Intel Update

How will the Affordable Care Act, also known as ObamaCare, affect a small business?

The one thing certain about ObamaCare is that all health issues and health insurance will start costing a lot more money and our US Government is attempting to target and force business owners to pay the majority of those expenses.

Most suggest these changes are driven by government regulations to develop an all-encompassing insurance coverage system similar to the European ones that have already proven to be unsuccessful -- regardless of medical need or desires. Insurance coverages mandated like employee dependent insurance coverages to age 26, sex change operations, cosmetic surgeries, expansive mental illness coverages including phobias of any type, paid leave time away from work for almost any excuse, and the like are not affordable for anyone... especially business owners.

Today, business owners must be prepared to purchase not just any type of insurance for their employees but only unlimited lifetime coverage and unlimited annual coverage (this requirement phases in between 2013 and 2014) on top of the escalating tax burdens coming on January 1, 2013.

A new portion of the regulations coming into play in 2013 will be insurance purchases for employee dependent children without any waiting periods for preexisting conditions up to the age of 26.

If his/her health plan loses its "grandfathered" status — as most small businesses will — he/she and his/her workers will have to purchase 100-percent coverage for a long list of preventive services.

The Obama administration also acknowledges there is "tremendous," "substantial," and "considerable" uncertainty about mandated/required coverage costs.

ObamaCare mandates serve as a double-whammy for small-business owners. He/she already faces some of the highest health insurance premiums, yet he/she provides some of the least comprehensive health plans due to the high premiums. So his/her premiums will rise even more than larger employers' premiums.

If he/she offers his workers a health savings account (HSA), medical savings account (MSA), flexible spending account (FSA), or health reimbursement arrangement (HRA), employees will lose the ability to purchase over-the-counter drugs tax-free.

If employees make non-medical withdrawals from their HSA or MSA, the penalty will double from 10 percent to 20 percent.

If our small-business owner and his spouse make over $250,000, they'll pay the new, higher Medicare "payroll" tax of 3.8 percent, starting in 2013. (It's currently 2.9 percent). But it's 2014 where things really get messy. That's when the government will require everyone to purchase even more "yet-unspecified types" of insurance coverages, which will cause premiums to increase even more.

If our small-business owner has 50 or more employees — or fewer full-time employees with lots of part-timers — he/she faces the prospect of tens of thousands of dollars in penalties under ObamaCare's employer mandate if he/she does not provide "adequate" coverage for his/her workers. The worst part is that these penalties will be triggered by factors that are unpredictable, unobservable, and totally beyond the control of our small-business owner. He/she could get hit with those penalties simply because a worker's spouse loses or changes jobs. Or if a worker's spouse moves out or dies. Or if an employee's parents move in. This creates so much uncertainty that a small-business owner with 55 employees may have to fire six of them just to eliminate that potential liability. But if he/she splits his 60-employee small business into two 25-employee businesses, then the federal government — maybe the IRS — will start snooping around to determine whether he/she did so for legitimate business reasons or just to avoid the mandate.

No matter the size of his/her firm, if he/she or his/her workers earn around $30,000 to $100,000 and get coverage through one of the new health insurance exchanges, their implicit marginal tax rates will jump from around 30-40 percent all the way up to 60-75 percent!

In many cases, if his/her employees get a raise or work more hours, ObamaCare will leave them with less take-home pay, because the higher earnings will cause them to lose thousands of dollars in subsidies. Their implicit marginal tax rate will exceed 100 percent!

ObamaCare has created enormous uncertainty and changes unheard of in American history. Our small-business owner doesn't have any idea what ObamaCare's mandates will cost him/her in 2011, 2012, 2013, or 2014. Or what additional benefits he/she will have to provide. Or what kind of insurance options will be available by then. All he/she knows is that these things will cost him/her more — possibly a lot more — and that he/she is going to be spending lots of time and money, for the foreseeable future, on tax accountants and attorneys.

Because of such uncertainties, he/she is going to be much less likely to take on new commitments like expanding or hiring new workers.

The Obama administration notes that beginning in 2010, as many as one third of small businesses may be able to obtain a tax credit that covers up to 35 percent of their health-benefits leaving the business owner to pay only 65% of the additional costs. But that tax credit disappears after 6 years and in some instances sooner. Hiring additional employees will also reduce or eliminate the tax credit.

