The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 that became law at the end of March include more than $400 billion in revenue raisers and new taxes on employers and individuals. This column focuses on the significant reporting and tax impact these new laws have on businesses, large and small, and on employees, although with the drafting of voluminous regulations yet to be done, more effects may be to come.
Health care reform fundamentally alters the health care landscape for individuals and employers. All individuals not covered by Medicare or Medicaid will be required to obtain health care coverage or pay a penalty unless they are exempt from the individual-responsibility mandate. Employer-provided coverage will generally satisfy the universal-coverage requirement. Lower-income individuals, as well as some middle-income families, may qualify for a premium-assistance tax credit, cost-sharing, or a voucher to help pay for health insurance.
The health care reform package does not include a public option but provides for state insurance exchanges where individuals can shop for coverage. States will be exploring how to set up these exchanges, which will offer tiered levels of coverage.
Individuals who currently have coverage and wish to retain that coverage can do so under a “grandfather” provision in the heath care package. A similar grandfather provision applies to employers that currently offer coverage.
The health care reform package does not require employers to provide health insurance coverage. However, “large” employers (generally ones with 50 or more full-time employees but with some exceptions) will be subject to “play or pay” rules after 2013. The health care reform package generally treats employees working 30 or more hours per week as full-time employees.
• No. 1, a nondeductible penalty will be assessed on a large employer that:
Fails to offer its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an employer-sponsored plan if at least one full-time employee is enrolled in an insurance exchange and receives a premium-assistance tax credit or cost-sharing;
• Or No. 2, offers, for any month, its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an employer-sponsored plan and any full-time employee is enrolled in an insurance exchange and receives a premium assistance tax credit or cost-sharing, with the intent of discouraging employers from dumping employees into subsidized coverage.
• Offers, for any month, its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an employer-sponsored plan and any full-time employee is enrolled in an insurance exchange and receives a premium-assistance tax credit or cost-sharing.
In the case of No. 1 above, the penalty is equal to the product of the applicable payment amount – 1/12 of $2,000 for any month, $166.67 – and the number of full-time employees for the month.
In the case of No. 2 above, the penalty is equal to the product of the number of full-time employees receiving a premium-assistance tax credit or cost-sharing for the purchase of health insurance through an insurance exchange for the month and an amount equal to 1/12 of $3,000 for any month, $250. However, the aggregate amount of the penalty on an employer for any month is limited to the product of the applicable payment amount (1/12 of $2,000 per month) and the number of full-time employees during that month.
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