Patient Protection & Affordable Care Act


1.   $250 Rebate  - “Donut Hole”

For Medicare prescription drug coverage.
Automatic tax free payment of $250 when individual reaches the coverage gap (donut hole).
Not eligible if receiving Medicare Extra Help.
2.    Small Business Health Care Tax Credit
Credit equal to 35% of premium cost (subject to certain limits based upon the average premium for the small group market in the state).  Commencing 1/1/2014, credit increases to 50%.
Tax exempt entities – credit of 25% (increasing to 35% in 2014).  Credit cannot exceed the total amount of income tax withheld and Medicare tax (employee and employer portions).
Full credit available to employers with 10 or fewer full-time equivalent employees (FTEs) and whose employees have annual full-time equivalent wages that average less than $25,000.
Phase out:  Credit phases out for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between10 and 25 full-time workers.
Employer must cover at least 50% of cost of health care coverage for some of its workers based on the single rate.
Credit claimed as part of General Business Credit.
3.    Health Coverage for Older Children
Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employee.
Employers with cafeteria plans may immediately allow employees to make pre-tax salary reduction contributions to provide coverage for children under age 27.
The act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. 
4.    Employer Responsibilities –
Cost of Employer-Sponsored Health Coverage Included on W-2:
For tax years beginning after December 31, 2010
Employers must disclose the value of the benefits provided by them for each employee’s health insurance coverage on the W-2.
Other Reporting Requirements:
1099s  For payments made after December 31, 2011, payments of any amount greater than $600 to corporate providers of property and services (previously just services) will have to file an information report (1099) with the IRS.
Insurer Reporting - For calendar years beginning after 2013.  Insurers (including employers who self-insure) that provide minimum essential coverage must report insurance information to the insured and IRS.
Large Employers – Penalty:
Commencing after December 31, 2013
Applicable to Large Employer (employs average of at least 50 full-time employees) who do not offer coverage for all full-time employees,  or offers minimum essential coverage that is unaffordable, or offers minimum essential coverage that consists of a plan wherein the plan’s total allowed cost of benefits is less than 60% or offers minimum essential coverage.
Penalty assessed if full-time employee is certified to the employer as having purchased heath insurance through a state exchange wherein a tax credit or cost-sharing reduction is allowed or paid to the employee.
Penalty – $100 per month /per employee excise tax.  Levied for number of employees (in excess of 30) that meet stipulations.
5.    Other Employer Changes
Free Choice Vouchers:
After December 31, 2010
Employers offering minimum essential coverage through an employer-sponsored plan and paying a portion of that coverage will be required to provide qualified employees with a voucher whose value can be applied to purchase a health plan through the Insurance Exchange.
Qualified Employees:

- Who do not participate in the employer’s health plan
- Whose required contribution for employer sponsored minimum essential coverage (if they did participate in the plan) exceeds 8%, but not 9.5% of household income.
- Whose total household income does not exceed 400% of the poverty line for the family. 
Value of voucher not included in the income of the employee to the extent used to purchase health plan coverage.
Simple Cafeteria Plans for Small Businesses:
For tax years beginning after 2010, a new employee benefit cafeteria plan known as a Simple Cafeteria Plan will be available. 
6.    Increased Tax on Non-qualifying HSA or Archer MSA Distributions
For distributions made after December 31, 2010
Additional tax for HSA withdrawals before age 65 used for purposes other than qualified medical expenses is increased from 10% to 20%.  (Archer MSA increased from 15% to 20%).
7.    Additional Hospital Insurance (HI) Tax for High Wage Workers
For tax years beginning after December 31, 2012
HI tax rate is increased by .9% on an individual taxpayer earning over $200,000 ($250,000 for married filing jointly).
8.    Surtax on Unearned Income
For tax years beginning after December 31, 2012
3.8% surtax will apply to net investment income of higher income taxpayers. 
Tax is 3.8% of lesser of:  Net investment income or the excess of modified AGI over threshold amount.  Threshold amount is $250,000 for a joint return or surviving spouse, $125,000 for married individual filing separately and $200,000 for all others.
9.    Modified Threshold for Claiming Medical Expense Deductions
For tax years beginning after December 31, 2012
AGI threshold for claiming itemized deduction for medical expenses will be increased from 7.5% to 10%.   7.5% threshold will continue to apply to individuals age 65 or over through 2016.
Also the deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees will be eliminated.
10.  Penalty For Remaining Uninsured
Beginning After 12/31/2013
Non-exempt US Citizens and Legal Residents have to maintain Minimum Essential Coverage
If not maintain minimum essential coverage:
            After 2016 – subject to a penalty
2.5% of household income > threshold amount of income required for tax return filing or $605 per uninsured adult in the household.  Fee for uninsured under age 18 is 1/2 of fee for adult.
Total household penalty will not exceed $2,085 nor the national average annual premium for bronze level health plan offered through the exchange that year.
            Penalty phased in from 2014 to 2016.
Penalty will not apply to certain individuals who cannot afford coverage based identified criteria, who reside outside the US or who are exempted for religious reasons.
11. Low Income Tax Credits for Participating in Health Exchanges
Beginning after 12/31/2013
For families with incomes up to 400% of federal poverty level ($43,320 individual or $88,200 family of four) not eligible for Medicaid, employer sponsored insurance; or other acceptable coverage.
“Cost sharing subsidy” provided for insurance purchased through established Insurance Exchanges.
12.  Excise Tax on High-Cost Employer Sponsored Health Coverage
For tax years beginning after December 31, 2017, a 40% nondeductible excise tax will be levied on insurance companies and plan administrators for any health coverage plan to the extend that the annual premium exceeds $10,200 for single coverage and $27,500 for family coverage. 
Tax levied at the insurer level.
Employers will be required to issue information returns for insurers indicating the amount subject to the excise tax.

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