*Exclusion of State student loan forgiveness programs for health professionals working with underserved communities.
*Small employer health insurance credit available for private businesses (35%) and for not-for -profits (25%). See separate discussion on this tax benefit.
*Exclusion from income for employer-provided health insurance for adult children under age 27 as of end of tax year.
*Allowance of pre-tax medical reimbursements through employer cafeteria plans to adult children under age 27 as of end of tax year.
*Effective for plan years beginning on or after September 23, 2010:
- Dependent coverage must be extended through age 25
- No lifetime or annual (starting 2014) coverage limits on essential benefits
- No rescission of coverage except for fraud or intentional misrepresentations.
- Preventive health care services with no cost sharing
- No discrimination in favor of highly compensated individuals
- Annual loss ratio reporting with annual rebate of excess costs to employees
*Insurers may not exclude children from coverage for preexisting medical conditions.
*Individuals with preexisting conditions who have been uninsured for six months are eligible for subsidized health care coverage through a national high-risk pool.
*$250 rebate for Medicare beneficiaries in the donut hole.
*Adoption credit increased to $13,170 and made refundable, and extended through 2011.
*Exclusion for employer-provided adoption assistance increased.
*10% tax on tanning salons starting July 1, 2010. Tax is imposed on customers, but must be collected from the salon owner.
*Economic substance doctrine codified effective April 1, 2010.
*Tax-exempt status for qualified nonprofit health insurers, new Section 501(c) (29).
*Employers report value of health insurance benefits provided to each employee on their W-2. The draft version of the 2011 W-2 has the code DD to report in Box 12 the health insurance premiums. IRS has also come out with Notice 2010-69 which provides relief to employers in the reporting of health insurance. The Notice states penalties will not be imposed on an employee who fails to report the health insurance on the 2011 W-2.
*Penalty tax on distribution from HSAs and Archer Medical Savings Accounts not used for qualified medical expenses increases to 20% from 10%.
*Non-prescription over-the-counter drugs cannot be reimbursed for a HRA, FSA,HSA or Archer MSA.
*Simple Cafeteria plans for small employers will have safe harbors to avoid discrimination testing. The purpose of a simple cafeteria plan is to provide incentives for business owners to provide a cafeteria plan that would not reduce their own benefits to meet nondiscrimination requirements to establish a cafeteria plan for their employees.
*2.3% excise tax on manufacturers and importers of prescription drugs and medical devices.
*Additional compliance for not-for-profit hospitals.
*Community Living Assistance Services and Supports (CLASS) program.
*Medicare beneficiaries receive annual wellness visit with no copayment.
*Medicare beneficiaries in the donut hole eligible for 50% discounts on brandname drugs.
*Insurance companies will have to spend 80-85 percent of consumers' premiums on direct patient care or send a rebate if they do not. For employer plans that cover more than 50 people, insurers would have to spend 85 cents of every premium dollar on medical care and efforts to improve health care quality.
-The expansion of 1099-MISC reporting which companies need to implement in their accounting systems ASAP. Starting in 2012 all businesses will have to issue 1099 forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods and services in a tax year.
See Separate Comments for this Change under 2010 TAX NEWS.
*Additional 0.9% Medicare tax for high-income earners. For single taxpayers this is annual earnings equal to or greater than $200,000, and for married couples joint earnings of $250,000. Payroll tax will increase from 1.45% to 2.35%.
*Medicare tax of 3.8% on net investment income of high-AGI taxpayers. This tax will be applied to some types of investment income, such as rent,interest, dividends, capital gains, and annuity payments. This tax will not apply to distributions from qualified plans such as IRAs and 401(k) accounts.
*Schedule A floor for medical expenses raised to 10%.
*Section 125 health flexible spending account (FSA) contributions limited to $2,500 annually.
*By July 1, 2013, federal Consumer Operated and Oriented Plan (CO-OP) program awards $6 billion to get Section 501 (c)(29) organizations up and running.
*States required to establish exchanges with the goal to generate competition among providers and give individuals and small businesses purchasing power leverage that big businesses have enjoyed.
*Individuals and small employers eligible to purchase through exchanges (large employers starting 2017). The law provides for four types of health care plans to be offered on the small business and individual exchanges.
*All individuals except those excluded must have minimal essential health insurance or pay a penalty, also referred to as a "shared responsibility payment." The penalty is the greater of a flat dollar amount per uninsured person (maximum 3 per household) or the applicable percentage of household income above a taxpayers minimum filing threshold.
*Refundable premium assistance tax credits will limit the amount an individual spends on their health care premium for the essential benefits package from 2% to 100% of the Federal Poverty Level (FPL) to 9.8% of income at 300-400% of the FPL.
*Cost-sharing reductions for low-and middle income individuals.
*The Health Care Act does not require employers to offer health insurance coverage but does impose a penalty on large employers (more than 50 workers) whose employees obtain premium subsidies through the exchanges. The amount of the penalty is $2,000 per employee per year, with the penalty waived for the first 30 employees. If the employer offers health insurance, but at least one employee receives a subsidy or credit in a state exchange, a penalty of $3,000 per year for each employee will be imposed.
*Employers that offer health insurance must provide employees with vouchers to purchase insurance through the state exchange if the employee earns less than 400% of the federal poverty level and the employee's share of the cost of insurance would be more than 8% and less than 9.5% of the employee's household income.
*Information reporting for health insurance coverage.
*Definition of minimum essential coverage.
*Rules for grandfathered individual and group health plans.
*Annual benefit limits for insured banned.
*Small business tax credit for private businesses increases to 50% (35% for not-for-profits), but limited to two years.
*Insurance carriers must accept every individual who applies for coverage.Premiums may vary only for age and tobacco use and not for current health or pre-existing conditions.
*All waiting periods for health insurance coverage limited to 90 days.
*Medicaid eligibility expanded to adults and children up to 133% of poverty.
*Health care exchanges expanded to include large employers.
*Excise tax on Cadillac health plans. Insurers will be subject to a 40% excise tax on health coverage with premiums in excess of $10,200 for an individual or $27,500 for family coverage.
SEE www.healthreform.gov for further information on the Health Care Act.