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What You Need to Know About Health Care Reform

As you're no doubt aware, big changes are under way in the health care industry. The Patient Protection and Affordable Care Act, commonly known as the Affordable Care Act or Obamacare, is intended to expand access to health care, remove certain restrictions, and protect customers. Although recent negotiations in Congress could delay the law's implementation, many Americans are still wondering how this complex legislation may affect them. Here, we'll look at the facts behind some common myths about health care reform.

Myth: The new law cuts Medicare's primary benefits.
Fact: The legislation adds benefits, such as annual wellness exams and preventive screenings, incorporated at no cost into Medicare Part B. Keep in mind, however:

  • As federal subsidies are reduced for Medicare Advantage plans, insurers may look to cut expenses by scaling back on services like dental coverage, vision care, or gym memberships.
  • In the future, higher-income subscribers may pay higher premiums for Medicare Parts B and D. Currently, the income threshold starts at $85,000 for a single person ($170,000 for married couples).

Myth: Medicare will be replaced with a national medical program.
Fact: Health care reform is not a national medical program or universal health care, but those who don't currently have health insurance should find it easier to get and keep coverage. The goal of the legislation is to give consumers the opportunity to choose their plans and plan providers.

  • Open enrollment for insurance purchased via the Health Insurance Exchange marketplace is slated to begin on October 1, 2013, for coverage starting on January 1, 2014.
  • Starting in 2014, the law intends that state and federal insurance exchanges will provide consumers and small businesses with an avenue for comparing the benefits and costs of a range of private health insurance plans.

Myth: Americans are required to buy health insurance.
Fact: Technically, this isn't true. But, by 2014, almost all U.S. citizens and legal residents (with certain exceptions) must either have health insurance coverage or be prepared to pay a tax penalty.

  • Premiums for low- and middle-income individuals who buy insurance through the new exchanges will be subsidized based on their household income.
  • The amount of the insurance subsidy will vary according to income, family size, and plan type.

Myth: Small employers are required to subsidize their employees' health insurance.
Fact: This isn't the case; however, small business owners are encouraged to provide access to affordable coverage.

  • Many businesses with fewer than 50 full-time employees qualify for tax credits based on their contributions to employees' health insurance.
  • Companies with 50 or more employees will be subject to fines for not offering affordable insurance that covers minimal essential health care.
  • If your employer provides you with access to health insurance, very little may change.

Myth: All taxpayers will feel the tax bite from health care reform.
Fact: The brunt of the taxes associated with reform will be borne by the highest-income taxpayers. Workers with annual adjusted gross income (AGI) above $200,000 ($250,000 if married) will see their payroll tax increase 0.90 percent and may see some investment income taxed an additional 3.8 percent.

  • Some taxpayers will feel the pinch through revised rules for claiming medical expense deductions. In 2013, only qualified expenses that exceed 10 percent of AGI are eligible for deduction, up from the previous 7.5-percent threshold.
  • In 2018, a new 40-percent tax will take effect for insurers that offer "Cadillac" health insurance plans (those with premiums of at least $10,200 for single coverage and $27,500 for family plans), and the costs will likely be passed along to the insured.

If you would like to discuss your current health care plan or how the new legislation may affect your financial situation, please feel free to contact us.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

IRS CIRCULAR 230 DISCLOSURE:
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.


2013 Commonwealth Financial Network®