Health Reform

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Wesley Watkins

I have been asked by many individuals and business owners: “What is the summary of the health reform bill?” and “Who is going to pay for this bill?” The answers vary depending on the context of the question, but I have addressed the effects of the bill for you below. The following information was constructed in part by the Independent Insurance Agents & Brokers of Louisiana Association:

The Healthcare Reform law includes a large number of health-related provisions that take effect over the next four years, including expanding Medicaid eligibility, subsidizing insurance premiums, providing incentives for businesses to provide health care benefits, prohibiting denial of coverage/claims based on pre-existing conditions, establishing health insurance exchanges, and support for medical research.

The costs of these provisions are offset by a variety of taxes, fees and cost-saving measures, such as new Medicare taxes for high-income brackets, taxes on indoor tanning, cuts to the Medicare Advantage program in favor of traditional Medicare, and fees on medical devices and pharmaceutical companies. There is also a tax penalty for citizens who do not obtain health insurance unless they are exempt due to low income or other reasons.

The new law is paid for in several ways.

  • Executive and employee compensation deductibility is limited to $500,000 for health insurance providers. 
  • 10% tax on indoor tanning services.
  • $2.3 billion annual tax on pharmaceutical industry (increasing to $4.0 billion in 2017 and back to $2.8 billion in 2019 and after).
  • $2 billion annual on medical device industry. Annual tax will is increased to $3 billion in 2017.
  • $2 billion annual tax on health insurance companies. The tax will increase each year until reaching $14.3 billion in 2018. For subsequent years the fee shall increase based on the previous year’s premium growth.
  • Tax increase on distributions for non-qualified medical expenses from an H S A (from 10% to 20%) or an Archer MSA (15% to 20%).
  • Impose an excise tax of 2.3% on the sale of taxable medical device.
  • $2.6 billion tax on insured and self insured plans to fund comparative effectiveness research.
  • Increases Medicare tax rate on wages by 0.9% (from 1.45% to 2.35%) on employee earnings over $200,000 ($250,000 family) for individual tax payers.
  • Impose new 3.8% tax on unearned income for higher-income taxpayers ($200,000/$250,000 threshold).
  • 40% excise tax on “Cadillac” health insurance plans.

Understanding this law is difficult for everyone. The need for you to have a qualified adviser has never been greater.  Many people who already have health insurance policies expected this bill to lower their health insurance premiums. Simply put, this bill was primarily designed for those who do not have health insurance. Some experts predict that your health insurance premium might actually increase because of this bill. The need for everyone to become involved in his/her health care costs is huge. If you don’t know the actual cost of your health care (prescriptions, doctor visits, surgeries, etc.), then you need to find out. Take control of your health care spending now. If you or your company need benefit counseling from a trusted advisor who will help educate and inform you and/or your employees, feel free to contact me at (318) 445-9359.