Major Provisions of Finance Committee’s America’s Healthy Future Act
(source: Taylor, English, Duma LLP)
Excise Tax on High-Cost Insurance Policies. An excise tax of 40 percent would be imposed on insurance premiums in excess of $8,000 for individuals and $21,000 for families. For individuals with high-risk jobs or those over age 55 and not enrolled in Medicare, the threshold would be $9,850 for individuals and $26,000 for families. The threshold would be indexed to the consumer price index for urban consumers (CPI-U) plus 1 percentage point.
Tax Credit to Buy Insurance. Beginning in 2013, tax credits would be available to help offset the cost of private health insurance premiums. The credits would be paid directly to insurers. The credits would be based on the percentage of income the cost of premiums represents, rising from 2 percent of income for those at 100 percent of the poverty line to 12 percent of income for those at 300 percent of poverty. Individuals between 300 percent to 400 percent of poverty would be eligible for a premium credit based on capping an individual’s share of the premium at a flat 12 percent of income.
10 Percent Floor on Itemized Medical Deductions. Only medical expenses in excess of 10 percent of a taxpayer’s adjusted gross income would be allowed to be deducted, up from the current level of 7.5 percent. The 7.5 percent level remains unchanged, however, for taxpayers 65 or older.
Penalties on Uninsured Individuals. The excise tax for failing to buy insurance would be phased in over several years, growing from a maximum penalty of $200 per adult in 2014, to $400 in 2015, $600 in 2016, and $750 in 2017. The maximum penalty would be indexed to CPI-U beginning in 2018.
No Criminal Penalties. Unlike for income taxes, criminal penalties for failure to pay the excise tax on individuals could not be imposed. Collections of the excise tax would be limited to withholding of federal payments due.
Hardship Waiver. Individuals who are unable to find insurance that costs less than 8 percent of their adjusted gross income would be exempt from the requirement to have health insurance.
Caps on FSAs. Contributions to tax-free flexible spending accounts in cafeteria plans would be limited to $2,500 per year and over-the-counter medicines purchased without a prescription no longer would be eligible for reimbursement from health savings plans.
New Option for Long-Term Care Insurance. The proposal would allow individuals to use FSAs to pay for long-term care insurance.
Elimination of Medicare Part D Deduction. Businesses that receive subsidies for providing prescription drug plans valued at as much as Medicare Part D for their retirees no longer would be allowed to exclude the subsidy payments from their gross income.
Increased Penalty for Nonqualified Distributions. The penalty for using health savings account funds for nonqualified medical expenses would be raised to 20 percent from 10 percent.
New Requirements for Nonprofit Hospitals. Tax code section 501(c)(3) hospitals would be required to conduct regular “community health needs assessments” to verify that they are providing a public service for the tax benefits they receive.
Reporting Value of Health Benefits. Business would be required to report the value of health benefits on W-2 forms.
Health Insurance Executive Compensation. A health insurance company would be prohibited from deducting any executive pay in excess of $500,000 if at least 25 percent of its gross premium income is derived from health insurance plans that meet the minimum requirements of the Finance Committee plan. Under current law, businesses can deduct up to $1 million annually per executive.
Corporate Information Reporting. The plan would require firms that pay more than $600 per year to corporate providers of property and services to file an information report with each provider and with the Internal Revenue Service.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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