By 2013, all businesses will have to fill out an IRS Form 1099 every time they purchase more than $600 worth of supplies and/or services from any vendor. If our small-business owner owns a trucking company, he/she will have to obtain tax ID numbers from all truck servicing centers. If any gas station won't cooperate, he/she will be forced to withhold money (i.e., send it to the IRS) for truck expenses. This may become the biggest nightmare in the bill for small businesses.

Here is a chart that may help explain what to anticipate with ObamaCare's penalties on employees and business owners...

How The Affordable Care Act is calculated (in 2016):
• For those making less than $9,500 a year, they will pay nothing.
• For those with incomes between $9,500 and $37,000, they will pay $695 per person (or as much as $2,100 for a family plan).
• If you earn more than $37,000, you will pay 2.5 percent of your household income less $9,500.
• If you earn more than $200,000 or there abouts, you will pay the "Bronze" health insurance plan fee established through your state exchange, which will top out at about $5,000 per person (or $12,500 per family).

There are a number of exemptions that will also impact your payment of the tax. The good(?) news is that, for most people, the "penalty tax" for those who choose not to buy health insurance will cost a lot less than health insurance.

As with everything tax-related, there's no simple answer to "How much is the Obamacare penalty tax?" But here are some key points, from FactCheck.org:
• The penalty/tax will be phased in from 2014 to 2016.
• The minimum penalty/tax in 2016 will be $695 per person and up to 3-times that per family. After 2016, these amounts will increase at the rate of inflation.
• The minimum penalty/tax per person will start at $95 in 2014 (and then increase through 2016)
• No family will ever pay more than 3X the per-person penalty, regardless of how many people are in the family.
• The $695 per-person penalty is only for those who make between $9,500 and ~$37,000 per year. If you make less than ~$9.500, you're exempt. If you make more than ~$37,000, your penalty is calculated by the following formula... the penalty is 2.5% of any household income above the level at which you are required to file a tax return. That level is currently $9,500 per person and $19,000 per couple. The penalty on any income above that is 2.5%. So the penalty can get expensive quickly if you make a lot of money.
• However, the penalty can never be more than the cost of a "Bronze" heath insurance plan purchased through one of the state "exchanges" that will be created as part of Obamacare. The CBO (Congressional Budget Office) estimates that these policies will cost $4,500-$5,000 per person and $12,000-$12,500 per family in 2016, with the costs rising thereafter.

So, basically, we are looking at penalties of approximately the following at the following income levels:
• Less than $9,500 income = $0
• $9,500 - $37,000 income = $695
• $50,000 income = $1,000
• $75,000 income = $1,600
• $100,000 income = $2,250
• $125,000 income = $2,900
• $150,000 income = $3,500
• $175,000 income = $4,100
• $200,000 income = $4,700
• Over $200,000 = The cost of a "bronze" health-insurance plan

The IRS will collect the penalty-tax, but the IRS will not have the power to charge us criminally or seize our assets, if we refuse to pay. The IRS will only have the ability to sue us. And the most the IRS can collect if it wins the suit is 2X the amount we owe. So if we want to thumb our nose at the penalty-tax, the IRS won't be able to do as much to us as they could if we refused to pay income tax.

By the way, the following folks will be exempt from the penalty-tax:
• Those who make less than $9,500
• Employees whose employers only offer plans that cost more than 8% of the employee's income
• Those with "hardships"
• Members of Indian tribes
• Members of certain religions that don't pay Social Security tax, such as Amish, Hutterites, or Mennonites

