Friday, June 29, 2012

Now That Obamacare Has Passed, Here's What It's Going To Cost You

Now that President Obama's health care overhaul has won the last stamp of approval from the U.S. Supreme court, the question you're probably asking is, Who's going to pay for it?


The Affordable Care Act will extend health care coverage to some 30 million uninsured consumers along with an expansion of Medicaid services. It also promises a slew of tax credits for small business and middle-income families to help offset the costs of mandatory coverage.

Much of the cost burden will be shouldered by the health care industry and employers that provide workers with insurance. On an individual consumer level, however, it'll be the wealthiest Americans who feel the sting of Obamacare––and, strangely enough, people who hit the tanning bed.

You can find a pretty thorough list of tax credits and provisions included in the Affordable Care Act at www.irs.gov and in a detailed list from the Kaiser Family Foundation.

Here are a few that stand out:

The Tan Tax: Since July 2010, tanning bed users have been burned by a 10 percent tax hike that will stay put now that Obamacare's been upheld. While it doesn't apply to doctor-prescribed phototherapy services, some gym tanning services, or spray tans, the tax does apply to typical tanning salons. (See this fact sheet on Indoor Tanning Services Tax Center for more information).

Medicare surtaxes: Here's where wealthier Americans will feel the effects of Obamacare. As of Jan. 1, 2013, a 3.8 percent surtax will be levied against surplus investments reported by the following groups: single filers reporting $200,000; married couples reporting $250,000; and married couples filing separately reporting $125,000.

In addition to the investment surtax, high-earning households will see their Medicare tax spike by 0.9 percent on their earned income, according to the Kaiser Family Foundation. The tax will apply to individuals earning more than $200,000 and married couples filing jointly who make more than $250,000. It goes into effect Jan. 1, 2013.

Consumer penalties: Part of the controversy surrounding health care reform was that the law would mandate coverage for all Americans on pain of penalties. Those penalties will be tiered and rise over a three-year period that kicks off in 2014, according to the National Association of Consumer Protection:

2014: Families––$285 or 1 percent of total household income, whichever is greater. Individual adults––$95.
2015: Families––$975 or 2 percent of income, whichever is greater. Individual adults––$325.
2016: Families––$2,085 or 2.5 percent of income, whichever is greater. Individual adults––$695.

If you're not covered by your employer, you'll have to pick from a list of government-mandated health insurance packages (they'll be called "exchanges", with options for individuals and businesses provided at the state level). Some exceptions do apply, including low-income families who can prove financial hardship.

Flex spending account limits: In addition to capping Flexible spending accounts at $2,500 in 2013, new rules limiting what you can buy with flex accounts will remain. They've been effective since Jan. 2011 and apply to OTC medications unless you have a prescription, excluding the following: "Insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles," per the IRS.

Employee health coverage: Part of the Affordable Care Act's intent is to ensure that businesses choose low-cost plans, which it hopes to accomplish by levying an excise tax on plans that cost more than $10,200 per individual or $27,500 per family. That provision isn't in effect until Jan. 1, 2018.

"The threshold amounts may be adjusted upwards if health care costs rise more than expected prior to implementation of the tax in 2018," Kaiser notes. "The threshold amounts will be increased for firms that may have higher health care costs because of the age or gender of their workers."

Pharmaceutical industry: Pharmaceutical manufacturers will see a spike in annual government fees. Much like penalties against consumers, these fees will be levied on a tiered schedule beginning in 2012, according to Kaiser.

– $2.8 billion in 2012-2013;
– $3.0 billion in 2014-2016;
– $4.0 billion in 2017;
– $4.1 billion in 2018; and
– $2.8 billion in 2019 and later.

And insurers won't be off the hook either:

– $8 billion in 2014;
– $11.3 billion in 2015-2016;
– $13.9 billion in 2017;
– $14.3 billion in 2018

Subsidies for small business owners: For businesses with fewer than 25 workers and an annual payroll of less than $50,000, the ACA provides a tax credit to help subsidize the cost of health plan enrollment. Through 2013, the credit will be worth 35 percent of the employer's insurance costs and supply full credit to employers with less than 10 employers with annual wages of less than $25,000, according to Kaiser. Beyond 2014, the tax credit will extend to 50 percent if the businesses choose a plan under the government's health care options.

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