-back: 2011 premiums will be based on reported Modified Adjusted Gross Income in 2009.
n The threshold for the higher-income related Medicare Part B premiums is frozen until 2019, effectively making an increasing number of people each year subject to higher premiums. The current standard Medicare premium is $110.50 per month and increases to $154.70 per month when the threshold - $85,000 for individuals and $170,000 for couples - is reached and continues to increase as income increases.
Effective Jan. 1, 2013
n A new 0.9 percent payroll tax on individuals earning more than $200,000, or $250,000 for joint filers. Currently the Medicare payroll tax is 2.9 percent of all earned wages - with workers and employers each paying 1.45 percent. As an example, an individual who makes $190,000 a year in wages and $30,000 a year in investments would not have to pay the new tax.
n A new 3.8 percent tax on unearned income generated from interest, dividends, capital gains, annuities, royalties and rents for individuals who earn more than $200,000 or couples who make more than $250,000. The tax will be imposed on the lesser of either net investment income; or modified Adjusted Gross Income (plus any excluded foreign income) over a threshold amount. The threshold amounts are $250,000 for joint filers and $200,000 for single filers. "Net investment income" does not include distributions from qualified plans or IRAs. Also affected are individuals who make a profit of more than $250,000 on a real estate sale or couples who make a profit of $500,000 on a real estate sale.
n A $1 tax per participant on insured and self-insured health plans for funding comparative effectiveness research to be paid by insurance companies. In 2014, the tax increases to $2 per participant and can increase based on a specific formula.
n Increase from 7.5 percent to 10 percent the floor on itemized deductions for medical expenses, but taxpayers age 65 and over are exempt from the cutback through 2016.
EFFECTIVE 2014
n Pharmaceutical companies will face a new excise tax based on the market share of the company.
n Most medical devices become subject to a 2.3 percent excise tax collected at the time of purchase.
n Health insurance companies become subject to a new excise tax based on their market share; the rate gradually raises between 2014 and 2018 and thereafter increases at the rate of inflation.
n Annual penalty of $85 or up to 1 percent of income (whichever is greater) is imposed on individuals who do not obtain health insurance; this will rise to $695, or 2.5 percent of income, by 2016. Families have a limit of $2,085. Exemptions to the fine include cases of financial hardship (where health insurance would cost more than 9.5 percent of an individual's income) or religious beliefs.
n Employers with more than 50 employees who don't offer full-time employees health insurance face a $2,000 per employee penalty. Businesses with fewer than 50 employees are exempt from the requirement.
Effective 2018
n A new 40 percent excise tax on high cost ("Cadillac") insurance plans is introduced. The tax is on the cost of coverage in excess of $27,500 (family coverage) and $10,200 (individual coverage), and increases to $30,950 (family) and $11,850 (individual) for retirees and employees in high-risk professions. The dollar thresholds are indexed with inflation; employers with higher costs because of the age or gender demographics of their employees may value their coverage using the age and gender demographics of a national risk pool.
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