Obamacare – What it means to you

This is not a comprehensive guide. This is meant to be a snapshot of the provisions that will affect you directly. There is still more to learn about Obamacare and more that will be revealed with time. So we’ll keep you abreast about the provisions that will affect you as events unfold.

What it means for You

Insurance companies can’t deny coverage to anyone for pre-existing conditions.

Plans can’t set annual limits on coverage. (The ban on lifetime limits took effect in 2010.)

States can choose (or not choose) to expand Medicaid eligibility to non-elderly, non-pregnant individuals with incomes up to 138% of the federal poverty level ($15,856 for a single individual and $31,322 for a Family of 4 for 2013-2014)1. For 2014-2016, the federal government will pick up 100% of those costs.

The law requires states to establish insurance “exchanges,” or join a federal exchange, where individuals and small businesses can comparison-shop for coverage. Source for residents of the state of Georgia: http://www.healthinsurance.org/georgia-state-health-insurance-exchange/

All health insurance plans must provide coverage for “essential benefits,” in categories such as maternity care, substance abuse services, mental and behavioral health services, and prescription drugs.

What this means for your Healthcare

Young adults can stay on their parents’ plans until age 26
There is a Penalty Tax of Health Savings Account withdrawals not used for health care expenses that doubled from 10% to 20%
If you participate in a healthcare flexible spending account at work, your contributions will be capped at $2,500/year, with no contributions for over-the counter medications
What it means for your Business

Small businesses with up to 25 employees, each earning $50,000/year or less, qualified for a new tax credit of up to 35% of the cost of providing health benefits to their employees.

To qualify for the credit, you have to pay at least 50% of the “employee-only” premium amount for your employees’ coverage. You can’t have more than 24 “full-time equivalent” employees, or FTEs. Your average wage can’t be more than $50,000 per year. Oh, and you can’t claim the credit for any premium you pay on your own behalf.

Employers with 250 or more employees must report the aggregate value of the health coverage they provide their employees on Form W2. This reporting is for informational purposes only and does not add anything to anyone’s taxable income

Still to come

Starting in 2014, the maximum credit goes up to 50% of premiums paid. If the credit is more than the business owes, you can carry it back against previous taxes you paid, or carry it forward to offset future taxes

Employers with more than 50 employees must offer health benefits or pay a penalty of up to $2,000 per employee. If they offer coverage that doesn’t meet minimum standards, the penalty could jump to $3,000. (The Obama administration has since postponed this requirement to 2015.)

What it means for your Taxes

If your earned income is above $200,000 – or $250,000 if you file jointly – you’ll pay an extra 0.9% Medicare tax on earned income above those amounts. Given the new marginal tax rates in 2013 “fiscal cliff” legislation, that extra Medicare tax could help push your actual marginal rate well above 40%.

Finally, you’ll pay a 3.8% “Unearned Income Medicare Contribution” on investment income if your AGI is above those same thresholds. “Investment income” is defined as interest, dividends, capital gains, rents, royalties, and annuities. This is the first time investment income has ever been subject to Medicare Tax.

Medical and Dental expenses must exceed 10% of your AGI, unless you or your spouse are 65 or older and not subject to AMT, in which case it stays at 7.5% of AGI until 2016.

Still to come:

2014 brings the most controversial changes. Specifically, this is the year when the “individual mandate” and “employer mandate” were both scheduled to begin:

Most individuals who aren’t covered through their employer will have to maintain “minimum essential coverage” or pay individual penalties. This is the so-called “individual mandate” you’ve heard so much about.
The law says that by 2014, all Americans have to maintain “minimum essential coverage” or face a penalty.
The penalty starts at $95 per adult or $47.50 per child, up to a maximum of $285 per family or 1% of income in 2014. It rises to $695 per adult or $347.50 per child, up to a maximum of $2,085 per family or 2.5% of income in 2016. After 2016, those dollar amounts are indexed for inflation. That’s it.

Now, there are lots of ways you can get that essential coverage.
You can get it from your employer. You can get it from your spouse’s employer. You can buy it on your own in the individual marketplace or on your state’s exchange. You can get it through Medicare, Medicaid, or your state’s Children’s Health Insurance program (CHIP). You can get it through Tricare (active-duty military personnel and veterans). The law doesn’t really care where your coverage comes from as long as you have it.

Every year, your Insurance Company will send you and the IRS a form confirming you have coverage. You’ll have to attach your copy of the form to your Income-Tax Return.