And, of course, Obamacare isn't free. So, whether we pay the penalty or not, we're going to have to pay a lot of other taxes to pay for it. Here they are...
• A 3.8% surtax on "investment income" when our adjusted gross income is more than $200,000 ($250,000 for joint-filers). What is "investment income?" Dividends, interest, rent, capital gains, annuities, house sales, partnerships, etc. Taxes on dividends will rise from 15% to 18.8% -- if Congress extends the Bush tax cuts. If Congress does not extend the Bush tax cuts, taxes on dividends will rise from 15% to a shocking 43.8%. (WSJ)
• A 0.9% surtax on Medicare taxes for those making $200,000 or more ($250,000 joint). You already pay Medicare tax of 1.45%, and your employer pays another 1.45% for you (unless you're self-employed, in which case you pay the whole 2.9% yourself). Next year, your Medicare bill will be 2.35%. (WSJ)
• Flexible Spending Account contributions will be capped at $2,500. Currently, there is no tax-related limit on how much we can set aside pretax to pay for medical expenses. Next year, there will be. If we have been socking away, say, $10,000 in our FSA to pay medical bills, we'll have to cut that to $2,500. (ATR.org)
• The itemized-deduction hurdle for medical expenses is going up to 10% of adjusted gross income. Right now, any medical expenses over 7.5% of AGI are deductible. Next year, that hurdle will be 10%. (ATR.org)
• The penalty on non-medical withdrawals from Healthcare Savings Accounts is now 20% instead of 10%. That's twice the penalty that applies to annuities, IRAs, and other tax-free vehicles. (ATR.org)
• A tax of 10% on indoor tanning services. This has been in place for two years, since the summer of 2010. (ATR.org)
• A 40% tax on "Cadillac Health Care Plans" starting in 2018.Those whose employers pay for all or most of comprehensive healthcare plans (costing $10,200 for an individual or $27,500 for families) will have to pay a 40% tax on the amount their employer pays. The 2018 start date is said to have been a gift to unions, which often have comprehensive plans. (ATR.org)
• A "Medicine Cabinet Tax" that eliminates the ability to pay for over-the-counter medicines from a pretax Flexible Spending Account. This started in January 2011. (ATR.org)
• A "penalty" tax for those who don't buy health insurance. This will phase in from 2014-2016. It will range from $695 per person to about $4,700 per person, depending on our income.
• A tax on medical devices costing more than $100. Starting in 2013, medical device manufacturers will have to pay a 2.3% excise tax on medical equipment. This is expected to raise the cost of medical procedures. (Breitbart.com)

So what, if anything, are you doing to protect your business from The Affordable Care Act, today? Tomorrow may be too late!

The Affordable Care Act will forever change the way American business owners conduct their business. ObamaCare will necessarily “create a war” between employees and business owners.

More Important Facts about The Affordable Care Act
• ObamaCare, Affordable Care Act for America are all the same thing; an extension of the Patient Protection and the Affordable Care Act and ongoing efforts to reform the health care industry.
• Some aspects of The Affordable Care Act health care reform are already enacted. The Patient Protection and Affordable Care Act was signed 2 years ago, I bet you didn't even notice unless you needed coverage and didn't have it.
• The Affordable Care Act requires that insurance plans cover preventative services and stops insurance companies from dropping you when you are sick, as well as offering a number of other reforms and protections.
• The Affordable Care Act does not replace private insurance, Medicare or Medicaid Reform, commonly called ObamaCare but officially called the Patient Protection and Affordable Care Act (Affordable Health Care for America Act, PPACA, or ACA for short) is legislation signed into law on March 23, 2010. The bill is meant to "provide affordable, quality health care for all Americans and reduce the growth in health care spending and for other purposes".

The Affordable Care Act reform of the health care system has been an ongoing effort to reform the national health care system. Although it has taken great strides under President Barack Obama, efforts to reform healthcare have been in motion for decades.

Why do some believe the Health Insurance Industry needs The Affordable Care Act's Reforms?
• PBS reports that 44 million Americans are currently without health insurance. Part of this is due to the extraordinary costs of quality health insurance in the US. Health Care reform ensures these Americans have access to health care.
• The Medicaid part D prescription drug "doughnut hole" coverage gap was leaving seniors unable to afford their medication or paying out of pocket.
• Government funding for private Medicare Advantage plans is costing the taxpayer money, it was supposed to save the taxpayer money by going on the private market. Obama's Health Care Reform reigns in the wasteful spending.
• Insurance companies could deny you for preexisting conditions or drop you when you get sick.
• Insurance companies could drop you for being sick.
• Insurance companies had no limits on raising your premiums.
• Insurance companies could stop treating you when you exceed your annual limit.
• Millions of people are too poor to afford insurance, but make too much to qualify for Medicaid.
• Preventative measures and wellness visits were not covered adequately, reforming this will save millions of lives and uncountable health care costs.

