Nullification ... and the Cost of ObamaCare | Eastern North Carolina Now

    Effective in 2011:

    -- Insurers must spend 80% (for individual or small group insurers) or 85% (for large group insurers) of premium dollars on health costs and claims, leaving only 20% or 15% respectively for administrative costs and profits, subject to various waivers and exemptions. If an insurer fails to meet this requirement, there is no penalty, but a rebate must be issued to the policy holder. This policy is known as the 'Medical Loss Ratio'.
    -- The Centers for Medicare and Medicaid Services is responsible for developing the Center for Medicare and --- Medicaid Innovation and overseeing the testing of innovative payment and delivery models.
    -- Flexible spending accounts, Health reimbursement accounts and health savings accounts cannot be used to pay for over-the-counter drugs, purchased without a prescription, except insulin.
    -- All health insurance companies must inform the public when they want to increase health insurance rates for individual or small group policies by an average of 10% or more. This policy is known as 'Rate Review'. States are provided with Health Insurance Rate Review Grants to enhance their rate review programs and bring greater transparency to the process.

    Effective in 2012:

    -- Employers must disclose the value of the benefits they provided beginning in 2012 for each employee's health insurance coverage on the employee's annual Form W-2's. This requirement was originally to be effective January 1, 2011, but was postponed by IRS Notice 2010-69 on October 23, 2010. Reporting is not required for any employer that was required to file fewer than 250 Forms W-2 in the preceding calendar year.
    -- New tax reporting changes were to come in effect. Lawmakers originally felt these changes would help prevent tax evasion by corporations. However, in April 2011, Congress passed and President Obama signed the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repealing this provision, because it was burdensome to small businesses. Before PPACA businesses were required to notify the IRS on form 1099 of certain payments to individuals for certain services or property over a reporting threshold of $600. Under the repealed law, reporting of payments to corporations would also be required. Originally it was expected to raise $17 billion over 10 years. The amendments made by Section 9006 of PPACA were designed to apply to payments made by businesses after December 31, 2011, but will no longer apply because of the repeal of the section.
    -- All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance. Women's Preventive Services - including well-woman visits, support for breastfeeding equipment, contraception and domestic violence screening - will be covered without cost sharing.[63][86] This is also known as the contraceptive mandate.

   Effective in 2013:

    -- Income from self-employment and wages of single individuals in excess of $200,000 annually will be subject to an additional tax of 0.9%. The threshold amount is $250,000 for a married couple filing jointly (threshold applies to joint compensation of the two spouses), or $125,000 for a married person filing separately. In addition, an additional Medicare tax of 3.8% will apply to unearned income, specifically the lesser of net investment income or the amount by which adjusted gross income exceeds $200,000 ($250,000 for a married couple filing jointly; $125,000 for a married person filing separately.)
    -- Beginning January 1, 2013, the limit on pre-tax contributions to flexible spending accounts will be capped at $2,500 per year.
    -- Religious organizations that were given an extra year to implement the contraceptive mandate are no longer exempt.

    Effective in 2014:

