"AxSA Notes on the Affordable Care Act" (A MUST-READ)

The following notes are comprised from the information generated for the AxSA Factoid of the Week.

01 July 2012: SCOTUS & the Affordable Care Act

The case known as the National Federation of Independent Businesses, et al, v. Sebelius will have far-reaching implications on the country, from the way in which most Americans engage the health-care industry to the enumerated powers of Congress. As we all know by now, the case centered on the constitutionality of the Affordable Care Act, wherein it had stated that nearly all Americans, by virtue of being an American, should acquire and maintain “minimum essential health insurance coverage”. The law went further to state that, in cases where Americans did not maintain such coverage either via employers or through their own private insurers, those persons must pay the federal government for the cost of their coverage. Beginning in 2016, uninsured persons would make “shared responsibility payments” of 2.5% of their individual household incomes, not exceeding the average annual premium for private insurance that covers 60% of top medical cost categories, and not going below $695 per annum. (The only groups not likely to experience this penalty are the incarcerated, undocumented persons, Native Americans, and specific low-income segments of the population.) While Congress and the Obama administration called the payments “penalties”, plaintiffs in the case argued that the federal government was acting beyond of its power, and they cited the Anti-Injunction Act, which they said deemed the penalty to really be an unreasonable tax. The Supreme Court ruled in favor of the federal government, contending that Congress does have a right to tax even unregulated industries and markets as part of its enumerated powers, and they have in effect upheld the constitutionality of the Affordable Care Act and all of its provisions and rules. Now, with such a ruling, it is estimated that third-fourths of all Americans expected to pay the “shared responsibility payments” will be wage-earners making less than $200k per annum—a group, ironically enough, that includes working- and middle-class Americans, most of whom work for employers with less than 50 employees, who received assurances from the President that they would face no new taxes.

09 July 2012: Affordable Care Act

In recent weeks, Americans have been fixated on the constitutionality of the individual mandate, as prescribed by the Affordable Care Act, but largely left on the sidelines of this debate has been any discussion about the overall cost of health-care reform. Shortly after the Affordable Care Act was passed, the first estimates suggested that the landmark bill would cost $501 billion from 2010 through 2019, but that number was exceedingly low. A rescoring of the ACA by the Congressional Budget Office, released earlier this year, puts the accurate cost at $1.25 trillion from 2012 through 2020. 

So how does the federal government plan to pay for this colossal piece of legislation? Following an exhaustive reading, this consultancy has identified more than one dozen new taxes, tax revisions, tax penalties, and so on, intended to help fund this reform. Beyond the “shared responsibility payments”, which was discussed in the previous factoid, here are a number of other revenue-generating mechanisms found in the ACA:

---There is an excise tax of $50,000 per hospital, in cases where a hospital or hospital corporation fails to comply with new Health & Human Services rules pertaining to financial assistance, billing practices, and the assessments of community health needs.

---The current deduction allowances for health saving accounts will be summarily ended. With this, new rules prevent the used of HSAs for the purchase of non-prescription drugs, and the tax on non-medical withdrawals from HSAs is increased from 10% to 20%. Separately, spending accounts used for medical and educational purposes of special-needs children will be capped to a size of no more than $2,500. 

---The act assigns new taxes to tanning services and to a cooking byproduct known as black liquor. 

---There are additional new taxes on businesses servicing the healthcare industry. Medical device makers face a 2.3% excise tax, for example, while new taxes are also imposed on pharmaceutical companies and insurance providers with profits of $50 million or more. Along with these new taxes, a special tax cut given to BlueCross BlueShield will be ended. 

---There is a surtax of 3.8% on all investment income for households making $250,000 per annum.

---The Medicare payroll tax on the self-employed and employees making more than $200,000 per annum will rise to nine percent. 

---The current threshold for the itemized deductions medical expenses is 7.5% of a taxpayer’s adjusted gross income. With the ACA, that threshold rises to ten percent. (Individuals who are 65y/o and older will have a reprieve until 2016.)

---For the elderly, there will be no more tax deductions for employer-provided drug coverage at retirement when combined with Medicare Part D.

---There are new limits to executive health insurance policies, standing at $500,000 per annum. Furthermore, there is a 40% excise tax on any employer-provided, comprehensive health plans exceeding $10,200 per single individual or $27,500 per family.

---When employers fail to provide coverage in companies of more than 50 employees, a tax penalty of $2000 will be assessed for each uninsured employee and $3000 for each employee tapping a health exchange. In the event that an employer requires an employee to wait for a period of 30 to 60 days before enrollment, then the employer will face a penalty of $400 per employee. In the event that an employer requires an employee to wait for a period exceeding 60 days before enrollment, then the employer will face a penalty of $600 per employee. (To date, more than 1,200 companies have been awarded waivers that exempt them from these provisions.)