The Complete Timeline of The Affordable Care Act 2010 - 2022
Many of the protections, reforms and taxes are rolling out in 2014. Our timeline of health care reform breaks down what has already happened and what will happen each year until The Affordable Care Act is fully implemented.

The Affordable Care Act 2010-2012

First let's start with what The Affordable Care Act has done to reform the healthcare industry so far:
• The Affordable Care Act allows the FDA to approve more generic drugs in order to drive competition up and prices down.
• The Affordable Care Act increases rebates on drugs through Medicare for Seniors.
• The Affordable Care Act closes the Part D Medicare Coverage Gap or "Donut Hole" that was forcing Seniors to pay out of pocket for drug costs. There is also a 50% discount on brand name drugs. Seniors currently get a rebate to cover the costs; ObamaCare closes the Medicare coverage gap for good in 2020.
• The PCORI, an independent non-profit advisory board, studies different types of treatments in order to ensure quality affordable health care under ObamaCare. These are the "death panels".
• Chain restaurants must now display calories in order to promote wellness and healthy living (this helps to keep the cost of health care down, since less people will need it).
• Health Insurance companies can't drop your coverage when you’re sick.
• Individuals can't be denied coverage for preexisting conditions.
• Children under the age of 19 can't be classified as having preexisting conditions
• Children under the age of 26 can stay on their parents insurance
• Income exclusion for Indian Tribe health benefits that were provided after March 23rd, 2010
• Medicare cuts to hospitals and other health care facilities, these cuts are reforms, the money is reinvested back into Medicare
• The Affordable Care Act creates a high-risk pool for individuals with preexisting conditions. These individuals can still get treatment, but at higher rates. The high-risk pool disappears come 2017, at which point high-risk individuals will buy the same insurance as everyone else.
• Insurance companies can no longer discriminate for disabilities or domestic abuse
• The law imposes a 10% tax on tanning booths. The concept is to tax and regulate products and services that are likely to cause people to need to use their health coverage, to offset what it costs to treat these individuals.
• Insurers can no longer increase your premiums for profit (also known as price gouging [only government would dare to associate profit with price gouging]). They must justify rate hikes to the state and then display them on their website the same day.
• Insurance companies now have to tell their customers how their money is being spent. If they don't spend at least 80% of the money on health care they have to give customers a rebate for the difference.
• Health Insurance companies can no longer turn down a claim without an appeal process. This allows customers to have legal standing to fight the appeal.
• Anti-fraud funding is increased and new ways to stop fraud are created.
• Increases rebates for brand name pharmaceuticals purchased through Medicaid.
• New Annual taxes on pharmaceutical companies
• The Affordable Care Act payment increases to physicians, mostly in rural areas.
• Some Small Employers are eligible for tax credits to help with health care related costs
• The Affordable Care Act improves treatment for patients with chronic illnesses.
• The law prohibits non-group plans from canceling coverage.
• A limit is placed on what type of insurance accounts can be used to pay for over-the-counter drugs without a prescription. This does not include insulin, asthma medication or other vital drugs.
• Employers must list employee benefits on their tax form. This helps to determine whiter the company will get tax breaks or credits for insuring employees.
• Hospitals in "Frontier States" (ND, MT, WY, SD, and UT) receive higher Medicare Payments
• Hospitals in "low‐cost" areas receive higher Medicare payments for 2 years
• All new plans must provide preventative care free of charge.
• The Affordable Care Act does away with annual spending caps.
• The Affordable Care Act greatly limits lifetime limits and annual limits of health insurance plans.
• Cuts $716 Billion from Medicare and Medicare advantage and reinvests it back into Medicare and The Affordable Care Act (this obviously covers a lot of ground. Read more on The Affordable Care Act and Medicare.)
• The Affordable Care Act places a $2500 limit on tax free spending under FSAs (flexible spending accounts).
• Your FSA cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. A similar rule went into effect on Jan. 1, 2011, for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
• FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met.
• The hospital "pay-for-quality" program begins. This is part of an overall effort to promote quality not quantity in the health care industry.
• There is a 3.8% tax increase on capital gains over, unearned income, interest, dividends, annuities, rent, royalties, and inactive businesses. Exemptions include income from tax-exempt bonds, veteran’s benefits and qualified plan distributions such as those from an IRA or 401k.
• The 3.8% tax does not apply to selling your primary residence in most cases.
• The Affordable Care Act has a 5 year plan that works to simplify administrative tasks associated with health insurance such as reducing paperwork.
• Starting in 2012 there is a new tax on private health insurance plans.

