FEDA News & Views


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The Patient Protection and Affordable Health Care Act—and the Tax Laws Hidden Within income tax, whichever is greater. The penalty is being phased in as follows: 2014 ($95 or 1 percent); 2015 ($325 or 2 percent); and 2016 ($695 or 2.5 percent). It then increases after 2016 based on a cost-of-living adjustment. For some, it may be less expensive to pay the fine as opposed to purchasing health insurance. However, be aware that the $695 penalty is a penalty by means of The Internal Revenue Code. In other words, the penalty must be paid or such individuals will face the IRS. By Bar t A. Basi an d Mar cus Ren w ick t is official. The 2012 election is over and it looks like The Patient Protection and Affordable Health Care Act is here to stay. The law changes the entire paradigm behind healthcare and even changes some tax rules. While it is the rule of the land, The Center graciously reminds those reading this special report that we do not take a position of endorsing the rule, nor opposing it. The purpose of this report is to inform the business community of what has changed in both healthcare and the tax consequences that will now affect closely-held business owners. I Changes in Healthcare (Rules on Pre-existing Conditions) Starting in 2014, insurance companies will no longer be able to deny coverage for preexisting conditions to adults. Children under the age of 27, whose parents are purchasing insurance for them, will no longer be denied health coverage within the next six months. Those with health considerations or who have children with ailments such as epilepsy, cystic fibrosis 24 FEDA New s & View s and a whole range of genetic and age-related disease will gain the right to be covered. Healthcare Exchanges Currently, healthcare insurers and consumers are limited as to where and how they can buy and sell health insurance. Under the new law, "healthcare exchanges" will be created, allowing more flexibility as to how, who and the means by which healthcare insurance can be purchased. While the exact mechanics of the healthcare exchanges remain to be seen, they are predicted to increase competition in the insurance marketplace and make healthcare insurance more affordable to consumers. Changes in the Tax Laws (Individual Mandate) With the new law comes an obligation for all individuals to be insured. Those individuals who refuse to get coverage will face a fine of up to $695 per year to a maximum of $2,085 per family per year, or 2.5 percent of the household income over the amount subject to Government Tax Credits In order to pay for the individual mandate for insurance, the federal government is offering tax credits to individuals who are not eligible for Medicare or Medicaid, or are not covered by their employers for health insurance. The tax credits do not become effective until 2014 and are available for individuals and families making between 100 percent and 400 percent of the federal poverty guidelines. The current federal poverty level for a family of four is $22,050, thus resulting in $88,200 as top qualifying income for a family of four. This credit works as follows: 1.The individual purchases insurance from an insurance exchange. 2. The individual tells the insurance exchange what their income is. 3.The IRS issues a credit and pays the insurance exchange a fee. 4. The individual pays the insurance exchange the difference. Employers with Over 50 Employees In the new law, there is no mandate or requirement that employers provide continued on page 34

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