The Fundamentals of Healthcare Reform
What Every Physician Should Know
Healthcare reform continues to dominate the headlines and remains confusing even for those most well versed in the new law. This article will focus on the areas of healthcare reform which could affect your medical office and their scheduled implementation dates.
Small Business Healthcare Credit
This credit is available to small businesses including medical practices with 25 or fewer full time equivalent employees. If your office currently has a healthcare (including dental and vision) plan and the average wages of your employees are less than $50,000 per year, you may be eligible for a tax credit to offset the employer cost of the insurance. The employer must provide at least 50% of the cost of single coverage. In 2010 this credit can be up to 35% of the cost of health insurance premiums.
When taking the credit into account, the following should be noted:
- Sole proprietors, partners in a partnership, shareholders owning more than 2 percent of an "S" corporation are not taken into account as employees for determining the credit.
- The credit will be claimed on your annual income tax return.
- For years 2014 and beyond, small businesses that purchase healthcare insurance through the new Healthcare Insurance Exchanges can receive a tax credit for two years up to 50% of the employer contribution.
New tax on Investment Income
Beginning in 2013, high income earners (individuals earning over $200,000 and couples earning over $250,000) will be subject to an additional 3.8% tax on investment income. The tax increase is projected to offset the cost of the new healthcare law.
High-Income Taxpayers - Surtax on Unearned Income
Also beginning in 2013 is an additional 0.9% tax on wages for individuals with wages of more than $200,000 and couples with combined wages over $250,000. The tax represents an expansion of the Medicare portion of social security taxes normally withheld on wages. Self-employed individuals will also be subject to similar tax consequences. Those practitioners that foresee their wages being over these limits in 2013 may want to consider advancing payment of 2013 wages into 2012.
Health Coverage for Children Up to Age 26
Starting September 23, 2010, health plans must offer coverage to enrollees' adult children until age 26, even if the young adult children (including stepchildren) no longer live with their parents, are not dependents on their parent's tax return, or are no longer students. Many large health plans have already put this provision into effect. Check with your individual carrier for clarification.
Health Savings Accounts - HSA's
Beginning in 2011 amounts paid for over-the-counter drugs will not be reimbursed unless you have a prescription.
Also, non-medical withdrawals from an HSA will be subject to a 20% fine in addition to regular tax.
Starting in the year 2011, employers will have to report the value of health insurance on the employee's W-2. This is for informational purposes only and will not affect the employee's or employer's tax return.
Health Care Insurance Stability
Starting in 2014, insurance companies will no longer be able to deny coverage to individuals due to pre-existing medical conditions.
How Health Care Reform Affects Oral Health
Beginning in 2014, insurance plans that are made available through State Exchanges will include pediatric (up to age 21) oral health services. In addition, the plans under the Exchanges will be prohibited from charging out of pocket expenses for preventive services, including preventive pediatric oral health services. The goal of this incentive is to advance children's oral health in this country. Note that there are no provisions in the new Health Care Act for adult dental benefits.
This article is a general synopsis of The Patient Protection and Affordable Care Act and is not intended to provide specific advice related to your practice. If you have further questions on these issues or would like an excel spreadsheet to determine if your business is eligible for the Small Business Healthcare Credit (including the calculation of "full-time equivalent employees"), please send an email to: email@example.com with Healthcare Credit Worksheet in the subject line. You may also consult with your insurance broker or CPA.
This article appeared in the September 2010 issue of New Jersey Physician magazine.
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