What Small Business Owners Need to Know
Small Businesses are classified in general as housing up to 50 employees, including self-employed in some states.
• More than 97% of small business owners will NOT see an increase in the health care taxes they pay under the new law
• Small Businesses with up to 25 employees & pay under $50,000 in wages are eligible for a tax credit.
• Those who participate in 2013, qualify for a small business tax credit of 35%, and will see an increase to 50% in 2014.
• Employers with over 50 full-time employees (see link below) fall into The Employer Responsibility provision.
• Getting all of your questions answered now is the role of any smart business owner. The U.S. Department of Health & Human Services has provided this guide specifically for the small employer.
The Federal Exchange
On Wednesday November 28, Gov. Jan Brewer announced that Arizona will not create a state-based health exchange but will leave that job to the federal government, as detailed in the Patient Protection and Affordable Care Act.
Citing the lack of clarity and guidelines from the federal government, Gov. Brewer announced “Without clear federal guidance and instruction, I cannot in good conscience commit the taxpayers of my state to this costly endeavor.”
What does this mean for Arizona? Information continues to flow from HHS regarding the Exchange requirements, but certainly the flexibility in how the Exchange is set up is now limited.
As if insurance carriers didn’t have enough reasons to increase health plan premiums, here are some of the new fees & taxes imposed on plans for 2013 and beyond:
- Patient-Centered Outcomes Research Fee (also known as the Comparative Effectiveness Fee)
- This fee is charged to health insurance companies from October 1, 2012 until 2019, and will be used to fund clinical outcomes effectiveness research in an effort to increase the efficiency of medical care.
- $1/covered life in the plan’s first year that ends on or after October 1, 2012, and before October 1, 2013;
- $2/covered life for plan/policy years ending on or after October 1, 2013, and before October 1, 2014.
- Fee subject to adjustment for increases in National Health Expenditures in future years.
- Health Insurance Tax (HIT)
- New tax imposed on health insurance companies starting at $8 billion in 2015, and increasing each year. By 2018, the tax will be $14.3 billion. The Joint Committee on Taxation estimates that HIT will exceed $100 billion over the next ten years. Find the AHIP report here on estimated effects on premiums.
- Federally Facilitated Exchange (FFE)
- The Department of Health and Human Services recently proposed a ‘user fee’ of 3.5% of premiums for health insurers who want to offer policies in new federal exchanges coming in 2014. The fee is meant to cover administrative costs of the new markets, which must be self-sustaining by 2015.
- ‘Cadillac Plan’ Tax
- Starting January 1, 2018, a 40% excise tax on excess benefits for employers offering high-cost, high-benefit health plans. These plans are defined as those with premiums exceeding $10,200 for single coverage and $27,500 for family coverage in 2018.
More Taxes: Attention high-income earners! Americans subject to the taxes below are individual filers who earn adjustable gross income of more than $200,000 and married couples filing jointly with AGI of more than $250,000:
- 3.8% on Investment Income
- Effective January 1, 2013, the new tax will be imposed on unearned net investment income, including capital gains from stock sales, dividend income, bonds, mutual funds, annuities, loans and home sales.
- 0.9% Medicare Payroll Tax:
- Also effective January 1, 2013, an additional Medicare payroll tax of 0.9% will be imposed on earnings over the amounts specified above. There is no additional Medicare payroll tax for employers.
We will provide updates on this and other taxes and fees regulations when they are finalized.
For a current, comprehensive tax overview, enjoy this excellent complimentary e-book put together by BenefitMall, one of our partners.
Regardless of how these new rules apply to you, there is no question change is expected. L & A Services, Inc prides itself on the valuable guidance provided to every client, and this role grows more & more significant as the American healthcare system evolves. You have questions; contact L & A Services for answers!