The Affordable Care Act Health Care Reform 2013

• Health Insurance Exchanges Open for low to middle income Americans to make it easier for them to shop for health insurance. Those making over 400% of the poverty level can shop on the exchange but will not receive tax credits or discounts. The insurance purchased on the exchange doesn't go into effect until Jan 1st, 2014.
• Tax credits, discounts on out-of-pocket costs, tax breaks and other subsides are available on the exchange. The help you get on the exchange is directly related to your gross adjusted income.
• There is a .9% The Affordable Care Act Medicare tax on those making over $200k as an individual or $250k as a business or family. This accounts for somewhere between 1.5% and 4.2% of tax payers (these numbers are from recent IRS and census reports, 2% is often used as a rough and not inaccurate estimate. Most sources agree the number is fewer than 3%. 3% is also the number of businesses making over this amount in taxable income).
• 3.8% Medicare tax on unearned income over $200 for individuals and $250 for families and businesses.
• $500.00 deduction cap on compensation paid to insurance company workers
• The Affordable Care Act lays out new rules about the amount that can be contributed to an FSA. A cap of $2,500 is applied to reform FSA's and prevent individuals from overpaying and then needing to rush to use the money before it disappears.
• Part D Coverage Gap or "Donut Hole" reduction goes into effect
• Eliminates deduction for Part D retiree drug subsidies for employers
• increases (7.5% to 10%) threshold at which medical expenses, as a % of income, can be deductible)
The Affordable Care Act Health Care Reform 2014
• No more preexisting conditions for anyone including high risk customers.
• There is a tax starting at 1% of your income or $95 and raising to 2.5% of your income or $685 by 2016 for individuals. For a family it's capped at $285 in 2014 and rises to $2,085 by 2016 it cannot exceed these amounts. This helps pay for emergency and future coverage you may need. The tax penalty is paid on your tax returns. This is a "tax" not a "mandate".
• Congress must shop on the exchange.
• Pharmaceutical companies are subject to a new tax
• The Affordable Care Act Medicaid Expansion expands coverage to 17 million low-income individuals (The Supreme Court ruling has given states the opportunity to opt-out of Medicaid expansion).
• A health insurance exchange is set up by states or the federal government if the states decide not to run their own exchange.
• Employers will be able to shop on the health insurance exchanges for employee insurance
• Tax credits, tax breaks and help with up-front costs are available to those struggling to pay for insurance.
• There is a new tax on medical devices
• Insurance companies are taxed based on their market share.
• The Affordable Care Act Raises the bar on medical expenses before you deduct them from your taxes.

The Affordable Care Act 2015

• Doctors income is based on quality of care not quantity of care. This is a vast simplification of the actual documentation in the bill. It is a protection from the current fee-for-service payment model.
The Affordable Care Act Health Care Reform 2017
• Small Business Employers can shop for employee coverage on the health insurance exchange.
• States can implement their own plans which meet the standards of The Affordable Care Act such as single-payer. (Similar to The Affordable Care Act, but instead of buying private insurance everyone pays a tax and everyone has coverage)
The Affordable Care Act Health Care Reform 2018
• All healthcare plans including plans held since before plans had to offer preventive care must now offer preventive coverage.
• The "Cadillac" tax for higher quality coverage is put in place.
The Affordable Care Act Health Care Reform 2020
• The Affordable Care Act fully eliminates the Medicare Gap (instead of just offering rebates to seniors)

Unfortunately, there are few, if any, businesses remaining in America that could possibly afford these actions since tax increases are stagnating and killing business growth throughout all sectors of our economy.

Read More: ObamaCare: the Burden on Small Business by Michael F. Cannon
Added to cato.org on August 17, 2010
Read more: http://www.businessinsider.com/here-are-the-new-obamacare-taxes-2012-7#ixzz2CFrlIjOR
Read more: Eric Platt/Business Insider SEE ALSO: The state of the global economy
http://www.businessinsider.com/chart-this-is-how-much-obamacare-will-cost-you-2012-7#ixzz2CFnyaliw