    -- Insurers are prohibited from discriminating against or charging higher rates for any individuals based on gender or pre-existing medical conditions.
    -- The Individual Mandate kicks in. Either individuals carry mandatory health insurance or they are required to pay a fine (government will be linked directly to the person's bank account). Obamacare will impose an annual penalty of $95, or up to 1% of income over the filing minimum, whichever is greater, on individuals who are not covered by an acceptable insurance policy; this will rise to a minimum of $695 ($2,085 for families), or 2.5% of income over the filing minimum, by 2016. Exemptions to the mandatory coverage provision and penalty are permitted for religious reasons or for those for whom the least expensive policy would exceed 8% of their income.
    -- Insurers are prohibited from establishing annual spending caps.
    -- In 2014, the state-run health exchanges will be set up in participating states (note that the Supreme Court decision left the states room to opt out of this "medicaid expansion" provision). Medicaid eligibility will be expanded to include those with incomes up to 133% of the Federal poverty line ($29,000 for a family of four)., including adults with dependent children. New subsidies will become available for with incomes up to 400% of the poverty level ($88,000 for a family of four). Those who don't purchase insurance will be assessed penalties:
    2014 - The greater of $95 or 1% of income.
    2015 - $325 or 2% of income.
    2016 - $695 or 2.5% of income
    As written, PPACA withheld all Medicaid funding from states declining to participate in the expansion. However, the Supreme Court ruled, in National Federation of Independent Business v. Sebelius, that this withdrawal of funding was unconstitutionally coercive, and that individual states had the right to opt out of the Medicaid expansion without losing pre-existing Medicaid funding from the federal government. As of July 10, 2012, the governors of several states: Texas, Florida, Mississippi, Louisiana, South Carolina, New Jersey, and New Hampshire had announced that they would decline to participate in the Medicaid expansion.
    -- Two years of tax credits will be offered to qualified small businesses. In order to receive the full benefit of a 50% premium subsidy, the small business must have an average payroll per full-time equivalent ("FTE") employee, excluding the owner of the business, of less than $25,000 and have fewer than 11 FTEs. The subsidy is reduced by 6.7% per additional employee and 4% per additional $1,000 of average compensation. As an example, a 16 FTE firm with a $35,000 average salary would be entitled to a 10% premium subsidy.
    Impose a $2,000 per employee penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers (as amended by the reconciliation bill).
    -- For employer sponsored plans, set a maximum of $2,000 annual deductible for a plan covering a single individual or $4,000 annual deductible for any other plan. These limits can be increased under rules set in section 1302.
    -- The CLASS Act provision would have created a voluntary long-term care insurance program, but in October 2011 the Department of Health and Human Services announced that the provision was unworkable and would be dropped, although an Obama administration official later said the President does not support repealing this provision.
    -- Pay for new spending, in part, through spending and coverage cuts in Medicare Advantage, slowing the growth of Medicare provider payments (in part through the creation of a new Independent Payment Advisory Board), reducing Medicare and Medicaid drug reimbursement rate, cutting other Medicare and Medicaid spending.
    -- Revenue increases from a new $2,500 limit on tax-free contributions to flexible spending accounts (FSAs), which allow for payment of health costs.
    -- Establish health insurance exchanges, and subsidization of insurance premiums for individuals in households with income up to 400% of the poverty line.

    Effective in 2015:

    -- CMS begins using the Medicare fee schedule to give larger payments to physicians who provide high-quality care compared with cost.

    Effective in 2018:

    -- All existing health insurance plans must cover approved preventive care and checkups without co-payment.
    -- A 40% excise tax on high-cost or high-end ("Cadillac") insurance plans worth over $27,500 for families ($10,200 for individuals) is introduced. [Dental and vision plans are exempt and will not be counted in the total cost of a family's plan].

    *** Appropriations in Obamacare continue until 2019.

    Tax Calculations:

    Taxes begin in 2014 and rise in years following. In each year, the tax consists of the higher of a dollar amount or a percentage of household income. For a given household, the tax applies to each individual, up to a maximum of three. Following is the schedule of taxes:

    2014: The higher of $95 per person (up to 3 people, or $285) OR 1.0% of taxable income.

    2015: The higher of $325 per person (up to 3 people, or $975) OR 2.0% of taxable income.

    2016: The higher of $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income.

    After 2016: The same as 2016, but adjusted annually for cost-of-living increases.

   Here are some sample tax calculations.

    2014; family of 2; taxable income = $26,000; tax = $260
because $260 (= $26,000 x 1%) is higher than $190 (= $95 x 2).

    2014; family of 3; taxable income = $26,000; tax = $285
because $285 (= $95 x 3) is higher than $260 (= $26,000 x 1%).

    2016; family of 3; taxable income = $26,000; tax = $2,085
because $2,085 (= $695 x 3) is higher than $650 (= $26,000 x 2.5%).

    2016; family of 3; taxable income = $85,000; tax = $2,125
because $2,125 (= $85,000 x 2.5%) is higher than $2,085 (= $695 x 3).

    2016; family of 8; taxable income = $85,000; tax = $2,125
because $2,125 (= $85,000 x 2.5%) is higher than $2,085 (= $695 x 3).

    2016; family of 8; taxable income = $300,000; tax = $7,500
because $7,500 (= $300,000 x 2.5%) is higher than $2,085 (= $695 x 3).

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    Diane Rufino has her own blog For Love of God and Country. Come and visit her. She'd love your company.